Blog - Five Keys to Determine the Effectiveness of a Nonprofit


Jessica Smith
Vice President
Director of Financial Planning

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We just celebrated one of my favorite days of year – Giving Tuesday. It is one of my favorite days because, perhaps even more so than on Christmas, it is a reminder to think outside of ourselves. With companies, like Facebook, matching contributions, and #GivingTuesday challenges, there is increasing access to donations. This is great for nonprofits doing amazing work, but as a donor, how do you filter out all the buzz and peer pressure and ensure the nonprofits you support are effective? Too often, efficiency gets confused with effectiveness. An efficient organization eliminates waste and maximizes productivity. An effective organization fulfills its mission. While an effective organization should consider efficiencies, efficiency alone is not the goal. All too often, donors are quick to zero in on the percentage of donations used for administrative expenses, like salaries, overhead, and general expenses to maintain the operation of the organization. While this is an important consideration, it is just one consideration when evaluating a nonprofit’s effectiveness. In fact, there are several important factors to consider, including:

 

1. Mission: The most important determination of whether a nonprofit is effective is if it is achieving its mission. Make sure you know what you are supporting. Do a little research to determine the nonprofit’s mission. The first place to start is the nonprofit’s website, but there are other third-party resources like GuideStar (www.guidestar.org), Charity Navigator (charitynavigator.org), and your local Community Foundation that can help.

 

2. Goals and Programs: Does the organization have very specific and measurable goals? Think SMART goals – Specific, Measurable, Achievable, Relevant, and Time bound. Are the nonprofit’s programs set up to achieve the specific goals and does the nonprofit report on the performance of those goals – positive and negative? Most nonprofits offer an annual report to donors. Ask for the previous year’s report in advance and pay particular attention to how achievements are discussed. The more transparent, the better!

 

3. Financial Wellbeing: Pay attention to the financials of the organization, but as a whole, considering the nonprofit’s mission, goals, and programs. If the nonprofit is tackling big tasks, it needs a strategic, focused leader at the helm with other dedicated talented individuals supporting, just like a for-profit organization does. Be careful not to judge too quickly based on the amount paid in salaries alone. Also consider where the nonprofit is located and the marketing and overhead costs necessary to accomplish goals. Just like any other business, marketing and overhead are needed expenses to help facilitate higher performance. It may be helpful to compare financials of different nonprofits, but only do so if you are comparing apples to apples. The nonprofits should do very similar work, in a similar location with similar goals.

 

4. Leadership: Check into the leadership of the nonprofit, both the internal leadership and the board leadership. Is the leadership engaged? Can they speak to the mission and goals of the organization? Do they implement a strategic plan? Are there checks and balances? Are there policies and procedures in place? Are there regular board meetings and term limits for board membership? Sometimes measuring the effectiveness of the leadership can be difficult. Before making large contributions to an organization, it may be helpful to sit down and interview both the Executive Director and the board (or at least a representative of the board) to ensure that they are on the same page and working well together.

 

5. Collaboration: Think about the nonprofits with the best reputations. Many of them have dedicated volunteers and donors who are committed to the mission. This doesn’t mean that the nonprofit has to be one of the biggest, it just needs to be able to facilitate work through others. It needs an engaged group advocating for the mission. The leaders, volunteers, and donors need to be willing to break down fences to partner with others to create great impact, even if that means sharing resources and taking a smaller cut of the pie.

 

Above all, it is important that the resources you give align with your core values and passions. Before you make your next gift, I challenge you to take time to consider your top three key core values and three areas of interests and ask yourself how they relate. Are there any common threads? Write down your findings and keep them as a reference for the next time you are asked to give. If the request doesn’t align with your core values and passions, give yourself the freedom to say no. If the request does align with your core values and passions, say yes and follow through to ensure your gift is used wisely. You hold the power of impact in your hands. What will you do with it?


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