Is “Overhead” A Tainted Word? A Survey Experiment Exploring Framing Effects of Nonprofit Overhead on Donor Decision

Abstract

Nonprofit overhead ratios (i.e., proportion of funds spent on fundraising and/or management) have long been used as a proxy for nonprofit efficiency. Prior studies find that donors negatively respond to charities with higher overhead. Using a survey experiment, we explore whether providing different types of information about overhead alleviates this donor aversion. When asked to choose between two organizations as donation recipients, donors preferred the organization with lower overhead. However, when presented with information that described the purpose of higher overhead as building long-term organizational capacity, an increased proportion of donors chose to give to the organization with higher overhead. Omitting the word “overhead” further increased the proportion of donors choosing the organization with higher overhead. This study adds to our understanding of overhead aversion and has practical implications for nonprofits that rely on voluntary private contributions to achieve their missions.