– By Kjerstin Erickson, Special Project Fellow at GuideStar –
My name is Kjerstin, and I used to run an international nonprofit organization. A pretty great one, at that: my organization, FORGE, helped more than 70,000 refugees in war-torn Africa recover from conflict and prepare for a peaceful and self-sufficient future. In refugee camps across Zambia and Botswana, we built libraries, created computer training centers, provided micro-finance and agricultural finance, started preschools, ran health education programs, and more. In short, we helped refugees determine not only what they needed but how they could build it for themselves. No one else was doing what we did, and we could squeeze more out more out of our money than a souvenir penny press.
So…why the past tense?
While there are no shortage of reasons I could give you, the simplest one is this: I starved FORGE to death.
When I started the organization, I was young, idealistic, and naive. Not experienced enough to know better, I bought the hype: that to be truly altruistic and efficient, we needed to operate at the highest possible levels of self-sacrifice. We needed to direct almost all money raised to buying pencils rather than building infrastructure, we needed to expect our staff to work for the lowest possible wages (or ideally none at all), and we needed to do it all with an eager, grateful smile.
If you judge a nonprofit by those metrics, boy was FORGE good. Our overhead for the first four years hovered just around 4%…most of which went to cover items like paper and stamps for the donation receipts that you are required by law to send. We didn’t invest in workspace (hello, employees that show up to your apartment everyday), we didn’t hire any development or administrative personnel (hello, 180 staff with no accountant or human resource manager), and we certainly didn’t pay money for systems that would help us spend our time more efficiently (hello, fumbling with 15,000 line items in Excel). We were the epitome of what we thought was the righteous path: an organization that is lean, mean, and ready to sacrifice for the greater good.
Here’s the rub: that didn’t turn out so hot. While our donors loved that their hard-earned money was being used for “the right things,” we were slowly strangling ourselves. We under-invested in systems infrastructure, we under-invested in fund development, and we under-invested in human resources. Because donors wanted to give to project expenses directly, we constantly added more to our portfolio without adding the capacity to manage it all. Because unrestricted funding was so hard to come by, we had to spend every last dime rather than build up a reserve. And because we internalized the message that reasonably compensating executive staff was shameful, we couldn’t hire seasoned professionals or afford a CEO to replace me.
In the end, we collapsed under the weight of our own naiveté and short-sightedness. As the founder and chief executive, I had the vision and the hutzpah to create something extremely meaningful and impactful in the world. But I didn’t have the foresight or the strength of will to see it through and fight back against the prevailing pressures constantly whispering in my ear to do it cheaper, do it leaner, and do it with lower gosh-darn overhead.
Overhead, it turns out, could have made all the difference. With the appropriate investments in efficiency-building infrastructure, administration, and development, FORGE would undoubtedly be alive today. Rather than starving a painful death, we’d be growing and thriving – a force for good in the lives of hundreds of thousands of people who have lost everything.
If you’d asked me ten years ago to name the dirtiest word in the nonprofit language, I would have undoubtedly told you: OVERHEAD. If you asked me today, I’d give you the same answer. In the intervening decade, however, the tables have turned. Overhead is not dirty because it represents inefficiency, waste, and greed; it is dirty because of the powerful myth it has promulgated. That myth – the one that equates “low” overhead with high performance and “high” overhead with greed and irresponsibility – leads to a very dangerous and unsustainable outcome. I bought into it, or at least didn’t push back on it hard enough. It pains me every day to think of what I lost, and how I could have done it differently.
It may be too late for FORGE, but its not too late for many other organizations struggling under the weight of the same pressures. Isn’t it about time that we get over overhead?
I ask you to join me in pledging to end the Overhead Myth today: http://overheadmyth.com/.
Kjerstin Erickson is a Special Project Fellow at GuideStar, where she works on initiatives to improve the effective flow of philanthropic capital. Prior to GuideStar, Erickson spent 9 years as the Founder and Executive Director of FORGE, a strategic-impact nonprofit that provided education, skills training, and entrepreneurial resources to more than 70,000 refugees in war-torn Africa. Having started FORGE at age 20, Erickson established a reputation for her commitment to bringing more frankness and transparency to the nonprofit sector. Erickson’s awards include the Skoll Scholarship for Social Entrepreneurship, the Do Something Award for public service, and the Stanford Haas Public Service Fellowship. She has also been named a “Top 40 Leader Under 40” by the Young Leaders Council, a “Person You Should Know” by CNN, and a “Top 10 College Woman” by Glamour Magazine. The above can also be found on the GuideStar Blog: http://trust.guidestar.org/2013/06/20/nonprofit-emaciation/.