In order to maintain longevity as an organization, nonprofits must have a solid infrastructure in place to handle the demands and work of their organization. Sounds simple, but many nonprofits find it difficult to balance the expectations of their donors with the reality of overhead costs. Supporters want to know where their money is going, and typically don’t love when they hear that printers, chairs, staff or the like were paid for with their donation. These basic necessities keep organizations functioning effectively and efficiently though.
Authors Ann Gregory and Don Howard refer to this phenomenon as “the nonprofit starvation cycle.” As they explain it, the cycle first begins with funders’ unrealistic expectations about how much it costs to run a nonprofit. Nonprofits then feel the pressure to conform to these unrealistic expectations, which leads them to spend too little on overhead . “This underspending in turn perpetuates funders’ unrealistic expectations. Over time, funders expect grantees to do more and more with less and less—a cycle that slowly starves nonprofits.”
So, how do nonprofits balance this need to please their donors and paying for necessities? Ultimately, it comes down to being transparent with their funders. When organizations report accurate information, in an open way, their donors will have a better idea of where their money is going and the justification behind the spending. Funders want the nonprofit to succeed.
Organizations need experienced staff with the correct training to do their jobs effectively. Tracking measures are necessary to see which implementations are working and which are not, so money is not wasted in unviable spaces. Marketing, which helps to spread awareness of the nonprofit, also gets funding from this “indirect expense” budget that covers overhead costs. With these justifications in mind, donors are more likely to feel okay with the direction their money takes, so long as it ultimately benefits the constituents.
The most successful nonprofits are the ones that can maintain the necessary infrastructure to keep running. They keep open communication with their donors and within their organization. Most importantly, they encourage efforts that allow them to stay true to their mission.