How the Overhead Ratio is Like the Left Front Knee of an Elephant

There’s the often-quoted parable of the three wise blind men touching an elephant and describing it: one touches the tail and says the elephant is a rope; one touches a tusk and says it’s a pipe; one touches a leg and says it’s a tree trunk.

This parable is usually told to illustrate the importance of perspective: individuals can perceive the same thing in different ways.  But there’s another lesson here; one the nonprofit sector needs to embrace.  That lesson is this:  a full understanding of anything complex requires that we bring many perspectives together.

In the nonprofit sector, we’ve been blind in our sole focus on the overhead ratio.  A nonprofit’s overhead ratio is kind of like the left front knee of an elephant: it’s an important part of a nonprofit’s makeup, but it’s not even close to the whole story.

In the nonprofit sector in general – and at GuideStar in particular – we face the challenge of figuring out how to articulate a holistic view of nonprofits.  And if we are to truly replace the Overhead Myth, we must offer an alternative which reflects the full richness of individual nonprofits – and the nonprofit community as a whole.  And, then, we have to actually collect enough data that donors and volunteers and journalists and nonprofit leaders can actually use.

Luckily, there are many efforts that are helping understand pieces of this broader puzzle: transparency (GuideStar Exchange), impact data collection and story-telling (Charting Impact—now part of the GuideStar Exchange), expert surveys (Philanthropedia), third-party analysis (GiveWell), stakeholder reviews (GreatNonprofits), star ratings (Charity Navigator), accountability standards (BBB Wise Giving Alliance), and many others.  Our challenge is to take these pieces and bring them together.  Our hope at GuideStar is to grow our GuideStar Exchange program into a common “profile” for the field—so that people can find what they need about a nonprofit in one place and nonprofits only have to provide their information once—and to supplement that with many types of analysis from these colleague organizations.

Over the next few months, we’ll be working to offer a clear framework for how the nonprofit sector can bring together these many parts of the elephant into a much greater whole.

 

Jacob Harold is the President and CEO of GuideStar. Harold came to GuideStar from the Hewlett Foundation, where he led grantmaking for the Philanthropy Program. Between 2006 and 2012, he oversaw $30 million in grants that, together, aimed to build a 21st-century infrastructure for smart giving. Before that, he worked as a consultant to nonprofits and foundations at the Bridgespan Group and as a climate change strategist for the David and Lucile Packard Foundation based at The Energy and Resources Insitute in New Delhi, India. At the beginning of his career he worked as a climate change campaigner for Rainforest Action Network and Greenpeace USA and as organizing director at Citizen Works.

Harold has written extensively on climate change and philanthropic strategy. His essays have been used as course materials at Stanford, Duke, Wharton, Harvard, and Oxford. He earned an AB summa cum laude from Duke University and an MBA from the Stanford Graduate School of Business with a certificate in public management. Harold has further training from Green Corps in grassroots organizing, Bain in business strategy, the Chinese Academy of Sciences in complex systems science, and the School for International Training in Tibetan studies. Harold was born and raised in Winston-Salem, North Carolina, where his parents ran small community-based nonprofit organizations. The above can also be found on the GuideStar Blog: http://trust.guidestar.org/2013/07/22/how-the-overhead-ratio-is-like-the-left-front-knee-of-an-elephant/.

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