This blog is part of a series, in Part 1 I discussed a high level overview of The Non-Profit Starvation Cycle, and in Part 2, Part 3 and Part 4, I discussed Step 1: Unrealistic Expectations of Overhead Costs, Step 2: Pressure to Conform to Expectations of the Non-Profit Starvation Cycle and Step 3: Cut Overhead Costs and/or Under-report Expenditures. In this post, I’ll discuss Step 4: Reiterate Funders Unrealistic Expectations to do more with less.
Non-Profits are put under a lot of pressure with strict guidelines for spending allocations and as a result they often under-report their overhead costs. This act of under-reporting to meet funder’s expectations reiterates the initial expectations set out by the funder’s. So they come to believe that the non-profit are ‘doing more with less’ and will continue to provide funds with unrealistic guidelines for overhead costs.
The best place to stop this cycle is by adjusting funders’ expectations. In step 1 I talked about the non-profits pushing back to the funders and expressing their concern. Here I’ll talk about the funders taking the lead on ending the non-profit starvation cycle.
Funders have enormous power over non-profits, so it makes sense for them to take the lead here and put a stop to overhead cut backs and under-reporting. They need to make a fundamental shift and focus on outcomes, not costs. Asking questions like “What are we trying to achieve?” and then accessing what needs to be done to achieve the goals set out – including overhead costs such as staff training and/or technology upgrades.
The mentality of ‘reaching our goals is more important than minimizing overhead spending’ needs to become instilled in funder’s. Focusing on minimizing costs can lead to narrow decisions that undermine the program or campaign results – putting even more pressure on non-profits and in effect truly wasting funding investments.
A CompassPoint Nonprofit study found that receiving general operating support from funders played a major role in reducing burnout and stress among executive directors in non-profits. With a small adjustment from funders, pushing outcome and results over cost efficiencies, the results in not only improved non-profit staff morale but program outcomes would be dramatic.
Lastly, another important thing to see from funders would be the standardization of the term ‘overhead’. Funders typically change the meaning of what is and isn’t included in overhead spending depending on the grant. This makes it challenging to compare apples to apples. Creating a dialogue between funders about overhead costs could shed some light on their unrealistic expectations and hopefully cause a shift to the real target and objective: outcomes.
In the next and last part of this blog series I’ll discuss Step 5: The cycle repeats and slowly starves non-profits where I’ll also discuss what grantees can do about the non-profit starvation cycle.