This episode is the second part of our discussion on overhead aversion. In the last episode, we talked a bit about why overhead expenses evolved to become this standard against which nonprofits are compared to one another, and how it became a measure of nonprofit effectiveness.
We also talked about how this thinking is majorly flawed and has led to poor outcomes for nonprofits. As it turns out, too little overhead and too much overhead is associated with poor outcomes for nonprofits, so we rounded out the episode by talking about an exercise or experiment you can do at your own organization to determine the ideal overhead expenditure for your specific nonprofit.
In the last episode, we specified the problem. But still a question remains- how can we talk about overhead such that we don’t turn away donors?
Here’s what you can expect to take away from this episode…
⦿ What is the avoidance route for combating overhead aversion
⦿ What is the transparency route for facing overhead aversion
⦿ What is the reframing route for changing the conversation about overhead aversion
SNEAK PEEK AT THE EPISODE…
⦿ [2:31] While donors may understand that nonprofits need to spend money on things like keeping the lights on, paying staff, and so on, that doesn’t necessarily mean they want their money to go towards these expenses.
⦿ [6:35] But, the next question the researchers wanted to answer is whether this overhead aversion was related to donors’ perception of overhead being a measure of nonprofit efficiency or is it related to the donors’ perception of their efficacy.
⦿ [8:20] But, if donors were averse to overhead because they wanted their own donation to go solely towards programs, then by covering the 5% or 50% cost, this should eliminate that aversion and donors should give at a rate similar to the 0% overhead treatment group.
⦿ [10:38] This is a really interesting experiment because if you think about it, when nonprofits receive large, unrestricted gifts, the typical reaction is to leverage the gift to get matching donations or to use the money as seed money for a new program.
⦿ [14:11] The idea here was that if the donors were averse to overhead overall and didn’t really care whether the overhead was salaries or fundraising, then the results should indicate that was a more or less even split between the two options.
⦿ [18:35] They based their hypothesis on the tenets of framing theory which suggests that small changes in how an issue is presented can result in large changes in opinion and in decision making.
⦿ [22:26] In terms of pros, this is the easiest solution to the problem of overhead aversion. It doesn’t involve raising unprecedented amounts of money, it’s a method you can easily implement with your next donation request.
⦿ [25:08] I think which route you take depends on what your needs are- do you have immediate needs that you have to address?
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LINKS MENTIONED IN THIS EPISODE:
⦿ Article: Breaking the nonprofit starvation cycle? An experimental test
⦿ Article: Avoiding overhead aversion in charity
⦿ Article: Overhead aversion: Do some types of overhead matter more than others?
⦿ Article: Is “Overhead” A Tainted Word? A Survey Experiment Exploring Framing Effects of Nonprofit Overhead on Donor Decision
⦿ Episode 27: How can nonprofits overcome overhead aversion? (Part 1)