In his latest column for Bloomberg Businessweek, Drucker Institute Executive Director Rick Wartzman discusses the need for philanthropic donors to recognize that “overhead” shouldn’t be considered a dirty word when it comes to nonprofit organizations.
Wartzman notes that, in his book Managing the Nonprofit Organization, Peter Drucker “advocated implementing a range of actions aimed at ‘converting good intentions into results’: conducting deep market research, incubating new ideas, and training and developing staff and volunteers. He also called for devising timely feedback and measurement mechanisms.”
Yet, Wartzman adds, “none of these undertakings . . . happen magically. They require talented employees, procedures, and technology to accomplish—all of it costly activity that could be classified as ‘overhead.’”
Wartzman bases his piece on the new book, Give Smart, by Tom Tierney and Joel Fleishman. “There are two kinds of overhead: good and bad,” they explain. “While it’s wrong to waste philanthropic dollars on goods and services that aren’t needed, it’s equally wrong to limit the impact of philanthropic dollars by depriving nonprofits of the funds they need to sustain, improve, and expand their performance (‘good’ overhead).”