This is my latest column for the Chronicle of Philanthropy. You will find the full archive of my past columns here.
Probing Questions All Donors Should Ask Before Making a Significant Gift
By Sean Stannard-Stockton | Chronicle of Philanthropy
One of the holy grails of nonprofit evaluation is to be able to compare nonprofits with different missions. Concepts like “social return on investment” strive to measure how much “good” an organization is creating, regardless of whether it is a soup kitchen or a job-training program. Given the difficulties of comparing the results of different types of organizations, it makes more sense for potential donors to ask a specific set of questions of all organizations.
Successful programs often look quite different from one another. However, high-performing organizations, those that have the ability to carry out successful programs, have similar characteristics. These organizations base their programs on research about what works, actively collect information about the results of their programs, systematically analyze this information, adjust their activities in response to new information, and focus all their energy on producing results.
To figure out whether nonprofits meet those standards, donors can ask specific questions that will help them decide whether a group is worth supporting. Each answer must be interpreted in the context of the nonprofit’s operations.
For instance, it would be unreasonable to expect a small grass-roots organization to present extensive evidence supporting its answers. However, no matter how big or small the group, donors can still assess whether an organization has the proclivity to become a high-performing group and whether it has put in place all that it can to move toward that goal. Even most large organizations do not possess all of the attributes of a high-performing organization. It is important that donors not let the perfect be the enemy of the good.
With that caveat in mind, here are the questions that donors should ask when they are considering a significant gift.
On what research or evidence did the organization design its programs? Whether you are evaluating a local after-school tutoring program or a global disaster-relief program, a high-performing nonprofit should be able to speak about the evidence and research that shaped its programs. While many organizations have not conducted extensive evaluations of their programs’ results, all programs should at least be based on knowledge about what works. When a nonprofit is exploring an unproven approach, it is critical that the program is treated as a research project to test an idea—and that donors are told that.
What information does the nonprofit collect about the results of its programs?For-profit organizations can track their revenue and expenses to determine exactly how much profit they are producing. Nonprofits need to track not only their financial transactions but also the social results that their programs achieve. The relevant information will vary at different organizations. However, all high-performing nonprofits should be making a consistent effort to collect the information that they believe is most relevant to measuring progress toward their goals.
How does the organization systematically analyze the information it collects? It is not enough simply to collect information; the whole point of gathering data is to better understand a situation. Whether information analysis takes the form of sophisticated statistical analysis or simply regularly scheduled reviews and discussion among the board and staff members, high-performing nonprofits should diligently attempt to understand the meaning of the information they collect.
How has the nonprofit adjusted its activities in response to new information?Unfortunately, knowing what should be done is not enough to spur every organization to action, just as knowing that eating less and exercising more are the keys to losing weight does not guarantee a successful diet. Nonprofits must be ready and able to adjust their activities as needed. High-performing nonprofits should be able to discuss specific instances in which they responded to new information by stopping or significantly altering their activities.
Does the organization have an absolute focus on producing results? In the business world, the intended result—a profit—is also the fuel that sustains the organization. In the nonprofit world, program results don’t usually pay the rent. That means that nonprofits are at risk of giving higher priority to fund raising and other revenue-generating activities than producing program results. Producing the revenue needed to run an organization is critical, but it is a means to an end. Sustaining an organization is useful only to the extent that it enables the delivery of program results. High-performing nonprofits should be able to speak convincingly to their absolute focus on results.
Plenty of nonprofit groups can show financial success. But donors need to ask the probing questions that will make sure that dollars flow only to organizations that turn financial resources into program results.
Sean Stannard-Stockton is chief executive of Tactical Philanthropy Advisors, in Burlingame, Calif., and author of the Tactical Philanthropy blog. He is a regular columnist for The Chronicle of Philanthropy.