Monday, October 26, 2009

Why Should Donors Care About Outcomes and Impact?

We announced in December of 2008 that it is our intention to modify our system of evaluating public charities to go beyond matters of financial health and assess the outcome indicators (and more broadly, the potential to create social value through high performance) of the nonprofits we look at. The reaction we have gotten to this goal has varied widely from thumbs up encouragement to mission impossible skepticism. We expected all of that and are up to the challenge, thanks to the help of many experts who have been working diligently in this area for years. However, one reaction we have gotten from a number of experts has baffled me, “What makes you think donors care about outcomes or impact?”[1]

My first reaction to this question is, “Are you serious?” I have worked in the nonprofit sector for over 25 years and have related to all kinds of donors over that time. It has always been evident to me that they generally assume that the nonprofits they support are having good results. The fact that this assumption may be inaccurate has never occurred to most of them. However, if I said to them, “Did you know that perhaps 98% of all the nonprofits out there can not definitively show that they are having a meaningful impact?” I am certain it would blow their minds and they would join the chorus of those who call for more deeply measuring the effectiveness of all nonprofits.

Of course I realize that people give to (as opposed to invest in) nonprofits for a variety of reasons from the school or church they attend, to a request from a friend, to an emotional connection after hearing a compelling story about someone who has been helped by a nonprofit. Nonetheless, we at Charity Navigator know quite well that there is a real hunger for objective information and digging deeper. Why else would 3 million people a year visit our web site, which is largely a database that evaluates the financial inputs and sustainability of nonprofits? Furthermore, with all of the nonprofits scandals over the years, public cynicism has risen dramatically. There has also been a dramatic rise in the use of the internet to learn more about nonprofits people have an interest in. All the evidence we see shows that objective data on nonprofit performance is needed and desired now more than ever.

So, why should individual donors care about social impact? First of all, so they can become social investors (donors with their eyes wide open in that they base their decisions to support a nonprofit on more objective evidence of high performance that can result in creating social value). Secondly, in these tough economic times, there is less money available for individuals to invest in the causes they care about. Therefore, it is critically important that this smaller pie of money goes to those organizations that can actually show meaningful and sustainable results! It seems like a no-brainer and common sense to me. I have a firm belief that the average individual donor/social investor has common sense too! Therefore, the question I have for the experts who ask about this matter is, “What are YOU doing to educate donors to how centrally important outcomes and impact are?!”


[1] For an organization to show that it has provided “impact” it must be able to rule out all other variables that could have caused the social benefit. Therefore, since most nonprofits will never have funding for randomized control studies and the like, we intend to focus on evaluating nonprofit outcome indicators and other evidence of high performance.

9 comments:

Ingvild Bjornvold said...

I think you're hitting the nail on the head when you say that it's not that people don't care about outcomes; it's that they "generally assume that the nonprofits they support are having good results. The fact that this assumption may be inaccurate has never occurred to most of them."

john said...

I find it interesting that in calling our attention to an almost non-existent culture of evidence in the nonprofit sector, you choose to throw out the number "98%" without citing any source for that number.

Ken Berger said...

john,

Part of the problem is a lack of hard data on this question. However, based upon my discussion with many experts and consultants to nonprofits, this is the number they suggest. I look forward to the day when we can have objective sources of information for this kind of thing, but such is the state of the sector currently!

friskylambpjw said...

Many of us are concerned with Outcomes, but it is very difficult to track the data well when we are always short staffed. There are few easy tools for tracking the variety of data required and what is out there is very expensive!

Ken Berger said...

friskylambpjw,

I know all about the problem of being short staffed from many years of work in human services and health care charities. That unfortunately, is the nature of the business as it stands for most. One possible solution is to explore collaborations and mergers as a way to become more financially strong and large enough to have a more diverse base of staff. However, power, control and ego issues often get in the way of this.

As to the costliness of being performance driven. You can start out with a small amount and build up. Check out the Center for What Works to begin.

Diana said...

As a nonprofit board member first, and a nonprofit employee second, I want to express that many board members are focusing on outcomes and metrics. Nonprofits today are being asked to do more and more. Board members must take on the role of gatekeepers for mission including measurements.

When I am on a board and staff comes to me to discuss adding a service or program I ask four questions:
1. Does it fit mission?
2. How will we pay for it?
3. Who will benefit?
4. How will we measure impact/outcomes?

Having said that, some nonprofits have missions that make measurements hard. If a child visits a museum today and is inspired or changed in some way how can we capture that? Measurements are easiest in the human service sector.

Jan Tennyson said...

I've worked with a non-profit that inspires at-risk youth in group homes, detention centers, shelters, and orphanages - to give them hope to believe they can make it through Role models, people who have overcome tremendous adversity, and stories that relate directly to those who can't see a light at the end of the tunnel. Records to record the success of these programs is almost impossible. Longevity and commitment to excellence working with a very difficult population to reach has to mean something to donors. Jan Tennyson-Dare to Dream Children's foundation

Ken Berger said...

Jan,

I appreciate your concern but disagree with your conclusion. It is NOT almost impossible to record the success of programs like yours. I suggest you read up on the matter and engage the experts. There has been a tremendous amount of work with at-risk youth and outcome measurement.

Ken Berger said...

Diana,

It is great to hear of your focus and great questions as a Board member. You are special in the best sense!

It is true that human service organizations are further along than some other sectors (education and health care orgs have done a fair amount of work too). However, the challenge is not insurmountable and constituency voice tools are one way to measure museums.