The True Cost of Impact
Hello everyone,
I hope summer is wrapping up well for your organizations. We will soon enter the season of mass invitations and opportunities to give to our causes. It is about now that I start thinking deeper about the value proposition we share with donors, which gets rooted in our exchange of values and our ability to create positive outcomes. We have to really understand the following:
- What value does your organization bring to the donor, to the community, etc.?
- How are the donor and volunteers finding meaning through your organization?
- What value are you not translating and sharing with your constituencies?
- Are we saying what we think we are?
This reminds me of the discussion of operational and administrative overhead costs (indirect expenses) versus so-called mission-centric costs (direct expenses). This discussion is grounded also in an understanding of how we create outcomes. I would argue that indirect expenses represent one of the greatest places of lost value in the charitable sector, yet it is the place where some of the greatest societal value is created. Society treats these overhead expenses like they have no value because for decades we have tried to get donors focused on mission-centric, tangible fundraising cases for support (direct program expense lingo).
As you know, all operational or overhead costs are in reality, mission-centric. If we are spending money on something that does not have mission impact, then we should not spend money on it. The challenge we have is not that indirect expenses are not mission-centric, but that we often don’t invest time in translating the value of those perceived non-mission centric items to the mission for the donor. Remember:
Direct Expenses + Indirect Expenses (operational, overhead, etc.) = Impact
If donors understand that operational expenses are catalysts to the value they hold in your mission and vision, then they will fund operational expenses. When a computer is just a computer or a staff salary is just a staff salary, who wants to invest in those items? I know I don’t. But when that computer or administrative support person is now translated for their value as a catalyst to the realization of the vision and fulfillment of the mission, I do want to invest in those items. These items all translate back to value and have a big impact on our value proposition to the donor.
The value proposition we have is the total of how we transform the community. It is not somehow restricted to just the direct program expenses. Every semester I have my graduate students focus on the mission nexus. This is how to translate seemingly hard operational expense items into direct mission and vision catalyst items. They come away from it with eyes open and realizing the lost value of operational expenses.
So here is my challenge as you are in the 3rd quarter. Don’t settle for a fall appeal that just asks people to give to some annual campaign. Instead, spend some time and show your donors the real value proposition. Explain how you transform society and how every resource you use is a critical part of that equation for transformation, whether it is staff salaries, backpacks for kids, computers, utilities, etc. Show the donor that they are a part of something bigger than themselves and that everything you invest in creates the value that they share with you. Don’t lose the value of some of the most value-creating expenses we have, operational expenses and overhead. Without those, we don’t keep the heart of the organization strong to deliver the tangible things society values.
I believe the articles and podcast this month will be of great value in this.
Thanks for all you do and the light you shine!
Warmly,
Jamie
