Why conversations around overhead should be refocused in the area that matters most – impact.
- Why overhead is vilified
- Why it really shouldn’t be
- Why a higher overhead is a sign of progress
- Where the focus really should be
- How to position your performance to avoid this trap
Episode Transcript
Hey everyone, Sean here and today what I want to talk to you about is why overhead is consistently vilified, or why it shouldn’t be because it matters when it comes to scaling impact.
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Now, overhead is everyone’s favorite line item on the balance sheet to pick on, especially when it comes to nonprofits. The public and other people seem to have this impression that if you’re doing what you’re supposed to be doing or you’re making the most of the dollars that are contributed towards you, and your overhead should be extremely low or near zero. For a whole multitude of reasons. This is just wildly impractical, and in my opinion, it’s a fundamental misunderstanding of what overhead represents.
Now, while we might not all love the fact that we have to have and manage overhead, it doesn’t mean it isn’t important. Your overhead is a key element of making sure that you have a strong team. If your overhead is being kept ridiculously low deliberately so then that is going to impact the strength of your team and what your team is capable of. I love the saying that goes if you want to go fast go alone and if you want to go far go together. The reason why I like that is because it really highlights the fact that you can’t do this alone, and you can’t remain ridiculously lean to the extent where it affects your performance. You need a strong team if you’re going to have a strong team. That means your overhead is not going to be ridiculously low or near zero and people need to understand that.
But what I would recommend doing instead of focusing on overhead especially if people are trying to beat you up over that is to readjust their focus and reposition the conversation around impact. Right because I’ve heard these heartbreaking stories about nonprofit organizations who overhead has grown. And people have just kind of run with that as a story and then made them out to look like they were doing something they weren’t supposed to be doing. When in reality their overhead was growing because their impact was scaling. And they were making significantly greater contributions over time. So the overhead played a key element in that but it was correlated to what was most important and that was the impact that they were generating. So if people are taking a closer look at your overhead and they really want to know why that number is growing or getting bigger, then I would encourage you to refocus them around where the performance really should be and why that overhead is going up because your impact is going up, ideally even faster. So that’s what matters more than most and that should help you avoid this as a trap.