Budgeting For Impact
Hello everyone,
I hope summer is wrapping up well for your organizations. For many, we are starting into budget planning time. It is now that we also start thinking about the value and the value proposition we share with donors which should drive how we also think about the budgeting process.
• What value do you bring to the donor, to the community, etc.?
• How are the donor and volunteers finding meaning through your organization?
• What value are you not showing?
• What value is lost?
• How do we budget for that understanding in our priorities?
This reminds me of the discussion of operational and administrative overhead costs versus so-called mission centric costs as well. I would argue that the bucket called overhead represents 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. What I mean by that is that society treats these expenses like they have no value because for decades we have tried to get away from them and get donors focused on mission centric more tangible fundraising cases for support (our direct program expense lingo). As you all know, all operational or overhead costs are in reality, mission centric. If we are spending money on something that does not have a direct mission impact, then we should not spend money on that. The challenge we have is not that 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.
As a donor, I will fund operational expenses, if operational expenses are catalysts to what I care about, the value I hold in your mission and vision. When a computer is just a computer or a staff salary is just 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 real value and seen as a catalyst and vehicle 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 a community. It is not somehow restricted to just the direct program expenses. Every semester I have my graduate students focus on the mission nexus, how to translate seemingly hard operational expense items into direct mission and vision catalyst items. They come away from it with their eyes open and realizing the lost value of operational expenses.
Where does all of this land? - the budgeting process. This month I have a podcast with Ryan Kitchell on the topic of how the budget should start with “Why” and build inspiration in the process. I have also attached a few items related to operational costs and budgeting. I believe you will find them all of value. If you ever need to dig deeper into these processes, our accounting firm FiscAlign can help as well. We strive to build impact through the fiduciary process and like JDLA, transform communities through it.
Ensure a focus on how you transform society. The understanding of 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 your budgeting process reflects those priorities. Please don’t lose the value of some of the most value-creating expense areas 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.
