Enough With the Overhead Ratios, Already!

Three cheers for Paul Shoemaker, executive director of Social Venture Partners Seattle, for so eloquently describing what is askew with much of the criticism of Invisible Children, the nonprofit behind the Kony 2012 video. The group has been getting flak for its “failure” to meet idealized ratios of spending on administrative versus other costs.

I have no independent knowledge of this group’s worthiness, but Shoemaker’s article, “Kony 2012: The Great Product Debate,” reminds us that faulting a group based solely on ratios can be a bit hasty. In this case, the criticism is for spending a “low” amount on direct aid — which, as Shoemaker points out, is nonsensical when the group doesn’t actually provide direct aid (or, for that matter, any other programs or services). Shoemaker says, “Invisible Children is an advocacy organization; that’s what they do. They spend money on media (i.e., “non-direct aid”) because that’s their strategy.”

I wish I’d been as lucid in discussing the issue with friends the other day at lunch. His point is so clear it sounds almost obvious — and yet it’s been largely overlooked.

But his larger point can be applied to any type of organization, even those serving clients, providing programmatic and other aid, and otherwise taking direct action on an issue: He says, “too many of us treat all nonprofits as if they operate in the same product category and use a one-size-fits-all set of metrics to measure their effectiveness – including often-misleading metrics like percentage of spending on program vs. overhead.”

I couldn’t  agree more. I’ve had other lunchtime discussions with friends about their suspicions regarding nonprofits whose work they appreciated in every other way, and would like to support — but they wondered if they were being “had,” because the group’s spending ratios didn’t fit the norm. Anyone who has ever created a budget (even a household one) should know that different types of service provisions have different costs. Meanwhile, paying staff salaries is nearly always expensive, and a big part of the “overhead,” whether you’re running a business or a nonprofit. (And that’s true even given that most nonprofits don’t pay too well.)

Let’s say, for example, that we’re talking about a trail maintenance group. The group monitors trail conditions and coordinates volunteers for cleanup activities. But its largest expenditures are for paying the executive director as well as a contract accountant and a part-time fundraiser. If trails are being maintained that wouldn’t have been otherwise, which is a result that people are willing to support; and  if no evidence has emerged that anyone is being overpaid or putting in less time than they’re paid for, what’s the problem?

Designing these metrics was a noble goal. But getting too attached to them just adds one more burden to that of the many nonprofits that are asked to be “efficient” using fewer resources than are realistically adequate for survival.