How do you measure the effectiveness of a nonprofit organization? In my post, Attributes of a Successful Nonprofit, I argue that low spending on overhead is not the way to measure the worthiness of a nonprofit, and suggest new criteria instead. A reader asks: How would you objectively measure attributes like lifecycle preparedness and organizational authority, as just two of your 12 criteria?
It’s a good question and not necessarily easy to answer, but I think essential to start to grapple with. I don’t know that we can necessarily measure these things, but they are important attributes for donors to ask about. Then again, if you look at the measures that groups like Charity Navigator are starting to use, it becomes apparent that other measures are possible.
Distinguishing Between Nonprofits with Similar Missions
First, I think it is important that people learn more about the nonprofit organizations that they support so they can be more intelligent in their giving decisions. With the proliferation of nonprofits, not all organizations with similar missions are equally effective or deserving of funding.
Consider two organizations, both with similar missions of helping under-priveledged kids. One organization has been around for 30 years providing after school programs for 187 kids in the local school. The founder still micro-manages the small staff of 3 and they never grew their revenue to over $200,000. The other organization is founded by a social entrepreneur that put together a team of experts to tackle the problem. They are leveraging their $200,000 a year budget to fund ideas that can change the lives of tens of thousands of kids. Both organizations spent 15% of their budget on overhead. That metric alone is clearly provides no indication of the impact that the respective organizations will have.
Lifecycle Preparednesss & Organizational Authority
Things like lifecycle preparednesss and organizational authority provide some new measure of those differences. Clearly, the first organization is going to be in trouble when the founder retires, since she is not grooming anyone to take over, whereas the second organization is being built upon a model of flexibility. In terms of organizational authority, the first organization has zero clout on policy, even with their local city council member. The second organization is claiming a leadership position by challenging people to develop effective long-term solutions to the problem.
Now, most organizations are not usually so divergent in their approaches, and so the goal is to help donors distinguish similar organizations.
Tracking Measures for Success
In terms of tracking these things, there are movements to quantify them. For example, the IRS asks on the new 990 form whether the organization has a conflict of interest policy as well as other measures in place. While not requiring organizations to have such a policy (at least not yet), it does indicate the level of professionalism of an organization.
John Brothers of Cuidiu Consulting (http://www.cuidiuconsulting.com) gives a great presentation of organizational lifecycles.
For example, younger organizations are trying to build their boards. More mature organizations should have full boards. Younger organizations are trying to build their infrastructure, while older organizations are planning for the future.
More Specific Questions
I can see other more pointed questions based on the age of the organization asking about these things – for example, if the organization is around for 20 years, shouldn’t they have a succession plan for a founder that may be past his or her time? How about questions on the organization’s technology infrastructure (for example, are their finances and donor bases are computerized and protected). That should be a given, and yet it isn’t – so do those organizations deserve support because they avoid investing in that to keep their overhead expenses low?
For organizational authority, it is important to look at real change that the organization has achieved. We can ask about any laws they helped pass to ameliorate the situation they are addressing, or new ideas they have inspired to solve the problem – for example, awards they have given for new ideas, or white papers issued.
Brand Equity is Important
Another way to look at this is how people perceive specific nonprofits. Harris Interactive’s conducts a brand equity study of 1,000 nonprofits measuring how people rank organizations in terms of trust, brand recognition, and likelihood of donating to.
Achieving brand recognition is important for nonprofits if they are going to earn the trust of donors and corporations and remain viable organizations for the long-term. Achieving strong brand equity that can be parlayed into cause marketing sponsorship is also important as other funding sources diminish and as nonprofits look to corporations to advice and increasing their exposure.
In short, I think that if we looked closely enough, we can assess better measurements to determine success for charities than simply how much they spend on fundraising. What do you think?
- Times Up: A Radical Proposal for Nonprofits
- Don’t Start a Nonprofit
- Attributes of a Successful Nonprofit
- How Much is This Dollar Worth?