On December 1, 2009, a major shift in assessing nonprofits was announced by Charity Navigator, GuideStar, GiveWell, GreatNonprofits, and Philanthropedia. The announcement (PDF) aimed to repudiate the myopic focus on nonprofit overhead ratios and executive compensation as metrics to measure their effectiveness. The five oversight organizations also set out a course to establish and embrace new ways to evaluate nonprofits and identify nonprofits.
The announcement was greeted with wide support by those who advocated for such a change. Sean Stannard-Stock, the curator of the Tactical Philanthropy track at SOCAP10, noted that the change would help move more capital to effective nonprofits. Dan Pallotta applauded the change on the Harvard Business Review blog, while also noting that the future challenge of applying new evaluative measures “consistently to hundreds of thousands of organizations.”
The new assessment frameworks will be discussed at a SOCAP10 session led by Ken Berger of Charity Navigator, Andrew Wolk of Root Cause, and Elie Hassenfeld of GiveWell. That session will review three analytical approaches to assessing a still unnamed nonprofit. In Ken’s case, for example, the session will allow him to clarify the new approach to rates a nonprofit on its financial strength, accountability, and effectiveness.
While I look forward to learning more the three assessment models, I also want them to reflect on two ongoing challenges. The first challenge deals with the unintended consequences of the past focus on financials indicators. The second challenge, which I’ll address in a follow-up post, examines the ongoing challenges of assessing nonprofit performance in the absence of full information.
The first challenge reflects the reality that we’re still left with the remnants of the previous assessment system that focused largely on overhead ratios and compensation levels. While the blogging community moved to embrace new assessment approaches, many nonprofits are still wrestling to understand how to explain and embrace these new assessment approaches.
Perhaps even more importantly, not all nonprofits are aware that a shift took place. Nor have some of their donors and board leaders –who have in some weird Pavlovian manner become fixated on overhead rations and compensation rates – learned that new assessment models are now emerging.
So, my first set of questions to the panel would be: how do we better inform nonprofits, donors, and nonprofit leaders that a significant change has taken place and that it’s actually OK not to be completely obsessed with overhead ratios and executive compensation? Where are the marketing and dissemination efforts to explain and educate nonprofits and their respective donors and leaders?
Next post: assessing nonprofit performance in the absence of full information.
Disclaimer: This post is part of a series of posts on the SOCAP10 conference. As part of the blogging coverage for the conference, I was able to register to attend at a discounted rate. A version of this post appears on the SOCAP10 blog.
Tags: Charity Navigator, SOCAP10, Transparency, Nonprofit Ratings
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