# Worth a read: talking about overhead to donors - Link: https://fundraising.co.uk/2023/02/06/worth-a-read-talking-about-overhead-to-donors/ - Published: 2023-02-06T12:45:39+00:00 - Author: Donna Day Lafferty **The first in a series about books, journal articles, and reports that fundraisers might find inspiring.** The discussion of core costs, or overhead, in fundraising materials is a particular bug-bear of mine. Mainly because what makes core costs low can be outside of the charity’s control. Comic Relief, withlarge sums to invest before distribution, [state](https://www.comicrelief.com/news/how-comic-relief-manages-money-it-raises) that: > “No money donated directly by the public goes to pay our running costs. We cover > these in > other ways – such as returns on investments […] .” > > ## Advertisement > > [⌊Posthub advert. You create the campaign. We'll handle the postal journey. Get started at post-hub.co.uk.⌉](https://fundraising.co.uk/ads/posthub-20261007-300x250/) Does this type of communication fuel an unhelpful narrative that goes along the lines of “charities that do it right don’t spend public donations on running costs”? Thus, driving donor demand for everlower overhead ratios, with the long-term potential to create poorly governed and managedcharities that are less effective and efficient. Or administrative staff that are stretched to breakingpoint. This is not a new topic, there is a lot of literature out there already (Bennett, 2009; Karlan & Wood, 2017; NfpSynergy & ImpACT Coalition, 2006) . ## Small overhead isn’t the same as cost-effective Caviola et. al.’s (2014) journal article on this topic cuts straight to a useful point, small overhead isn’t the same as cost effective. I don’t know if we say that often enough. Then they think about what tosay to help donors make choices that align with what really does matter to them, which is handy. Like all good academics, they offer a nifty term that can leave you asking, what’s that when it’s at home: ‘evaluability bias’. In a nutshell, donors use data they can make sense of, or to quote them“the tendency to weight the importance of an attribute in proportion to its ease of evaluation.” The punchline in their abstract that made me sit up was: > “when presented with a single charity, people are willing to donate more to a > charity with > low overhead ratio, regardless of cost-effectiveness. However, when > people are presentedwith two charities simultaneously—thereby enabling comparative > evaluation—they basetheir donation behavior on cost-effectiveness…” It is in some ways a simplistic analysis of giving. They state that “If the aim of charitable donation is to maximize the impact of one’s donation […] then people should prefer to donate to those charitiesthat are most cost-effective.” We know that giving decisions are more complicated than that(Bekkers & Wiepking, 2011). But when we say how little (or how much) we spend on overhead, weare talking to that element of donor decision making. So, it remains a useful study even if only toguide your discussion of overhead. They touch on the phenomenon of what you measure, becomes what’s important, and how this has potentially impacted the way we communicate with donors: > “as the overhead ratio is more readily available for most charities because it > is straightforward to calculate, it becomes easier to choose a charity based on > this aspect. > “Measuring cost-effectiveness, on the other hand, can be extremely difficult and > requires > extensive empirical research…” Although my professional fundraising experience says that measuring overhead isn’t that simple (The Urban Institute and Indiana University, 2004) . I’ve been involved in the arguments about whatgoes in, what doesn’t, and who decides. But I take their point. Actually, we know impact reporting isimportant but difficult (Breckell, Harrison,& Robert, 2010) , and the discussion of comparing costeffectiveness may be just a fraught with pitfalls as comparison of overheads. **SEE ALSO: [13 fundraisers share their fundraising bookshelves](https://fundraising.co.uk/2020/02/04/13-fundraisers-share-their-fundraising-bookshelves/)( 4 February 2020)** In the Caviola et. al.’s (2014) they compare the effectiveness, impact against cost, of two charities. It is this comparison that drives the donor behaviour in favour of effectiveness rather than lowoverheads (warning, this is theoretical giving, but read their justification for the research model). That’s a tricky move for us to take in fundraising material, we’re hardly likely to seek to discredit each other, thankfully it’s not how the nonprofit sector works. I once worked for a canine charity, which provided assistance-dogs. The fundraiser before me had done a very good job of comparing the cost of an assistance dog with the cost of an equivalent service from the NHS. In comparison we are stunningly cost effective, no slight to the NHS but trained dogs are just cheaper than care assistants. _My recommendation, before you decide how and when to include details of your overheads, is to give this paper a read. It’s not a how-to, but it might help you, to help your donors, to reduce their ‘evaluability bias’. ## Bibliography Bekkers, R., & Wiepking, P. (2011). A literature review of empirical studies of philanthropy: Eight mechanisms that drive charitable giving. _Nonprofit and Voluntary Sector Quarterly_, 40(5),924-973.Bennett, R. (2009). Factors influencing donation switching behaviour among charity supporters: anempirical investigation. _Journal of Customer Behaviour_, 8(4), 329-345.doi:10.1362/147539209X480972Breckell, P., Harrison, K., & Robert, N. (2010). _Impact reporting in the UK charity sector:_ CFDG,Charity Finance Directors’ Group.Caviola, L., Faulmüller, N., Everett, J. A., Savulescu, J., & Kahane, G. (2014). The evaluability bias incharitable giving: Saving administration costs or saving lives? _Judgm Decis Mak,_ 9(4), 303-316.Karlan, D.,& Wood, D. H. (2017). The effect of effectiveness: Donor response to aid effectiveness ina direct mail fundraising experiment. _Journal of Behavioral and Experimental Economics_, 66,1-8. doi: https://doi.org/10.1016/j.socec.2016.05.005NfpSynergy, & ImpACT Coalition. (2006). _Getting the Message Across: Practical strategies to helpcharities to change the way stakeholders see them. [Retrieved from NfpSynergy](https://nfpsynergy.net/report/download/70/0?email=d.daylafferty%40chi.ac.uk&company= UoC&name=Donna%20Day%20Lafferty&auth=7bfa8b37a27e9537404e608e25918462: https://nfpsynergy.net/report/download/70/0?email=d.daylafferty%40chi.ac.uk&company= UoC&name=Donna%20Day%20Lafferty&auth=7bfa8b37a27e9537404e608e25918462). The Urban Institute and Indiana University. (2004). _Lessons for Boards from the Nonprofit Overhead Cost Project. [Retrieved from The Urban Institute and Indiana University](https://scholarworks.iupui.edu/bitstream/handle/1805/5564/lessons_for_boards_from_the _nonprofit_overhead_cost_project.pdf?sequence=1&isAllowed=y). * **[7 myths about the Big Lottery Fund](https://fundraising.co.uk/2016/09/08/7-myths-big-lottery-fund/)( 8 September 2016) * **[Research reveals what makes fundraisers tick](https://fundraising.co.uk/2022/10/27/research-reveals-what-makes-fundraisers-tick/)( 27 October 2022) * **[Blackbaud to match-fund internships on the University of Chichester’s new fundraising degree course](https://fundraising.co.uk/2014/03/09/blackbaud-match-fund-internships-university-chichesters-new-fundraising-degree-course/)( 9 March 2014) * **[Guest experts confirmed for Fundraising Camp – Chichester](https://fundraising.co.uk/2015/03/12/guest-experts-confirmed-for-fundraising-camp-chichester/)( 12 March 2015)**