Wednesday, December 12, 2007

Two New Attempts at Rating Nonprofits

This is what motivated me to write the prior posting on year end charitable giving. There is an interesting article in the Chronicle on Philanthropy this week about two organizations that are taking new approaches to rating not-for-profits and trying to dig deeper than the financials.

The first, GiveWell, has started assessing a small number of organizations in a limited number of fields and hopes to both expand their ratings and develop tools that others can use. They are described as being anti-CharityNavigator and hoping to shake up the field. More at

The second is taking a democratic approach to letting the people who know about the workings of an organization share their experience - similar to an book rating. Staff, volunteers, donors, anyone with an opinion can weigh in and share it. They are currently working in two communities and hope to expand.

Evaluating Nonprofits for Charitable Giving

As we near the end of the year, many people pull out their check books and make gifts or additional donations to nonprofit organizations who serve people in need, who enrich our community through educational or cultural experiences or that share the values/goals of the donor in making our community or world a better place.

Twenty years ago, we gave with the implicit understanding that our donation would be used wisely to do the work of that organization. We likely received a thank you note and receipt for our gift but we did not scrutinize the organization or its efforts very closely. We somehow assumed that everyone at every not-for-profit worked for subsistence-level wages and always put their client's needs above their own. In fact, I recently heard a conversation about an elder donor who believed that the IRS only authorized organizations as not-for-profits if they met that standard.

Has the world ever changed... we now want to know how well an organization does their work, we want them to have exceptional staff - but to pay as little as possible to keep them, we want complete transparency in financial and leadership dealings, and may even want to specify how our donation is used.

With over 1 million charitable not-for-profits in the United States, how do we know which organizations are worthy of our investments? There are a number of rating organizations that are valiantly attempting to help address the need, but no one is quite there yet. And the biggest issue is how to define nonprofit effectiveness in both absolute and relative terms. How much should it cost to provide afterschool programs? how much more is it worth if the program graduates a high percentage of participants from high school? How do you value an afterschool program against an Aids prevention program or a Symphony Orchestra or a food bank?

On a national level, several services have been around for a number of years that focus on the financial aspects of a not-for-profit. They look at whether the organization completes the appropriate forms and follows financial "Best Practices". Some give extra points for organizations with an endowment because of the financial stability, some subtract points for an endowment since the money is not currently providing program services. Unfortunately, none of them even attempt to evaluate the quality of programs or the impact of the organizations - the real reasons we would choose to give. – The Better Business Bureau Wise Giving Alliance - The Evangelical Council for Financial Accountability

For general information about most established nonprofits -

Your local community foundation may have information that goes beyond the financial basics and be able to provide guidance.

Making the Move from Corporate to Not-for-Profit

It is exciting to see how much interest there is from experienced business leaders and managers to move into staff leadership positions in the Not-for-Profit community. Because of my roles as both a consultant to nonprofits and the publisher of the Not-for-Profit News, I get a lot of calls and e-mails asking to meet for breakfast or coffee to "get your advice on my career transition". I sometimes will speak with these people by phone but I seldom schedule meetings because I have found that the conversations tend to be very similar and not very productive. I hear similar comments from high profile leaders in the nonprofit and funder community and thought I might use this platform to briefly offer some resources and insights so that meetings of this type can be used more productively.

1) As soon as the idea of working in the nonprofit sector strikes your fancy,
go find a volunteer or board service opportunity with a cause or organization you can get excited about and jump into it with both feet. Become a "go to" person for staff and offer to take the lead on a few activities or events. Not only will this give you a flavor of the sector but it also adds to your resume - what not-for-profit would hire an executive who had never volunteered or served on a board before?

Don't make the leaders of foundations or community nonprofit experts your first stop in thinking about this type of move - they are not career counselors and you may be doing more harm than good to your search by arriving on their door step too early and unprepared. Wait until you know what type of role and what type of organization - you didn't want to work for "just any business" and you don't want to work for "just any nonprofit". Do approach a couple people who work in nonprofits similar to what you feel you are looking for to learn about their work.

3) Think about what you are hoping for in your next position. Many business people envision a nonprofit role as a chance to slow down and step out of the stress of the business world, especially if they are taking a reduction in pay. In reality, nonprofit leadership is just as difficult and stressful, sometimes even more. Working evenings and weekends with constituents or volunteers or board members is required. In preparing these notes, one nonprofit funder commented that she had a business person resign after a couple years of nonprofit leadership because there was no time to pursue his golf game.

4) Recognize the transition from big to small can be just as significant as from business to nonprofit. 80%+ of nonprofits have a handful of staff or smaller. If you have worked for even a mid-sized business, you have likely either forgotten or never had to worry about all the little details of keeping an organization running while making payroll each week - you would likely have no IT or marketing department or staff attorneys or maybe even someone to open and close the office each day - except you.

5) Do some reading to
acquaint yourself with the differences between business and not-for-profit cultures and leadership. Here are a couple to start with:

From the Stanford Social Innovation Review -What Business Execs Don’t Know—but Should—About Nonprofits

How Bridgers - individuals whose professional experience comes primarily from for-profit companies make the switch to the nonprofit sector - for reasons both personal and professional

And of course, Jim Collins's monograph "Good to Great and the Social Sectors" where he suggests that businesses will eventually begin seeking leaders from the nonprofit sector because it takes stronger leadership skills to lead volunteers and marginally paid staff than it does to lead in a corporate hierarchy full of financial and promotional incentives.

Be your own career counselor - There is a booming industry in books about making the move into nonprofit leadership. One of the early ones that has many practical exercises and good advice is “From Making a Profit to Making a Difference” by Richard King.

Explore other resources, both national and local to learn about the field and narrow your areas of interest. Some resources:
8) Take a class at the Fund Raising School. We are fortunate to have the highly regarded Center on Philanthropy at IU close by.

9) Finally, do
be excited about the possibilities while realizing that it could be the hardest, most frustrating, and most rewarding work of your career.

Please share your though
ts and helpful resources you have found.

Early New Year's Resolution - Just Blog It!

As we wrap up 2007, one of the items on my list is to take the few minutes that it will require a couple times each week to get the thoughts and reflections out of my head and into this blog in the hope that I can spark a meaningful discussion or offer a new resource. If you have topics you would like to see us cover, please let me know.