Financial information does relate in any way to an organization’s effectiveness. This type of guide based solely on financials is a disservice to donors as well as to the entire nonprofit sector by perpetuating the notion that nonprofits are better if they spend less on overhead.
Financials have no relation whatsoever on the type of problem the organization is attempting to solve and their effectiveness in doing so. Many organizations spend little on fundraising (they rely on diminishing government grants – not a great strategy) and have no clue how to eliminate the cause of the social problem that they are addressing, and indeed will never actually do so. They have simply institutionalized a method of serving a specific population.
Furthermore, studies have shown that with no standard method for reporting various administrative and fundraising expenses, nonprofits consistently mis-report them. In fact, guides like this actively encourage under-reporting of expenses so that nonprofits look good comparatively to other groups. This vicious cycle must end.
In a time when we need more transparency and education about what it actually costs to operate a nonprofit to successfully address social problems, and at a time when nonprofits face more competition and threats to their funding than ever, we need to support novel ideas for addressing the root cause of problems.
—
If you want to create a guide that actually helps donors to find organizations that are effective, consider measuring the following:
IMPACT: Is the organization just applying band-aids to a situation or is it actually addressing the root cause of the problem? Is it affecting the attitudes and behaviors of its constituents in the communities it is addressing to positively affect change?
RELEVANCE: Is the organization stuck in yesterday’s mode addressing past issues that are no loner needed (like refugee settlement for specific populations) or is it addressing the needs of people today? Is the organization culturally-competent and using relevant tools and technology to address current challenges?
INNOVATION: Are new ideas and risk-taking discouraged or does the organization have the capacity to be creative, inventive and pioneering in responding to the changing needs of our society and the world around it?
LEVERGAGE: Is the organization merely helping one person at a time or does it have a model that allows it to leverage funds or resources to help exponential people with the same money?
REPLICATION: Is the organization just serving a single population or can the organization’s model be replicated by others to eliminate similar problems in other communities?
ORGANIZATIONAL EFFECTIVENESS: Is the organization just getting by or does it have sound policies and practices in place? Is it investing in marketing and infrastructure that will allow it to grow?
LIFECYCLE ADAPATION: Is the organization addressing its life cycle stage effectively? For example, are early stage organizations building their boards and donors base? Do mature organizations have infrastructure, leadership training and succession planning in place?
COLLABORATION: Does the organization try to protect its turf and “go it alone” or does it work with other organizations to solve problems and serve their populations?
ADVOCACY: Does the organization shy away from trying to change policies that affect their populations or does it combine advocacy with direct service, as studies have shown is the most successful way to create change.
STRONG LEADERSHIP: Has the same person been applying an outdated philosophy for the past decade or is there someone at the helm who brings character, vision and guidance?
ORGANIZATIONAL AUTHORITY: Does it just get by on a formula for providing nondescript services or has it pioneered breakthroughs that are adopted by other organizations? Has the organization established a reputation for being a leader in it field?
It would be wonderful to have a guide that recognizes the nonprofits that are creating real change based on these factors. Our society looks to nonprofits for leadership in addressing our pressing issues. Set the bar and expect great results – our society depends upon it.
In this post, I pick up from How Much is This Dollar Worth which argues that low spending on overhead is not the way to measure the worthiness of a nonprofit. Instead, I suggest the following criteria for donors to use in evaluating a nonprofit organization.
The New Criteria for Evaluating Nonprofits
1. IMPACT
Is the organization just applying band-aids to a situation or is it actually addressing the root cause of the problem? Is it affecting the attitudes and behaviors of its constituents in the communities it is serving to positively affect change?
2. RELEVANCE
Is the organization stuck in yesterday’s mode addressing past issues that are no longer needed (like refugee settlement for specific populations) or is it addressing the needs of people today? Is the organization culturally-competent and using relevant tools and technology to address current challenges?
3. INNOVATION
Are new ideas and risk-taking discouraged or does the organization have the capacity to be creative, inventive and pioneering in responding to the changing needs of our society and the world around it?
4. LEVERAGE
Is the organization merely helping one person at a time or does it have a model that allows it to leverage funds or resources to help exponential people with the same money?
5. SCALABILITY
Is the organization just serving a single population or can the organization’s model be replicated by others to eliminate similar problems in other communities?
6. ORGANIZATIONAL EFFECTIVENESS
Is the organization just getting by or does it have sound policies and practices in place to ensure its success? Is it investing in marketing and infrastructure that will allow it to grow?
7. LIFE CYCLE PREPAREDNESS
Is the organization addressing its life cycle stage effectively? For example, are early stage organizations building their boards and donors base? Do mature organizations have infrastructure, leadership training and succession planning in place?
8. COLLABORATION
Does the organization try to protect its turf and “go it alone” or does it work with other organizations to better solve problems and serve their populations?
9. ADVOCACY
Does the organization focus only on direct service or does it advocate for broader change? Studies have shown that combining service and advocacy is the most successful way to create change.
10.VALUES
Does the organization say one thing and do another or is it acting in sync with their values? (Such as providing social services for their clients, but failing to pay their employees a living wage to provide benefits).
11. STRONG LEADERSHIP
Has the same person been reinforcing the status quo for the past decade or is there someone at the helm who brings character, vision and leadership?
12. ORGANIZATIONAL AUTHORITY
Does the organization just get by providing formulaic services or has it pioneered breakthroughs that are adopted by other organizations? Has the organization established a reputation for being a leader and authority in it field?
WAKE UP CALL: I posit that these are the new criteria that nonprofits need to take seriously and that donors should consider when determining which organizations to support. It would be wonderful to have these standards adopted as the measure for success instead of merely looking at overhead expense ratios. Our society looks to nonprofits for leadership in addressing our pressing issues. It’s time to set the bar high and expect great results – our society depends upon it.
Follow up post
Measuring New Criteria for Nonprofit Effectiveness
[…] RELATED ARTICLE: Attributes of a Successful Nonprofit […]