Wired Causes

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If you work for a charity rating agency, you did not want to be at the DMA Nonprofit Federation meeting this week. Watchdogs were about as popular as canines at a cat convention. First, you had the keynote speaker - Dan Pallotta, author of Uncharitable and a big critic of watchdogs like Charity Navigator and the BBB Wise Giving Alliance. He laid out a provocative, controversial and compelling case for allowing charities to operate like capitalists - paying to get good talent, spending and risking what’s needed to do effective long-term fundraising, and being judged on social value created rather than overhead spent. There was some good thinking there - and some pointed potshots. In the process of making his case, he slammed watchdogs for perpetuating a simplistic focus on how much charities spend on “overhead.” The audience loved it, of course. Direct marketers are labeled as fundraising “overhead” and the less efficient of them have been called out by watchdogs, sometimes with good cause. It was a joy for them to hear “overhead should be dead.”

Specifically, he said: “We must get people to stop asking what percentage of their donation goes to a cause.. and give nonprofits more freedom to spend their money on things demonized as overhead, so they have some hope of reaching a fraction of the scale of the social problems they are trying to confront.” He advocated that we stop using the word overhead, that donors stop asking questions about overhead, and that we throw out the watchdogs and build “a magnificent national assessment apparatus.”

Then there was the release of two studies at the conference that also called into question the work of watchdogs, saying their ratings “may be causing more confusion than clarity.” The reports were “Reframing the Discussion about Nonprofit Effectiveness,” and “Charity Rating Scales: The Challenge of Developing ‘Effective’ Measures of Nonprofit Organizational Effectiveness,” both available via the DMANF. The studies say the ratings affect donations, with watchdog approval leading to donor money. This is a problem, the thinking goes, because the ratings only measure how much money a nonprofit spends on “overhead” rather than how effective that charity may be. The DMANF said the first report concluded:

Those who want to learn about a nonprofit prior to making a financial contribution not rely on watchdog websites as “one-stop shops” for information, but to do “old-fashioned” research about a charity’s operations and programs to help make a more fully informed decision.

Hmmm…. I’m not sure what “old fashioned research” involves, but I can say it is unlikely to happen. It seems to me this whole watchdog-bashing is long on criticism but short on solutions. I love the idea of a magnificent national assessment apparatus, but that is a very, very long way away. In the meantime, what are donors to do? And what are we nonprofits to do?

Let’s review. Here’s the anti-watchdog position: Overhead doesn’t tell the full story about a nonprofit’s work. Therefore, it is bad. Kill the watchdogs. Donors should set out to do their own in-depth research on a nonprofit’s effectiveness - or we should await the magnificent national assessment apparatus.

Here’s what I like about that argument: Yes, overhead is only one limited criteria and the CEO’s salary doesn’t really tell you how many lives get saved by a charity. I agree with Pallotta that paying for talent is not bad, and fundraising is a necessary expense. And yes, it’s a shame that overhead is the only quick way to compare charities.

Here’s what I don’t like about what I heard: That anyone in their right mind thinks the solution is for donors to do “old-fashioned research,” taking time to go try to figure out which nonprofits are effective with in-depth analysis based on…? I don’t do that with my 401k - so I certainly don’t have the time to do that with my charities - if that data was even readily accessible. There is no single good source of information on nonprofit effectiveness, though some good people are doing their best to start trying to provide it. We don’t have the magnificent national assessment apparatus, so what do donors do in the meantime?

Today I called up Ken Berger of Charity Navigator today to ask what he thought - and to find out if he knew the claws were out. As he’s publicly said, he agreed that overhead is a one-dimensional view into charities. That’s why he, with partners like Great Nonprofits and GuideStar, got together and said as much. It’s also why Charity Navigator is adding two additional dimensions to its ratings. You see, here’s the funny thing: the watchdogs have gone on record agreeing overhead doesn’t tell the whole story. And Charity Navigator is working to add two more dimensions to its work. They have always done #1. They recently added #2 and are working on #3 with their partners:

1. Financial health – Is the nonprofit sustainable? Does it have robust financial strength to survive in good times and bad? Is the overhead not at the extreme end of the continuum?

2. Accountability – Does the organization have ethical practices, good governance and transparency? Is it accountable to its constituents?

3. Outcomes – Can the nonprofit supply information about meaningful and lasting change in the communities and lives of the people it serves? Can they show evidence that these changes are as a result of their efforts? Do they have systems and processes in place to effectively manage their performance?

These three dimensions will then be part of Charity Navigator’s star ratings - which is the only way any of the watchdog critics are going to get to their goal of a more well-rounded view into nonprofit effectiveness that donors actually use. They may hate the watchdogs, but we need a simple, watchdog-like system with an at-a-glance seal of approval. It would be nice if the seal told as full as a story as was possible in a sector where it’s not always easy to measure impact. People like to see stars - a simple, accessible and easily compared rating - and that is never going to change. Let’s not condemn a desire for simple ratings. And let’s quit trying to change that universal truth and constructively contribute to a way to make those stars as three-dimensional as is practical. A fuller picture is something everyone wants - but we need to do the work together of making that possible.

Full disclosure: I write this blog as an individual and not as a representative of my organization, but I should say my organization Network for Good partners with Charity Navigator and GuideStar.

That’s what everyone is saying at the Direct Marketing Association conference here in New York, where I spoke this morning with fellow bloggers Jeff Brooks, Sarah Durham of Big Duck, Roger Craver of the Agitator and Karen Zapp.  Jeff Brooks says people under 50 don’t give enough to merit much cultivation at all.  Then the authors of the report, Heart of the Donor, Insights into Donor Motivation and Behavior for the 21st Century, said older donors are the most generous - and they give primarily through the mail. 

So should you write off anyone remotely youthful?  Forget the Internet for the next two decades?  Errr…. no. 

The Heart of the Donor study said those in the 25-54 age range tended to give both online and through the mail.  Lisa McIntyre says:

“One thing we find interesting is this nexus in the 25-54 year old group—the donors who will be most important to us in the coming decade seem equally facile with both mail and online.  The point is this: if the goal of a nonprofit is to effectively target today’s best donors, then they should focus significant and smart attention on the donors giving the most money – seniors and boomers.  For example, the number of donors in the 18-24 group and 70-plus are comparable, but the 70-plus donor gives three times as much.  Does that mean nonprofits should turn a blind eye to the younger segments?  Of course not.  Their value will likely increase as they age.  But fundraising expenditures must be weighted according to a strategy that maximizes those who are giving now.”

Here’s what I think: focusing only the oldest donors is short-sighted, and we definitely can’t assume what has worked in the past will work in the future.  The fact that “older” donors give more does not mean we should do the same old fundraising.  Even the crowd here agrees on that: Boomers (who are not so ‘old’ for goodness sake) - and everyone younger - have a whole new set of expectations from their charities, from greater tranparency and accountability to a greater sense of engagement.  We have to start changing how we fundraise now or we’re going to be irrelevant very soon - and for generations to come.

More on that here.

Earlier this week, Facebook added  “where” to the list of personal information members share with the world.  There was much speculation what this feature might mean for FourSquare and the subsequent riddles, “What happens when you add Foursquare to Facebook? (Answer:  Facebook).
I’ve learned now that when Facebook announces a new feature, it is a signal [...]

Today, some important news released:

1. GuideStar said today the giving outlook is grim (though as I always like to point out, online giving is up).  Notably, The Effect of the Economy on the Nonprofit Sector: A June 2010 Survey said:

•Some 40 percent of participants reported that contributions to their organizations dropped between January 1 and May 31, 2010, compared to the same period a year earlier.
•Eight percent indicated that their organizations were in imminent danger of closing.
•Sixty-three percent reported a total increase in demand for their organization’s services between January 1, 2010 and May 31, 2010, compared to the same period a year prior.
•In order to balance budgets, 17 percent of respondents reduced program services, and 11 percent laid off employees.
•More than 60 percent of participants reporting decreased contributions attributed the drop to a decline in both the number of individual donors and the size of their donations.
•Among organizations that use volunteers, 17 percent used one or more in what had formerly been paid positions.
•About a third (32 percent) of organizations increased their reliance on volunteers, whereas 9 percent experienced a decline.

2. We’re not doing a good job cultivating large donors.

This, according to Greg Ulrich, a management consultant who has worked with businesses and nonprofit groups. He led the study, Money for Good, and he said in today’s Chronicle of Philanthropy (article requires membership to access):

What we learned is both encouraging and frightening. On the encouraging side, we found that $45-billion in potential donations is available annually from people who make $80,000 or more a year. (Those people make up the wealthiest 30 percent of American households.) That figure includes gifts that donors would be willing to switch from the charities they support now and new money they would be willing to donate to organizations that appeal to them the right way.

On the frightening side, we learned that most nonprofit groups are pursuing the $45-billion in the wrong ways—ways that, despite their best intentions and efforts, are unlikely to be effective. And being ineffective is easy given that $150-billion of the donations that affluent Americans contribute annually is essentially out of reach. Donors are exceedingly loyal to the organizations they already support, and they are not likely to change their minds about how to distribute that $150-billion.

In case you are concluding this is my most depressing post ever, he has some good advice for you, which includes:

*Approach your donors with a focus on their motivations and behaviors, not simple demographics.
*Concentrate on just a few types of donors that may be attracted to your cause, not everyone!
*Be focused, consistent and simple in your marketing approach.

Listen to this:

It turns out that only about one-third of all donors do any research before making a donation, and the vast majority of those who do, research simply to validate their gift (not to look for the charity that will make the greatest difference with their donation). Donors also want simple facts and figures and look to the nonprofit itself for that information. So make that easy to find. You don’t need to provide them with 15 key measures of performance or an abundance of information that does not matter to them (like, for instance, the size of the problem you are trying to solve).

Great advice in my view. 

3. While we may stink at fundraising and giving is down, at least we’re tweeting!  Yikes. Maybe our time would be better spent following Greg Ulrich’s advice.

Hat tip to Agitator for highlighting this data:

Yesterday, I had the pleasure of participating in Twitter chat series #socialmedia.   It’s been a one-hour  weekly chat on Twitter for the past 10 months  organized and hosted by Marc Meyer and Jason Breed.     The way it works is they invite a “host” to ask 3 compelling questions, 20 minutes each, that revolve around [...]

While it’s not yet true that “Illinois Does A Few Adult Films To Make Ends Meet”, the state has begun to cast lascivious glances at its nonprofits.  Those property-tax exemptions look mighty comfortable.  Why don’t you push that  cushion over to my side of the bed? And with most interactions taking place behind closed doors, [...]

A friend sent me this great quote from a Gail Collins piece in the NY Times on women gaining the right to vote - which was preceded by a 70-year slog.

“We always need to remember that behind almost every great moment in history, there are heroic people doing really boring and frustrating things for a prolonged period of time.”

Our work is sometimes boring and often frustrating, but it’s leading somewhere eventually—a slow motion miracles played out over a very long time.

The SXSW Interactive Festival (scheduled March 11-15, 2010 in Austin, Texas) is a mega huge social media industry event.  The final program is done through a combination of an open submission and voting process.   The panel picker process has opened – so you can vote for the panels you think are worthy of being on the [...]

Note from Beth: Social media is not a waste a time, but there are ways to waste your time.   On Saturday, I had the honor of presenting at Craigslist Foundation Boot Camp and one of the burning questions was about efficiency.   So, I’m going to explore this theme over the coming weeks.
A  few [...]