Although there is no longer the same tax incentive for year-end donations that there used to be, you may be contemplating making a charitable gift before 2020… or you may find yourself thinking about making a donation in the future. Either way it’s important to keep this in mind: Do not focus on overhead expenses when you decide what nonprofits you should support.

For years, online resources such as Charity Navigator have emphasized overhead in their ratings of nonprofits. This seems like a wise decision, right? We want our donations to go directly to those we are trying to help. And there are definitely organizations that spend little of what they receive on those they claim to serve. Consumer Reports notes that the Disabled Veterans National Foundation spent only 4 percent of donations on its programs. If you want to help veterans, it’s clearly better to give elsewhere.

But in 2013, GuideStar, Charity Navigator, and the Wise Giving Alliance published an open letter telling America’s donors that overhead is “a poor measure of a charity’s performance.” And Nonprofit Quarterly frequently posts about the importance of focusing less on overhead and more on a nonprofit’s efficiency.

Here’s why we should stop focusing on overhead when deciding where to give our charitable donations

• When we focus on overhead, we lose sight of what’s most important: Nonprofit programs that work. If I’m running a nonprofit with low overhead, but its programs aren’t making a difference, should you support my nonprofit? It’s far better to support a more effective nonprofit with higher administrative costs.
• Nonprofits can’t figure out what works if they don’t have the money to measure results or the freedom to take risks. In the business world, there’s a lot of focus on measurement. If a nonprofit can’t spend money on measuring results (that’s overhead), how can we know if its work is effective? Also like good businesses, nonprofits must be allowed to take risks to see if a new program will be more effective in accomplishing its mission. Unfortunately, risk-taking may require increased administrative expenses. That, too, means higher overhead.
• A focus on overhead forces nonprofits to underpay employees. Too often we think that if someone works for a nonprofit, they should be in it for love, not money. Of course it’s good for nonprofit employees to be passionate about their work. But it’s unfair to expect people to struggle financially, because they work for a nonprofit. And if nonprofits want to attract skilled employees, they must be able to offer competitive wages and benefits.
• Pressure to keep overhead expenses down prevents nonprofits from updating aging equipment or buildings. If you want nonprofits to be able to engage in efficient, effective work, they need the tools to do so. When employees have to deal with equipment that breaks down or to work in buildings that need repairs, they won’t be as productive as employees who have well-maintained, up-to-date equipment and work spaces.
• Do you believe in making shopping decisions based on justice, rather than lowest cost? Nonprofits should be able to do that, too. Consumers who care about justice may buy locally produced or fair-trade goods. Nonprofits could make similar spending decisions, but they need to spend more money to do so.

Efficient, effective nonprofits deserve our support.

As I mentioned in the example of the Disabled Veterans National Foundation, overhead isn’t irrelevant. But it shouldn’t be the key factor in our donating decisions. Yes, it’s easier to judge a nonprofit based on one number – overhead – than to try to figure out what nonprofits are efficient and effective at their work. But when we stop focusing on overhead, we give nonprofits the freedom to do better work.

News about my book, Geek Culture.

While Geek Culture is photo-heavy and best read in print, people have asked me about a Kindle edition, so after a lot of work on the layout, I’ve published it as an ebook. Kindle Unlimited subscribers can read it for free, or you can purchase it for less than half of the print price.