It’s been a few months since the three powerhouse nonprofit watchdog groups – Charity Navigator, Guidestar and the BBB Wise Giving Alliance – made this decade’s most important statement to the nonprofit world:

To the Donors of America:

We write to correct a misconception about what matters when deciding which charity to support.

The percent of charity expenses that go to administrative and fundraising costs—commonly referred to as “overhead”—is a poor measure of a charity’s performance.

We ask you to pay attention to other factors of nonprofit performance: transparency, governance, leadership, and results. For years, each of our organizations has been working to increase the depth and breadth of the information we provide to donors in these areas so as to provide a much fuller picture of a charity’s performance.

. . .

So when you are making your charitable giving decisions, please consider the whole picture. The people and communities served by charities don’t need low overhead, they need high performance.

FaunAs we all know, established habits and mindsets die hard, and the immensity of this reversal is barely being felt in our beloved charity sector. When I talk with major donors, it’s clear that the old misconceptions still prevent them from focusing on performance.

Unless we all work much harder, it may be decades before the overhead myth is completely debunked. Even bold new fundraisers like charity: water are still claiming 100% of public donations go to mission work. I love their work, but I am guessing there are some donor/investors who would insist on knowing the scope of their infrastructure before making large, game-changing gifts.

I recently had the privilege of hearing a keynote delivered by Dan Pollotta on this subject. His presentation was truly a call to arms against the old traditions. He stated that if we truly want to end certain diseases or terrible conditions in our world then we need to find out what it would take and create the infrastructure and funding to make it happen in our lifetime!

We need our best and brightest minds researching and discovering the solutions. Yes, this means compensation on par with the commercial sector. If any Silicon Valley VC firm worth its salt can raise one hundred million dollars to finance a software product or new social network, think what those same top-notch individuals could do to eradicate disease or save a rain forest.

I love helping small and medium-sized nonprofits. They will always be near and dear to my heart. However, certain problems may require scaling to a level we have not seen before in this sector. We must be able to differentiate a million dollar mission from a billion dollar mission and not penalize those capable of building the infrastructure to make such a large scale mission achievement successful.

Can we truly eradicate the overhead myth?

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Jay Love

Jay Love

Co-Founder & Chief Relationship Officer at Bloomerang
A 30+ veteran of the nonprofit software industry, Jay Love co-founded Bloomerang in 2012. Prior to Bloomerang, he was the CEO and Co-Founder of eTapestry for 11 years, which at the time was the leading SaaS technology company serving the charity sector. Jay and his team grew the company to more than 10,000 nonprofit clients, charting a decade of record growth. Prior to starting eTapestry, Jay served 14 years as President and CEO of Master Software Corporation. MSC provided a widely used family of database products for the non-profit sector called Fund-Master. He currently serves on the board of the Center on Philanthropy at Indiana University and is the past AFP Ethics Committee Chairman. Jay is also the author of Stay Together: How to Encourage a Lifetime of Donor Loyalty.