NOTE: This blog was originally posted on Forbes. Read it here.
In ancient Egypt, the Nile River provided fertile land for farming, but the annual floods often destroyed crops. To combat this, the Egyptians developed a system of irrigation and flood control, allowing them to plant more seeds and increase crop yields. They also used crop rotation and fertilization techniques to maintain soil fertility and improve crop yields over time. This allowed them to support a large population and build a powerful civilization that lasted for thousands of years.
For years in the nonprofit world, there has been a belief that the less money an organization spends on administrative, technology and fundraising expenses, the more effective it will be in achieving its mission. Unlike the Egyptians who used research, management and technology to address hunger, the nonprofit space created a “starvation cycle.” This is a harmful cycle where nonprofits are deprived of the necessary resources to establish and maintain adequate infrastructure. As a consequence, these organizations are struggling to perform basic functions and meet the needs of their beneficiaries.
Donors may be reluctant to spend on expenses that are not directly correlated with the programs or services that nonprofits offer because they associate these expenses with wasted money or “bad management.” However, research shows that nonprofits spending more on information technology, facilities, equipment, staff training and fundraising are more successful than those that skip these overhead expenses. Furthermore, donors who are more committed to the cause are, in fact, accepting of higher levels of overhead.
American Kennel Club (a Cloud for Good client), a nonprofit organization working to advance canine health and well-being, utilizes a suite of Salesforce Cloud solutions in its mission of promoting responsible dog ownership and promoting dog advocacy. Investments in Salesforce for Nonprofits, a computer telephony integration tool and a client portal have dramatically impacted the organization’s reach, allowing staff to efficiently field 55,000 phone calls, emails and live chats per month while organizing 22,000 in-person and virtual events each year.
Hamilton Families, a nonprofit organization working toward ending family homelessness in the San Francisco Bay Area, revamped its programs and gained actionable insights through Salesforce Communities and Experience Cloud. This investment in technology has tripled the organization’s housing success rate and allowed for more nuanced program management.
One other nonprofit organization, Detroit’s Downtown Boxing Gym, an out-of-school program providing area youth with tools and opportunities that prepare them for success in school and beyond, has invested time and resources into expanding its model of support. Through this investment, the organization has created a customized student and program management system, integrated fundraising and marketing, and a streamlined method for accurate report development helping thousands of kids secure brighter futures. These technological advancements have resulted in a 100% high school graduation rate among the organization’s students, and 98% of those graduates going on to college or professional employment.
Increases in program effectiveness following technology investment are happening within the higher education space as well. In a recent ROI analysis performed by the University of Massachusetts Amherst, Salesforce Marketing Cloud was shown to dramatically increase email deliverability, save internal staff approximately 180 hours via automation and directly impact the institution’s ability to enroll more students into classes and programs. Another higher ed institution, Indiana University Advancement, created an “Amazon-like” approach to online giving. This resulted in a 230% growth in recurring gifts and six-figure revenue growth after just six months with the new technology (Amherst and IU are also Cloud for Good clients).
To help nonprofits overcome the overhead myth, funders can take a number of different steps. For example, they can provide general operating funds to give organizations more flexibility in making investment decisions. They can also commit to covering a greater share of administrative and fundraising costs in grants that are restricted to a particular use. Additionally, funders can foster open conversations about overhead, which can lead to the development of a shared definition of the term and a greater focus on outcomes.
Nonprofit leaders can also play a role in breaking down the overhead myth. They can start by developing a strategy that explicitly recognizes infrastructure needs and framing strategy discussions around goals rather than costs. Communicating the logic behind increased overhead investment to all levels of the organization, including the board, can help build collective commitment. Finally, nonprofit leaders can work to provide funders with better ways to measure performance, such as by highlighting the costs associated with achieving outcomes and how investments in overhead can help reduce those costs.
