Organization A’s overhead is 5% and organization B’s overhead is 15%. Who should you give to? Many donors would not hesitate to give to organization A because their lower overhead must mean they are more efficient since more of the money goes to the on-the-ground need.

Last week Fast Company had one of those articles that I wish I had written. Entitled, Its Time to Start Judging Nonprofits Like For Profits, the article discussed the problem of judging an organization by overhead alone. They correctly stated that many donors are advised to use sites like Guidestar or CharityNavigator when making their giving decisions. These sites are great for looking up an organization’s financials but they tell you very little about the impact those organizations are having.

The authors write:

“No one would judge a for-profit company for spending on advertising, sourcing the best hires, or using the best equipment. Indeed, these are points that a wise investor looking for long-term stability should seek out in a for-profit. This constant pressure that nonprofits feel from both their mission-driven world and the donor landscape toward minimizing anything that could be counted as “overhead” is destructive and efficiency-killing. Low overhead means burning staff out at an alarming rate, and having trouble sourcing or retaining skilled workers. It pushes organizations toward duplication over cooperation to attract and maintain funding. Worst of all, it forces a short-term view on what should be a long-term mission. This hurts not only the organizations, but the missions they serve.”

I think the authors are right on. Low overhead is not always better. Nonprofits need hard-working, brilliant teams and that takes money. Our most talented people should be addressing our most pressing problems. To attract them they need decent salaries, benefits, and technology. Of course there are horrendous examples of outrageous spending (see Jon Krakauer’s Three Cups of Deceit for one particularly upsetting example) but just because some people abuse donors’ money does not mean that everyone else should live in forced poverty.

As you make your giving decisions of course consult Guidestar and CharityNavigator, but don’t let that be the end of your investigation. Dig into how the organization is impacting people’s lives and addressing problems. Unfortunately, these numbers are currently very difficult to find (if they even exist) but these are the numbers to give by.