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Measuring Charities' Effectiveness'Who Cares?

(July 12, 2004) Most donors are not all that interested in performance measurements (metrics) for charitable organizations and do not take them into account when they give, according to an article in the Summer 2004 issue of the Stanford Social Innovation Review.

The authors of the report, Katie Cunningham and Marc Ricks, originally wanted to determine how charities could improve their performance measurements by receiving feedback from donors. However, after several interviews they quickly found that most donors were not interested in charitable metrics and several were actually opposed to the concept.

To help explain donors' opposition and offer ideas about what metrics providers should do overcome donors' misunderstandings and objections, the authors identified five major findings:

  1. Donors do not perceive a need for performance management since they see little difference among organizations and rely on personal connections when making decisions to give. Encouraging individual donors to look at performance measurements before they write a check requires an appeal to their desire for greater social impact.
  2. Donors, who see philanthropic activities as an escape from their intensive work environments, do not have time for reading performance measurements. Thus, the data should be simple to understand--informing donors about which organizations are performing more efficiently and having a greater impact, but without confusing them about what all of the information means.
  3. Donors are skeptical of purely quantitative metrics' ability to reflect performance and consequently do not have confidence in performance measurements. For donors to accept performance metrics, providers should find a way to incorporate qualitative depictions of organizational performance and impact--expert evaluations, peer review, client satisfaction surveys, client testimonials, board reviews and media coverage, to name a few--rather than simply capturing financial ratios.
  4. Donors may feel that performance metrics are a poor use of charities' scarce resources, especially money and time. Therefore, it is critical to assuage donor concerns about the demands on nonprofits by making these organizations allies in the drive for more performance measurements.
  5. Donors look to institutional funders to engage in performance measurement on their behalf. For example, they consider foundations more accountable and more careful in their giving decisions because they are donating money on behalf of their funders or board. However, despite the confidence donors have in the expertise and judgment of foundations, the metrics must make sense to donors. Measurements should not be limited to the 'latest and greatest' figures, but rather to data that are reliable and practical. Again, brevity is critical, as donors have limited time.

Despite the lack of interest and, in a few cases, opposition to performance measurements, the report concludes that the use of metrics can be beneficial for both donors and charities. Using some of the ideas mentioned, the authors believe it is possible to attract donors' interest and use performance measurements in the future to reflect the achievements of an organization through the use of quantitative indicators across a variety of dimensions, including financial, staff, operational, and impact.

The report was based on interviews with donors who contributed more than $50,000 annually in order to engage with philanthropists who make gifts that are likely to have a sizeable impact on nonprofits' budgets. Of the 22 donors they interviewed, only four were strongly interested in getting better data on the performance of nonprofit organizations.

For a copy of the article (PDF format) in the Stanford Social Innovation Review, click on the link below.

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