The 'Third Rail' of Nonprofits: Overhead

Overhead is a touchy subject for many nonprofits. Donors who want most or all of their contributions to support an organization's cause may be overly critical of administrative costs and other overhead. Nonprofits, in turn, often feel pressured to keep overhead down and so may misrepresent those costs, reinforcing donors' unrealistic expectations.

Tom Tierney, chairman and co-founder of Bridgespan Group, a nonprofit consultant to nonprofits, wrote "The Donor-Grantee Trap" with Richard Steele. Tierney spoke about how a "starvation cycle" is dangerous to charities and the people they serve.