At Welborn, we believe communities flourish when the organizations serving them have what they need to do their best work. Through Grow (a capacity-building platform) and our focus area Nonprofit Excellence, we spend a great deal of time listening to nonprofits, funders, and community partners about what helps mission-driven work succeed. One theme continues to surface: too many people still treat nonprofit overhead and administrative costs as warning signs rather than essential investments.

That mindset is understandable. It is also incomplete.

For years, the social sector has been shaped by what many call the “overhead myth,” the belief that a nonprofit’s effectiveness can be measured primarily by how little it spends on administration, fundraising, technology, finance, evaluation, communications, and staff support. The result has often been a cycle where organizations feel pressure to minimize visible operational costs, even when those very systems are necessary to sustain meaningful impact.

But healthy organizations require healthy infrastructure.

Nonprofits are expected to tackle some of our community’s most complex challenges: early learning, housing stability, mental health, food security, workforce development, neighborhood vitality, and family well-being. These are not small or simple responsibilities. They demand strong leadership, skilled staff, sound financial management, effective communications, reliable technology, and meaningful evaluation systems.

Communities do not flourish because nonprofits spend less on operations. Communities flourish because nonprofits have the capacity to deliver meaningful results.

This is especially important in our region. Welborn’s 2024 regional nonprofit landscape survey identified more than 1,100 charitable nonprofits operating across the five-county survey area, representing more than $1 billion in assets and over half a billion dollars in annual revenue. These organizations are not peripheral to regional progress. They are core civic and economic infrastructure.

And infrastructure costs money.

Yet advocating for adequate operational investment does not mean abandoning accountability. In fact, the opposite is true. Strong infrastructure should lead to stronger stewardship. Organizations asking funders and donors to invest in capacity must also demonstrate transparent governance, ethical leadership, measurable outcomes, and responsible financial practices.

Operational investment without accountability can erode trust. But accountability without investment creates fragility.

The healthiest nonprofit ecosystems hold both realities together: nonprofits need sufficient operational capacity to do their work well, and nonprofits must be able to clearly communicate how those investments strengthen mission delivery and community impact.

This is where the conversation around overhead needs to mature. The better question is not simply, “How low are your administrative costs?” The better questions are:

• Are your systems helping you deliver stronger outcomes?
• Are you building an organization that can sustain impact long-term?
• Are you transparent about how resources are being used?
• Are your internal structures aligned with your mission and values?

For nonprofit leaders, this moment presents an opportunity to reshape the narrative. Rather than apologizing for investments in staffing, technology, evaluation, or communications, organizations can help donors understand how those systems contribute directly to effectiveness, resilience, and long-term community benefit.

At Welborn, we believe nonprofits should not have to choose between sustainability and trustworthiness. The strongest organizations pursue both.

If we want healthier communities, we need healthier nonprofit organizations — organizations equipped not only to respond to today’s challenges, but also to adapt, learn, measure, and grow over time.

That requires investment.

Reflection Questions for Nonprofit Leaders

• How would you describe your organization’s overhead and explain why those investments are essential to achieving your mission?
• If a funder asked about your organization’s effectiveness, what evidence beyond financial ratios would you share to demonstrate your impact, leadership, transparency, and long-term sustainability?
• How can you clearly communicate the value of investments in operations, technology, staff development, or other infrastructure as drivers of mission success?
• What stories or examples best demonstrate how investments in your staff, systems, and operations have strengthened your mission?
• How do you position your organization as one that continuously learns, adapts, and improves to better serve its community?
• What are you doing to help your board understand the role that operational and capacity-building investments play in your organization’s success?

Resources to Consider

• Overhead Myth, Ted Talk by Dan Palatta (link on Grow)
• Trainings
  • Nonprofit: Sustain Abilities, Fundamentals of Nonprofit Management (for Nonprofit Leaders and Board Members)
  • Donors: Board Champions, Giving for Impact