Low overhead, low salaries are not the way to achieve missions

Alyce Lee Stansbury, CFRE, Notes on Nonprofits

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Nonprofits that don’t adequately support infrastructure and operating expenses will not effectively achieve their mission. Any good business understands the need to spend money to make money and in a nonprofit business, this means spending money to achieve the mission.

One of the great myths of the nonprofit sector is the lower the operating costs, the more efficient the operations. Show me a nonprofit that brags about its tiny overhead percentage and I’ll show you a nonprofit organization that’s starving itself and not likely to survive.

In a big step forward, five of America’s wealthiest foundations are calling on other grant makers to join them in helping to cover essential operating costs. The Ford, Hewlett, MacArthur, Open Society and Packard Foundations have joined forces to help grantees with rent, decent wages, technology and other overhead. This decision came after considerable study.
In one analysis of 274 nonprofits that received grants from two or more of the 15 largest U.S. foundations, 42% had less than three months’ worth of cash on hand. Kathleen Enright, chief executive of the Council on Foundations, which represents grant makers, adds, “The more sophisticated donors get, the more likely they are to understand what it takes to run a strong, healthy nonprofit organization and that only funding programs is not helping to achieve that end.”  

Low staff salaries also undermine nonprofits. This was a cover story in the Chronicle of Philanthropy published earlier this month. “[Low salaries] limit who take nonprofit jobs and who can afford to stay which can hurt the mission and the bottom line,” the report states.

Jeri Eckhart Queenan, a partner with The Bridgespan Group, was quoted in the article, “In order to solve society’s most pressing problems, we need strong, vibrant, high-performing nonprofit organizations. This seems to be something everyone agrees on but where we differ is on how to fund nonprofits to make it happen.”

I’ve had several conversations with clients and colleagues about this issue. In one example, a seasoned, 12-year senior employee was earning less than the first employee hired over 20 years ago. In another example, I met a young professional from Washington, D.C., who recently moved to Florida. She lamented the low salaries at one of the largest, most prestigious nonprofits which dispels the myth that large organizations in large cities pay substantially higher wages.

A conversation with another client revealed their struggle to hire their first full-time fundraiser which did not include benefits. The ED said many of the best candidates immediately withdrew from consideration. Locally, an ED position is currently being advertised with no benefits and a starting salary of $33K which will likely narrow the applicant pool. Kelly and I are planning to write more on this topic and want to hear from you. Please send your thoughts to [email protected].

The lowdown on Giving Tuesday 
I promised in a previous column to address the pros and cons of Giving Tuesday, a national day of giving on the Tuesday after Thanksgiving set for Dec. 3 this year. Giving Tuesday was launched in 2012 by the 92 Street Y in New York City and is now a global online giving campaign that raised $400 million in 2018 from donors in over 150 countries.
Here are the pros. Giving Tuesday is an opportunity to engage people at all giving levels. The scope and visibility of the campaign gives nonprofits the opportunity to tap into this national spotlight on giving.

When done well, Giving Tuesday can attract new donors and engage existing donors in a focused effort to raise funds and awareness for a cause they care about. I’ve also seen current donors, who get excited about the campaign, give more and provide matching gifts.

Critics of Giving Tuesday believe it encourages one-time gifts and gives donors who can make larger gifts a reason to give less. That’s because Giving Tuesday campaigns are often focused on a smaller ask to encourage greater participation. I’ve heard from donors who have felt bombarded on Giving Tuesday via email and social media by every nonprofit they support.
Last year, I received countless emails from a plethora of nonprofits including some I had never supported. This is why some nonprofits choose not to participate to avoid annoying their most loyal donors.  

If your organization decides to participate in Giving Tuesday, make sure you have the time, resources and staff to do it well. That means start now.

Be thoughtful about the number of requests, reminders, and last-minute asks you send to avoid making donors feel like an ATM machine. Gifts made on Giving Tuesday should be the start of or a continuation of an authentic relationship, not a last-minute money grab. Donors can see and feel the difference.

Alyce Lee Stansbury, CFRE, President of Stansbury Consulting, and Kelly Otte, MPA, Executive Director of PACE Center for Girls Leon co-produce the column and always like to hear from readers at [email protected].