Last Thursday’s Hutchinson Leader featured an editorial titled ‘It’s A Great Cause, But…’ about how to choose which nonprofit fundraiser to support with your own charitable dollars. The editorial highlights upcoming local events, but no matter where you live or what cause you support, the column’s suggestions are relevant:
The decision really comes down to two things:
1) How you value the services that the nonprofit provides, and2) How you value the fundraising event you attend. If it’s a benefit concert or golf tournament, you might view your donation as more of an entertainment cost than a charitable donation. It depends on your point of view.
I could go off on a tangent about how inefficient events are as fundraising strategies (believe me, they are entertainment), but instead I’ll muse on the overall nonprofit efficiency question that the editorial raises. The writer cites the Charities Review Council’s 70/30 ratio (at least 70 percent of a nonprofit budget should go toward programs and not more than 30 percent should be spent on management and fundraising) as the standard by which nonprofits should be judged.
The efficiency vs. effectiveness topic is hotly debated today. MCF touched on it in our recent Giving Forum issue on general operating support. Our grantmaker members make tough choices every day — not just about which cause and organization to support, but about whether to restrict grants for program expenses or whether to make general operating grants — and trust the nonprofit recipient to decide how to best to use the money to further its mission.
Kate Barr, executive director of the Nonprofits Assistance Fund, blogs regularly (and occasionally rants) about efficiency/effectiveness measures. She’s even declared it’s time to throw the 70/30 ratio out the window. Whether you agree with her or not, she has a point: if we want to make an impact with our charitable gifts, we must understand what we are measuring … and that efficiency doesn’t necessarily equal effectiveness.
Join the conversation: How do you determine whether your favorite charity is getting the most bang for your buck? How do you measure effectiveness in your organization?
July 16, 2008 at 3:32 pm |
Here is my short answer, you demonstrate effectiveness by first creating trust and then demonstrating that you have somehow helped someone, improved a community, etc. A good way to build trust in your organization is through transparency and helping the public to see how you use their resources. You could also consider [self-promotion alert!] an Accountability Wizard review (http://smartgivers.org/AccountabilityWizard.html).
Rich actually wrote an interesting editorial on this very subject in the Star Tribune not too long ago (http://smartgivers.org/UseofFunds.html).
The Use of Funds standard is one of the most entrenched standards in the charity evaluation world. Did you know that it is craftily hidden in Council’s phone number (651 224 7030)? We are still comfortable using this as one of the Council’s sixteen standards but we do not actually recommend its use alone to compare nonprofits against each other.
We at the Council do worry that overreliance on this very tangible measure can create a sense that spending money on administration and fundraising is somehow bad. We actually tell donors that administrative and fundraising costs support the mission as much as program expenses. We use the standard as a “floor” or threshold rather than a means of comparing nonprofits or measuring relative efficiency and effectiveness.
However, I believe it is crucial to not let the logical problems with this standard overshadow what it tells us about public trust. It reflects that people are searching for easy ways to understand nonprofits. Some people are often shocked to learn that fundraising costs money and that nonprofits require considerable administrative support in some cases.
I am so glad to see this blog. It is quite timely, as we are in the beginning of a longish process to update our standards, maybe even the standard in question. In fact, if you are interested in participating you should email me at pverrette@smartgivers.org. We will also post opportunities on our web site and blogs (http://smartgivers.org/CouncilBlogs.html).
July 17, 2008 at 9:37 am |
Paul, thanks for your insights. We at MCF can totally relate to your comments about trust and transparency. In the Hutchinson Leader article was a reference to transparency, too, and that reminded me of the Principles for Grantmakers to which all MCF members subscribe. Our Transparency Principle applies well to grantmakers and grantseekers alike.
It’s also good to be reminded that the 70/30 “use of funds” standard is just one of 16 guides for evaluating nonprofits. I guess we’re all looking for more simplicity in our lives, but charitable giving still requires some complex head/heart decision-making.
July 22, 2008 at 12:03 pm |
When the Otto Bremer Foundation established its Organizational Effectiveness Program, staff gave a lot of thought to whether to use “effectiveness” or “efficiency” in the program name. On one level, our linguistic dilemma could be viewed simply as another example of rarified philanthro-speak. At the time, it cut to the heart of the matter: what do we care about in relation to helping nonprofit improve HOW they were doing their work?
We quickly came to the conclusion that an organization can be remarkably efficient and still not be true to its mission, or serving the best interests of the community it purports to work with or serve. If that is true, one could argue that the analytical focus should be on effectiveness, and how to improve or support it.
Former Humphrey Institute instructor Paul Light developed a short-hand definition for effective organizations: mission-driven programming, sufficient administrative capacity to support the work, and an ability to capture and show results. (I might add a fourth element – a governing board that both oversees and provides leadership.) In any case, without sounding too simplistic, these major elements, generally described, create a useful basic framework for analyzing nonprofit organizations and their underlying work.
The challenge of applying a “use of funds” standard seems particularly formulaic when considered against the remarkable diversity within the nonprofit sector, in terms of organizational types and foci, size and impact, to name but a few factors. While the emphasis on effectiveness, without numerics, is challenging for its potential subjectiveness, the successful track record of foundations that don’t use the 70/30 standard suggest it is a reasonable alternative.
July 25, 2008 at 8:46 am |
Is 2000 years long enough to “measure results?”
Original post is on http://www.cfctreasures.wordpress.com (April, 2008)
The Good Samaritan & “Performance Measurement”
by Bill Huddleston
Currently, there’s a lot of hype in the world about being “results oriented” and the culture of “performance management” has seeped its way into almost every realm of American life, including business, government and now, the non-profit world as well.
Well, why shouldn’t it? Doesn’t it sound like it’s the only way to be, after all, who could be “against results” or against “performance measurement.” It sounds great, but like the question, “When did you stop beating your wife (or husband)?” it sets the stage in an extremely negative, and skewed fashion.
Let’s use a historical example, the story of the good Samaritan from the Bible is one that I believe is so widely known that it qualifies as a societal story, not just a religious one.
To recap, in the parable a traveler is robbed, beaten, stripped of his clothes and left for dead. Two different people walk by, leaving the robbery victim alone. Then a man from Samaria (the Good Samaritan) comes upon the man, and even though the two different groups hated each other, he stops to render aid. The Samaritan takes pity on the victim, bandages him, pours oil and wine on his wounds, then puts the victim on his donkey and takes him to an inn and takes care of him. The next day, the Good Samaritan gives the innkeeper two dineri (this was about a month’s earnings at the time) and tells the innkeeper, “Look after him, and when I return I will reimburse you for any extra expense you have.” (The story is from Luke 10:29-35).
Now let’s apply modern performance measurement and outcome techniques to this story.
With 2000 years of history the story still resonates, how many people have been helped because someone remembered the story of the Good Samaritan and acted in a way that was not perhaps their first impulse? We will never know, and to the performance management crowd, this incident would be recorded today as “too expensive” and “ineffective” – after all, the Samaritan only helped one person. We don’t know if the Samaritan ever came back and paid those extra expenses, and it was a month’s earnings to help just this one person.
It would also received the rating of : “Results Not Demonstrated” – we don’t know if the victim ever recovered, was permanently injured, or had mental impairment due to his injuries. All we know is that he had the crap beat out of him, multiple people walked by, until the “unclean” Samaritan stopped to help.
According to the performance measurement tools, the Good Samaritan “program” was a failure and had no impact.
I think not.
Copyright Bill Huddleston, All rights reserved.
http://www.cfcfundraising.com
October 15, 2008 at 11:52 am |
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