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High performing nonprofits develop careful strategies for creating consistent revenue to sustain operations. Donors do not want to support an organization one year and see its programs collapse the next year from insufficient funding. Great organizations with bold visions and effective programs understand that sustainable revenue streams are mission-critical.
Finding out if organizations you support will sustain themselves is step 3 in our 6-step process for evaluating nonprofit performance.
Do you want to know if charities you support operate efficiently and effectively in pursuit of their mission? You can. The best online charity evaluation platform just got better. The 2-page nonprofit Analytical Overviews from Intelligent Philanthropy have added 30 entry fields for a total of 150 up-to-date data points on organizational health and performance. Check out a sample 2012 edition Analytical Overview. There is no more comprehensive and concise overview of a charity's leadership, financial management, strategy and impact available on the internet anywhere.
New nonprofit information in the 2012 edition Analytical Overviews include...
High performing nonprofits must understand how to manage their money. Charities cannot promise great things to supporters and run out of resources along the way. A delicate balance of maintaining healthy reserves, minimizing debt, and sticking to a budget is required. Donors don’t want a bait-and-switch where increased donations go to debt service or get stockpiled in the bank without any increased impact. And no one can tolerate financial mismanagement where an organization lives in the red with unrealistic budgets or doesn’t put the majority of its funds into mission-related activities.
Just days before Intelligent Philanthropy turns 1 year old, we have finally been recognized as one of 8 major online charity evaluation and accountability organizations. RELEVANT Magazine published an article "Where Do Your Donations Go?" and listed Intelligent Philanthropy alongside Guidestar and GiveWell. Admittedly, the author chose to highlight and interview Charity Navigator and ECFA leaders. But the citation in a 3rd party publication is a step in the right direction for what we believe is the best all-around charity evaluation platform available.
What if your donation to fight human trafficking paid the salary of a human trafficker? What if your donation to support widowed law enforcement families went to a felon’s bank account? What if your child sponsorship monthly donation and letters never helped the girl in the picture? What if you gave money to loan to a struggling entrepreneur in Africa that was actually embezzled by loan officers? In the last year, I have seen each one of these nightmares come true. It could have been avoided. Read how in my latest Alliance magazine article Giving poorly can be worse than not giving at all.
Before you evaluate nonprofit performance, stop and ask 3 questions about the charity:
These 3 questions are all related to OUTCOMES. Outcome measurement and outcome-based evaluations have taken center stage in the contemporary debate about nonprofit performance. I, for one, am a voice and supporter of this trend. However, we can't let the trend rewrite each organization's goals. Some charity's just don't exist to produce the savory long-term, ever-increasing, measurable outcomes that have become all the rage. So if we are going to determine how well an organization is performing, we must first figure out what standards we can and cannot use to evaluate performance.
Endless conversation about "outcomes," "performance," and "impact" needs to come to an end. It doesn't need to stop. It needs to get somewhere. Concrete categories and conclusions need to take shape and either be adopted or discarded. That is what my next 7 blog posts are all about. I'm going to lay out a standardized approach to assessing organizational health and performance in the nonprofit sector.
Before I present the six standards for evaluating nonprofit performance, I've got to be clear about the pros and cons of a standardized approach vs. a customized approach.
Do you want to know if you are supporting effective and efficient nonprofit organizations? You can. That is what the Intelligent Philanthropy web platform is designed to do. I've stopped blogging for the past 4 months to launch it as soon as we could.
I have been working on this project for almost 2 years with my coworkers at Excellence In Giving. We have evaluated all other online resources for making smart giving decisions and decided that our platform would outperform all of them.
A money manager recently asked me: "Is it difficult for Excellence in Giving to find philanthropists who will pay for charity evaluations?" The simple answer is "yes." Although blogs and news articles are beginning to recognize the field of philanthropic advising, most big and small philanthropists do not recognize the value of paying experts to evaluate potential grantees. They do want to support the best organizations but typically balk at the idea of putting significant money into the necessary research that identifies high-performing, well-managed, difference-making nonprofits. Most of the time that hesitation results in donations given to a number of "good" organizations but not necessarily the "best." Sometimes it means donors unwittingly support scandalous frauds.
Last week an Excellence in Giving client sent a grant request from the Texas Highway Patrol Association & Museum (THPA) to our research team for review. A couple hours later we had scandal, suspicious money trails, and felonies in the report.
None of us wants to be judged for not doing what we never tried to do. But it happens all the time. One nonprofit I recently critiqued responded with this exact complaint, "You can't say we have failed to become partially self-sustaining when we have not made that an explicit goal for the last ten years." The complaint was justified. I had to modify my critique to read: if a donor wants a self-sustaining model, this organization has not developed it in the last ten years.
So how do we create a 'fair' performance standard for measuring nonprofit outcomes? In the world of business investments, analysts can run the numbers and get a clear record of expenses, revenue, and profit. In the nonprofit world, measuring performance is more elusive. There is no absolute standard that applies equally to organizations operating in different program and geographic areas. The only fair approach is comparing the relative performance of organizations in the same sectors.