Welcome to my new blog, an attempt to inspire thinking about nonprofit management and share ideas on how to do the things we think about doing.
Reduce your Overhead- Indirect Rate-Management and Administration-Fundraising Expense. Think about what these terms mean to a manager, a board member, a volunteer, an individual donor, a foundation, a corporate partner. Then, think about how staff time is allocated. Then think about how the outside world determines if a nonprofit is successful and worthy of a donation. Complicated? Confused?
Nonprofits of all kinds are continually pressured to reduce their overhead and focus on services and programs that are well evaluated and measured. And, this is generally a good thing that helps organizations perform efficiently and be accountable to their public. But the while this sounds simple, the operating reality is often complex. Some nonprofits don’t allocate time, and some operate under the philosophy that all time should be spent on program (including events) or services, some misunderstand the idea of tracking time spent in administration and fundraising to be a bad thing instead of one that has other returns to the organization. Some are even fearful in investing in infrastructure that supports staff and program objectives. The flip-side, some board members don’t consider staff time as a program costs that may be directing human power away from other core programs or services. Donors want their money have the most direct benefit, and some corporations want to make sure their dollars are used wisely and offer an intangible return on investment. Now, we also need to consider the watchdogs that monitor an organization’s success and what they view as the right ratio. Complex? Still Confused?
Follow a plan to ensure time is allocated to the right areas; work with an accounting professional to determine how to do this if it’s not already in place. Be real about how time is spent and monitor this periodically to make sure dollars and time spent in any area is right for the organization. Share this information in an interesting financial presentation and with your leadership. They may disagree, but they may also want to see changes in the distribution of staff time. This can also be used as a conversation starter to motivate or change employee behavior- “Hey Bob? Why are you spending so much time on X, when our focus is Z? How can I help?”
Key Point: It’s important to remember what is right for one organization is not necessarily right for another. This is why we should find what works best in a real operating reality based on the needs and priorities of the organization rather than lock into an ratio established by an external organization. When true allocations are measured and reviewed inefficiencies will come to light and management can work with leadership using real data to find better ways to deliver programs and services in a way that supports the mission.
Homework- tell me if your organization tracks staff time and what it means for the organization. —JLA