How High-Impact Nonprofits Measure Success
In an environment where “excellence” is a top business goal, it’s unusual to read that the “good-enough” organization may trump everyone in terms of actual positive impact. But that’s one of the key underpinnings to the research captured by Leslie Crutchfield and coauthor Heather McLeod Grant in Forces for Good: The Six Practices of High-Impact Nonprofits (John Wiley & Sons, 2008), who will speak Monday morning at the ASAE & The Center’s Annual Meeting.
Crutchfield hastens to explain the “good enough” statement: “We mean that every nonprofit has to be able to raise money and develop diverse revenue streams, attract and retain top talent, and do all the things any organization needs to survive…. But even if you’re excellent at doing all those things, it’s not enough to have the greatest amount of impact. What we’re saying is that we think internal excellence is admirable and something to strive for, but it’s not going to get you the social change that you’re looking for if you’re looking to be a great nonprofit…. You have to do that and be excellent outside the four walls of your institution, and do things beyond just the internal metrics.
I asked her whether redefining greatness means eschewing less meaningful metrics such as overhead-to-program ratios, those annoying ratios so beloved by charity rating Web sites and organizations. If so, that could be pretty tough, since the public increasingly uses these ratings to determine their donation choices, and it’s not like foundation folks and corporate philanthropy officers aren’t monitoring to them, too. And then there are the nonprofit/association leaders themselves—they’re keenly aware of those metrics, too, so are we talking about a major mindshift?
“Absolutely,” Crutchfield responds. “There’s important information in the conventional metrics. Let’s take the classic one—the overhead-to-program ratio. That’s where a donor or board member or volunteer can look at a nonprofit and say, ‘Okay, how much percentage-wise does a nonprofit spend on the development office and marketing versus actually feeding the hungry?’ Our point is that some organizations can look very lean and efficient--they can have that less-than-10% ratio--but if you look at the overall results, how many lives are they saving? How many people are they feeding? If you look at the outcomes, often the efficiency ratios don’t really line up with the organizations achieving the greatest outcomes.”
That statement may be just what some leaders need to take to their boards and donors to start a discussion about “real success,” piloting new metrics processes, and moving away from traditional measurements that diminish and distract from the true bottom line: positive, long-term change.
For instance, when Crutchfield interviewed Bill Shore, founder of Share Our Strength, one of the 12 “high-impact” nonprofits depicted in the book, he talked about the defensiveness of many organizations when it came to the overhead-to-program ratio, asking, “Which organization would you rather fund—the one that has less than 20% overhead ratio but isn’t saving many kids or the one that has a higher overhead ratio but is saving millions of lives? You have to look at outcomes.”
I grumbled that this seems obvious, but it breaks down at the prove-it point. She agreed. “The reason why we don’t have a better system is because it’s very hard to measure relative roles or impacts,” she says. “What we’ve gravitated toward is measuring what’s measurable and what’s easy to measure, and we rely on that instead of challenging the sector to find ways to measure what really matters. For example, impact. That requires more qualitative types of assessments. It requires judgment. It requires obtaining a lot of different kinds of information. It hasn’t happened for a lot of good reasons. It might even be impossible to develop a measure that would be a holistic way to rank nonprofits based on holistic results, and many groups are trying to figure this out. But I don’t think anyone has grabbed the Holy Grail yet, although it’s a quest that many thought leaders are on.”
I hope that’s true, but frankly, I’ve heard of few organizations on that path. Kaboom!, the playground-building nonprofit, is one of them, and Teach for America is another. It’s hard to think of many more. Anyone else out there ready to lead a mindshift in the name of true change?
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Comments
We invited Leslie to speak at our nonprofit leadership summit earlier this year and she has some good points, but it's interesting to see how this flies in the face of the regulatory environment and the press issues that face nonprofits (charities).
There are so many starting at any given point--and the abuses of fundraising practices of the small local charities are readily apparent if you spend your evenings and home and have yet to sign up for Do-Not-Call. Many of the large and well-functioning charities also have had to develop thick skin thanks to the attitudes being expressed in editorials and by regulators ... As a result I wonder how receptive many of them are to look outside their program to overhead ratios for more meaningful measures of efficacy. The environment for them is very different than for most associations when you look at simple things such as reserves: AIP, Guidestar, all the 'charity watchdogs' used by donors and consumers to review and screen philanthropies they might support tend to penalize the charity for building reserves beyond a small amount for sustenance, when our common indicator of association health is the size/ratio of reserves to annual operating budget.
I sometimes feel as if we should be glad we don't have an 'association watchdog agency' but also appreciated their work in essentially trying to extend the Collins type analysis into charities where I would argue excellence is even harder to measure because societal impact can be a fuzzier objective and harder to achieve than member satisfaction...
Kevin
Posted by: Kevin Whorton, WM&R | August 15, 2008 4:09 AM