More Money for Good, More or Less

 A post by James V. Toscano

In a recent posting on “Apples or Oranges,” I suggested a number of problems with Charity Navigator’s methods in trying to combine measures of financial health and of transparency and accountability into some kind of measure of effectiveness.

There are number of other organizations besides Charity Navigator attempting to guide donors on the effectiveness of nonprofit organizations, including Hope Consulting, Guidestar, Foundation Center, Better Business Bureau and our own Charities Review Council, to name but a few in a crowded field. Ultimately, at least for now, the holy grail is the attempt to measure and report on the impact on society of the work of specific nonprofits.

Now a report, More Money for Good authored by Guidestar’s departing CEO, Bob Ottendorf and Hope Consulting’s Greg Ulrich tries to add new dimensions to the overall attempt to try to ensure that money goes to the most effective nonprofits.

This report is directed at the nonprofit world, telling organizations what they have to do to meet donor expectations reported in the first two Money for Good reports. What information, in fact, do donors want from nonprofits on their outcomes and impacts? This report attempts to answer utilizing Money for Good survey results, citing specific information desired by donors, examples of what other nonprofits are doing, and looking at the future of these trends.

What it Does

At one level, this document gives good advice. Most suggestions point to tools and related materials that Guidestar has had a hand in developing, many free for the asking. The attempt here is to clarify what various types of donors, foundation staff and advisors to donors, really want to see.

So nonprofits are advised to use the Charting Impact tool developed by Guidestar, Independent Sector and the Better Business Bureau’s Wise Giving Alliance. A series of five questions aiming at clarity of what each nonprofit is trying to do, its strategy, its capability, how it measures results and how it feels it is changing the world, along with indicators of such progress, constitute this tool. Donors then will have a better idea of what the organization is up to, possibly comparing answers of more than one group before making a donation.

Also recommended is the GuideStar Exchange Program that has nonprofits tell their story on the GuideStar website. This profile can include mission, program, financials—whatever the nonprofit feels it wants donors to know. GreatNonprofits is suggested as a way to collect impact information from constituents through their reviews of the nonprofit, as is Financial SCAN, a tool providing information on a nonprofit’s finances.

Why do all of this? Well, the research shows there’s potential money out there for all of this work. The revised number that seems to be available for organizations that can demonstrate impact is $15 billion, or about 5% of all annual private giving. This is a number that will certainly attract our attention. It is also the icing on the $300 billion cake that will also start getting sliced differently in years to come.

What It Doesn’t Do

The report is more cheerleading than chartering. It uses the Money for Good reports’ results and points nonprofits toward more transparency and accountability through information and communication on impacts.  However, without an operational definition of impact, and consensus on the metrics behind that definition for various sectors of the industry, we are no further ahead.

First, we all need to get empirical definitions of results, outcomes and impacts, each an entirely different concept, for each of the segments of nonprofits. Secondly, we need some general agreement, as most industries have, on the metrics used to measure these concepts so they are comparable. Third, we need to use these numbers as part of a feedback process to continuously improve what we are doing, group by group and, fourth, we need to publish results so that all can learn from each other.

Without the ability to compare apples to apples, we are really reciting poetry. And while there is noting wrong with poetry, we do not parade it as an empirical tool. Certainly the task is daunting, especially for small organizations that may have within them the creative spark to do something new and better. Certainly, the task is difficult in trying to figure out if what works in one place and time will work in another, or if bringing something to scale will produce the same impacts.

The only way we can sort these out is to systematically devote the time, the people and the resources to do the job correctly. More Money for Good perhaps is the poem that inspires the science.

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