In my first post on the topic of High Performance vs. High Impact, I stated that Impact was the holy grail of philanthropy. It was something to journey towards and High Performance organizations were the best way to get there.
But to get to High Impact, we need to know not just that we have a robust, high performance vehicle to travel in, but that we’re headed in the right direction. Unfortunately, High Impact is not a single destination that all organizations are driving towards. And there’s no fully featured map to get there. But some issue areas have better maps than others and some approaches are known to work or not.
How then do we know if a high performance organization is on the right (or best known) track?
A high performance nonprofit must constantly evaluate whether its efforts are resulting in positive outcomes. This is critical. In Paul Brest’s presentations about his book Money Well Spent, he talks about King Ferdinand and Queen Isabella as being “strategic philanthropists” in their funding of Columbus. My argument to Paul has been that the best thing to do is not study how to get to India (but actually end up in America) and then set out on that exact path with the exact tools needed according to your theory, but instead to build the most robust seafaring fleet possible. A high performance exploring team that is geared up to face the uncertain journey.
But if that “robust seafaring fleet” does not bother to evaluate if it is on track and make adjustments as needed, it dissolves into a Monty Python skit of a navy rowing (very efficiently!) in circles or even off the ends of the earth.
I should have made this point more clearly in my originally posts. But on the other hand, this point is so blindingly obvious that explicitly pointing it out seems superfluous.
But on examination, the need for pointing this attribute out reveals a fundamental difference between for-profit and non-profit organizations. Not one that needs to be fixed, but one that needs to be overcome because it is here to stay.
Note that in Warren Buffett’s set of criteria for a high performance for-profit he never says something like, “Companies must constantly evaluate whether their business activities are resulting in revenue and profits.” He doesn’t have to say this because there is a self-reinforcing mechanism at work. For-profit firms whose business models work (result in revenue and profits) make money and are able to grow. Companies whose activities don’t work (even those that are High Performing) do not generate enough revenue and profits to stay in business and they shut down.
This link doesn’t exist in the nonprofit world.
A nonprofit can be a high performance organization that implements a weak intervention. Its programs can be total failures, but implementing them does not directly affect the nonprofits revenue or ability to attract capital.
So in the nonprofit sector, we can’t just assume that any high performance nonprofit organization will result in impact. We must demand (and the nonprofit must demand of itself) that a constant focus is put on whether the organization’s efforts are turning into positive outcomes.
This focus isn’t a definitional aspect of a high performance organization. But it is the critical link between high performance and high impact.
Side note: Interestingly, for-profit companies sometimes forget about this critical link between high performance efforts and high impact (in their case, profits). In the late 1990’s, many dot-com companies ignored this link completely, believing that if they just attracted enough attention, the profit would take care of itself. That of course didn’t work out very well.
We’ve seen the link break down recently when mortgage companies began responding to very short term profits, while ignoring the fact that long term liabilities were piling up on their balance sheets. That of course didn’t work out very well either.
So ignoring this link, not tracking whether efforts are resulting in outcomes, is an attribute of both for-profit and nonprofit companies. But in the for-profit market, it cannot be ignored for long until the consequences become dire. But this short circuiting mechanism doesn’t exist for nonprofits. That makes their job all the more difficult. The only solution is for funders to put the mechanism in place themselves. Give more to high performance organizations who measure the results of their efforts and give less to other nonprofits.
Doing so will transform the social sector into a robust, high performance, high impact creator of social good.