Dan Pallotta on why overhead matters in the non-profit sector
Dan Pallotta at a TED talk on why overhead matters in non-profits.
Here is the essence of the talk:
- Non-profits exist to alleviate social problems for which there is no market.
- Working at the level of causes means needing to take work to scale.
- Going to scale means that we need to grow the resources available (without using commerical or profit making methods).
- What is called “overhead” is actually the capacity to do this.
Perlotta makes a compelling argument for increasing overhead in the non-profit sector and talks about why we have to change our mindsets in order to see this as unproductive. The essence is that in situation where you have a fixed amount of funds, then limiting overhead means you can get more of the funds to clients. But in a situation where the amount of funds can grow, investing in overhead allows organizations to both meet their mandates AND to grow the scale of donors and impact to reach upstream for deeper change.
Overhead can be thought of in a variety of ways, including:
- Operations and capital maintenance, so people have good and safe facilities to work in
- Talent and benefits, for people who will never receive a bonus payment in their lives. Many of the people that work for charities by the way are folks that have been clients of non-profits in the past, so this alos makes good economic sense.
- Strategy, learning and research, to ensure that the methods being used are the best avialable and to help organizations makes sense of complex and changing environments.
- Communications – connecting with others nto make an overall impact on the sector or issue as well as attracting resources such as talent and money to bring the initiative to scale.
- Working with governments to help shape policy to address root causes. Otherwise known as “going upstream” this helps charities get at the root causes of their client’s distress and not simply be plucking babies out of the river without figuring out who is throwing them in.
The work of fundraising for deep social change needs to make the argument that investing in overhead is an investment in real change and not just meeting client needs. In many ways it is a BETTER investment, because it means that you can address underlying issues which makes it possible to solve some problems and move resources into other places. If you want to make real social change, find an organization that has a sophisticated approach to issues and you increase your chances of making shift happen. None of the clear victories of the last century came without these kinds of activities in place. Eliminating polio? How do you think that happened?
