- Wed, September 30 2009
- Filed under: Nonprofit leadership
Anessa Stine, Flickr: “Black Dresses_7 to 14”
Some time ago, I said transparency is the new black for nonprofits.
In the current environment of distrust, everyone in our sector needs to go out of their way to be highly transparent and accountable. You must show where the money goes, in all your outreach.
But that’s not enough for everyone. For a select group of funders and major donors - and perhaps mainstream givers, someday - you must show real, measurable impact in a way that enables you to be judged on a social ROI or compared to other causes in effectiveness. These folks want some data under that transparency.
While not necessarily new, this topic is building buzz as some leading thinkers propose interesting avenues for pursuing this more data-driven philanthropic model. I was on a panel with Steven Goldberg (author of A Billion Drops in a Million Buckets) a couple of weeks ago to discuss his book’s proposal to create a capital market for nonprofits based on their performance. I also have been closely following the work of Lucy Bernholz, who has a recent must-read series of highly thoughtful reflections on the future of high-performance philanthropy here. Sean Stannard-Stockton of Tactical Philanthropy is pursuing these issues from the major donor side. Their insightful, provocative and in-depth analysis certainly beats my breezy fashion analogy if you want to go deep on this topic.
If you want the topline take, here is what I think.
1. Is there a demand for information on impact? Yes. This discussion about nonprofit impact and performance is not going away. You, as a nonprofit, will be under increased pressure from every kind of donor to show at least on a rudimentary level that you are using the donations you receive to make a real difference.
2. How strong is the demand for this? It depends. All funders want reporting. Some foundations and major donors want data on nonprofit impact organized in a way that allows them to compare and contrast charities - or to choose high performing nonprofits. They are interested in social ROI. But this is a small demand relative to overall giving. Most individuals are far too lazy and rushed to want that degree of information. The vast majority of people give because they care (it’s emotional) and only need basic confirmation that their money will make a difference. They aren’t going to spend a lot of time analyzing their charity’s performance - heck, they may not even do that with their 401k. The desire for data on impact or ratings will only gain traction on a grand scale if the insights on performance are reduced to a simple star system or Consumer Report-style bubbles.
3. Who will fill the demand for data on impact? It will take eternity for all nonprofits to coalesce around any one system for measuring impact. But in the meantime, donors and interested observers will develop their own rating systems. Some interesting initiatives are springing up, from Great Nonprofits to GuideStar’s new nonprofit pages to the direction Ken Berger is taking Charity Navigator to the Nonprofit Mapping Project. I agree with Lucy who says the trick is organizing this kind of networked data springing up from the masses. The other day Seth Godin created a portal for brands to see in one spot on the places they are being discussed online. This day is close for nonprofits.
The bottom line? I doubt we’ll ever get to a nonprofit capital market based on easy to interpret, consistent performance data across our sector. But we need to do better than the extremely limited information most donors have on where their dollars go. And we have to. Donors expect something more than a receipt. If we want to retain their support, we have to be transparent - and show some bang for their buck. They want that much - as long as we keep it short and simple (which is an approach that never goes out of style).