Not too long ago I had the opportunity to listen to a wonderful speech that was given by Thomas Tierney, chairman and cofounder of Bridgespan, at the 2009 Philanthropy Roundtable Annual Meeting. For those who have not had the opportunity to listen to it, the speech can now be found on the Philanthropy Roundtable’s website. It was a refreshing oration which I believe every donor (and nonprofit leader) would benefit from listening to. One of the focuses of the speech was to identify several brutal facts facing donors who are seeking to achieve greater impact through their contributions. Since this year, more than any other in recent memory, donors are interested in seeing their seeing their contributions stretched a little further to help more people, recognizing these facts is essential if you want to optimize the impact your philanthropy is having.
The first brutal fact that Tierney identifies is that donors are only as good as the organizations they give to. This becomes particularly tricky when a donor considers the sheer number of nonprofits that are out there – more than a million at the latest count.
The second fact is that excellence in giving is self-imposed. It is very easy for a donor interested in average returns to stroke a check to the organization of his choice and continue on his or her merry way. However, donors who want to see more children helped with their donation must raise the bar in their giving. It was easy to appreciate his view that, unlike the for-profit sector, there are no predators in the nonprofit world. In other words, if a charity underperforms, there is no larger charity that will come and absorb it. Underperformers, although often quite well-intentioned, abound in this sector. It is left up to the donor to determine what nonprofits meet their high expectations.
The third fact that donors must face is that there are obstacles and handicaps that appear in the nonprofit sector, which are not present in the for-profit world that most donors are familiar with. There are no capital markets for nonprofits, nor any sort of pipeline for identifying and promoting talent. Effective nonprofits must be repeatedly asking themselves the difficult questions about how they define success and how they are going to achieve that vision if they want to have the kind of impact that discerning donors are looking for.
Compound those brutal facts by this week’s press release issued by a collaborative of nonprofit watchdogs, including GuideStar and Charity Navigator, which essentially encouraged donors not to rely on overhead and fundraising ratios as a measurement of effectiveness in their favorite nonprofits: tools that have been historically used to determine a nonprofit’s efficiency.
I completely agree with what the press release had to say. Overhead ratios do not relate to the impact that a nonprofit is having on its target population. Not to mention these ratios encourage nonprofits to sacrifice investing in resources and talent that would increase their effectiveness but would negatively affect their ratio. On top of it all, I have never seen two nonprofits interpret the rules for determining overhead costs in the same way.
So what does that leave donors? Since excellence is self-imposed, how can donors interested in achieving more than average returns on their donation navigate the obstacles presented by the nonprofit world and find the partners that deliver the results the donor is looking for? It can be terribly overwhelming. The good news is…there is help.
Our role at Operation Kids is to provide the research and resources necessary so that our clients can make informed giving decisions and achieve the impact they are hoping for – without taking any fees. We do this because we firmly believe that more donors giving to more effective charities results in more lives changed. If you are interested in raising the bar in your charitable giving this holiday season (or any time), contact us and see if we can help you.