Let’s explore what these expectations look like as well as how to attempt to alleviate that pressure on staff.

The overhead myth and the nonprofit starvation cycle

Overhead refers to costs to the organization that are not specific to programming or service delivery. This includes payment for office space, salaries of non-programmatic employees, and fundraising costs. If your nonprofit occupies a building, you have to pay for electricity, heat, and water. Unless previously agreed upon, you have to pay a salary to your CEO, CFO, and Human Resources staff. You have to pay for office supplies. If you plan on doing any serious fundraising, you have to pay to print off fliers and mailers.

The nonprofit starvation cycle comes into play with charity watchdog sites who rate nonprofits based on the percentage of revenue they spend on overhead as opposed to their total revenue. For example, a nonprofit reports a 6% overhead expense rate. This will attract donors who look upon nonprofits with a higher overhead percentage as inefficient. And that nonprofit with a 6% overhead? They have to figure out how to continue to operate with such a small amount of overhead money available.

Donors or government contracts?

Both private donors and government contracts have expectations to be met. Donors often restrict their funds, earmarking their donation for a specific purpose. This is problematic due to the lack of funding to pay for overhead, as well as the potential for the earmarked program that is no longer a priority to the organization. Time-restricted donations are a good compromise. Donors can be assured that, for a specific amount of time, their donation goes to the program of their choice. After the time frame has passed, however, any money left can be used at the discretion of the organization.

Government contracts can pose other concerns. Government officials often don’t fully understand the full impact of the restrictions they place on funding within their contracts. Overhead is often not included, and sometimes the amount needed for program fees are not fully covered. Nonprofit leadership has to attempt to meet their mission while navigating an unfamiliar legislative landscape.

Internal unrealistic expectations

Nonprofits pass along the unreasonable expectations on to their staff in the form of shortened timeframes, excessive documentation requirements, and high workloads. This increases stress and burnout. Staff who originally wanted to make a difference bail due to feeling unsupported. They are unsatisfied with the following: pay and benefits, lack of promotional opportunities and lack of professional development.

Action Items to Reduce Pressure on Nonprofits and Staff

• Education
  • Research shows that many donors are unable to define “overhead”. Once they learned what it meant, donors were more likely to understand the need for overhead spending.
  • Legislators who write policy that informs governmental contracts do not always understand the limitations of nonprofit organizations. Leadership can write letters to state representatives and other government officials to open conversations.
  • Nonprofit leaders need to read all their contracts to understand regulations. This allows leadership to pick their battles and negotiate.
• Transparency
  • Be honest with both donors and government organizations regarding the need for overhead spending. Have frank discussions with both sides, explaining that overhead expenditures are required for organizational capacity building.
  • Be honest with donors regarding realistic impacts with regards to time frames and smaller donations. Many donors want to contribute to lasting change. Give them the information needed to make the right decisions for themselves.
• Support Your Staff
  • Encourage open communication. Allow staff to verbalize concerns and offer suggestions to reduce stress and burden. Even if these suggestions are unable to be used, the fact that leadership listened and considered helps staff feel valued and heard.
  • Offer flexible schedules which helps promote work-life balance. When employees don’t have to worry about missing work for preventative medical care or to care for ailing parents or young children, they are able to focus better on their work.
  • Offer an Employment Assistance Program. This will help staff manage their personal concerns while also remaining a productive member of the team.

Nonprofit leaders can use education, transparency, and support to help mitigate the risk of losing money and employees due to unrealistic expectations.

Jessyka Russell is a December, 2024 graduate of Arizona State University’s Masters of Nonprofit Leadership and Management program. She also has a Masters in Professional Counseling from Carlow University in Pittsburgh, PA. Jessyka has held numerous supervisory positions in mid-sized nonprofits until moving to a direct care position with UPMC, a large, global nonprofit, in October, 2023. Jessyka currently works as a Community Health Choices Service Coordinator, arranging services to allow the medically and financially fragile individuals in Pittsburgh to remain in their homes as long as is safely possible. Upon graduation in this program, she plans on increased opportunities for leadership. Jessyka looks forward to free evenings that she can spend with her three children, husband, and plethora of books which have been neglected during her schooling.

Image by Lillian Finley

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