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?”
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?!”
 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.