From Research

New report says: a significant investment in nonprofit growth can really pay off

If institutional funders want to see significant increases in an organization’s philanthropic revenues, they’ve got to have a much bigger picture of the scale of needed capacity in fund development. Funding just one development director, with no other support, doesn’t really help organizations make the big leaps, in my opinion. But funding an entire staff in development, that would be a great take-away from this study.

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New study suggests opportunities for solving small nonprofit back office needs

Here’s a new must read if you care about small nonprofits: “Outsourcing back office services in small nonprofits: Pitfalls and Possibilities.”

Thank you so to my colleague and friend Jane Arsenault of FioPartners for forwarding this report.  (If you are interested in nonprofit alliances and haven’t read through Jane’s 1998 book Forging Nonprofit Alliances, you’ve been missing one of the pioneering works on this topic).

“Outsourcing back-office services…” is a study conducted by the Management Assistance Group for the Eugene and Agnes E. Meyer Foundation of Washington, D.C. It confirms through a study of Meyer grantees, industry experts and other literature what many of us have been thinking about, wishing for and experimenting with for a number of years.

Among the findings:

  • Outsourcing may present an opportunity for small organizations to improve their back office.
  • There may be new for-profit business opportunities in providing these services.
  • Because of their small size and lack of spending on any back office, outsourcing doesn’t offer immediate cost savings for most small organizations. But the report goes on to say that it could help free time for more focus on program and strategy.
  • Outsourcing needs to be approached cautiously by both organizations and their funders.

Large nonprofits and nonprofit networks have been outsourcing many back office functions for years. In our experience, small nonprofits haven’t been profitable enough for for-profit businesses to service. The lack of money to be made providing these functions has been a real barrier to the development of many services from which small organizations could benefit.

And small organizations simply haven’t had the time, expertise or money to solve this problem for themselves.

Across the country, larger nonprofits are stepping up to provide some of these services. All types of creative arrangements have been developed that don’t force small organizations to merge and thereby dissolve the important, close constituency and localized advocacy work that so many of our smallest nonprofits provide.

With the current economic crisis and a renewed interest in exploring nonprofit joint ventures, the time may finally be right for a thousand flowers to bloom in this area.

Now I’m worried – who decides what is effective and who should be funded?

I’m just amazed at the hubris of GiveWell, an unknown self-described nonprofit outcome evaluator, to believe that they have the credibility to issue the ratings they have and, by doing so, to tell donors not to give to these organizations. If this is the quality of analysis that we can expect from the type of “intermediary” organization being promoted by the Hewlett study, then it is hopeless to expect any real forward motion in understanding what works and what doesn’t.

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Charity Ratings?

Don Griesmann reminded me today in his blog about one of my pet year end peeves… the charity ratings that pop up in magazines like Forbes or are published on self-proclaimed watchdog sites like Charity Navigator. (I get particularly incensed at a business magazine editor claiming to know what the most effective charities are — give me a break.) With just under a million public charities in the US, there is no way that anyone could possibly know of every charity that is doing a great job.

One enormous hole in these rating systems is the lack of a handy report to measure societal impact. And you know that these raters are not investigating each and every charity firsthand. So these rating systems are mostly based on the information that can be gleaned from the Form 990. This results in too much attention on finances, in particular the ratio of program vs management/fundraising expenditures.

While it is a noble pursuit to try to help the public make more informed decisions about the charities they donate to, unfortunately, there is no easy rating system for measuring community benefit.? Here’s the problem with using low overhead as the determinate of effectiveness: Read more