Uncharitable by Dan PallottaHave you ever had to answer the question, “What percentage of my donation goes to the cause?” Or what about, “How much do you spend on overhead?”

Last Friday, Dan Pallotta was the plenary speaker at the Nonprofit Technology Conference. Dan is the author of Uncharitable: How Restraints on Nonprofits Undermine Their Potential and thinks those are the wrong questions because they don’t answer how effective your organization is, nor do they answer how much impact your organization is having.

Dan argues we, as a society, have been led to believe that nonprofit staff shouldn’t be fairly compensated because it’s immoral to make money from donations. He says many believe that nonprofits can’t spend money on good advertising and marketing because it’s wasteful, and they can’t take risks on new revenue ideas because risk is the same as irresponsibility in nonprofit management.

These attitudes about overhead, says Dan, mean that nonprofits are limited in what they can spend on staff, buildings, supplies, etc., forcing organizations to go without the things they need to grow and actually make real change in the world.

From a communications perspective, I agree with Dan that emphasizing how little we spend on overhead is a terrible way to communicate success to donors. Yes, donors do want to know that their money is being used to make a difference, but that does not automatically equate to low overhead numbers.

In some ways, I think the growth of the “low overhead = effectiveness” line of reasoning is a direct by-product of years of really bad communications from our sector. If we were better at telling the real stories of our work, and helping donors better understand the role they play in making change, then we wouldn’t have to default to playing this numbers game.

Ultimately, it’s all about trust. Are you communicating in ways that build trust with your supporters? Are you sharing the story of your work in ways that donors can really understand? Can they see how their support is one piece of a larger puzzle of change? If you can do that, then your supporters will trust the management of your organization to spend the dollars wisely, regardless of which bucket your bookkeeper puts them in.

Hear Dan’s TED talk from March.