How to Judge Nonprofit Effectiveness

This article is deemed a must-read by one or more of our expert collaborators.
Click here for more.

We contribute to organizations close to our hearts, but we also want to make sure that our time and money have the maximum impact. Understanding nonprofit effectiveness goes beyond the financial indicators. The best approach is to think holistically, taking into account all of the dimensions that influence an organization’s impact; it requires taking a deeper look beyond financials and moving beyond the myth of the overhead ratio.

There is no one formula for assessing impact or nonprofit effectiveness, but most experts agree that there are six dimensions we must consider when looking at the effectiveness of a nonprofit organization. You also can choose to invest in an issue fund or intermediary which rigorously analyzes nonprofit organizations that receive their grants.

The six dimensions to explore when looking at nonprofit effectiveness:

The Overhead Myth and Nonprofit Effectiveness

To assess the success of business, we rely on profit and other performance metrics that are widely accepted and readily available. In the social sector, data on performance is challenging to find, and often does not exist in specific organizations.

Many donors have grabbed onto the overhead ratio, defined as the proportion of overall budget an organization spends on management and administration. This ratio is easy to calculate but unfortunately, does not help to assess what we most need to know.

Numbers for overhead are unreliable and inconsistently reported. They can vary dramatically depending on the work an organization does. For example, an organization that engages people in remote parts of Africa in developing businesses, able to support their families, might spend significantly more to find and serve those people compared to organizations providing mosquito nets to prevent malaria.

Most importantly, the impact for each of these organizations will also be different. Some work is life-changing and profound and other is light-touch, yet effective. Because spending on measurement, research, and performance management is counted as overhead, there may be, in some cases, an inverse relationship between the overhead ratio and effectiveness. Be an impact-driven giver and pay for performance.

Additional resources to evaluate nonprofit effectiveness:

These resources from Guidestar, Charity Navigator, The Better Business Bureau, Bridgespan and Stanford Social Innovation Review can help you learn more and give you guidance and tools.

THE OVERHEAD MYTH – by BBB, Charity Navigator, Guidestar

THE NONPROFIT STARVATION CYCLE – by Stanford Social Innovation Review

HOW TO RESEARCH A NONPROFIT – by Bridgespan Group

PAY WHAT IT TAKES PHILANTHROPY – by Stanford Social Innovation Review

Since you are interested in Impact Philanthropy, have you read these selections from Giving Compass related to impact giving and Impact Philanthropy?

This article is deemed a must-read by one or more of our expert collaborators.
Click here for more.

3 Ways to Amplify Feedback In Refugee Communities

Giving Compass' Take: • This Feedback Labs post discusses how organizations can elevate refugee voices around the world and incorporate their feedback in innovative ways. • One takeaway here is that social media might be surprisingly useful in this work. Are international groups that deal directly with refugees using all tools at their disposal? • Here's how anti-refugee narratives can hinder aid efforts. In public discussions and representations of the refugee crisis there is often something missing: the voice of refugees themselves. In this Labstorm, GlobalGiving led an open discussion on a new tool or process to amplify the voices of refugees. How should aid organizations collect feedback from refugees? How can GlobalGiving amplify feedback already collected by other organizations? What will the role of that information look like both inside and outside refugee camps? There are a variety of ways that humanitarian organizations collect feedback from refugee communities already, and that feedback is used in a variety of ways. However, some existing sources of refugee feedback are largely untapped, and the responsibility that aid organizations have for using and sharing that feedback equitably is substantial. The LabStorm discussion provided three key takeaways on feedback and the refugee crisis: Ambient feedback has huge potential. Talent Beyond Boundaries, an organization which interviews refugees about their skills and professional experience to create CVs that they use for advocacy, was surprised to find that many of their clients heard about TBB not by word of mouth, but by Facebook posts from past clients. Listen to host communities too. The humanitarian focus of refugee crises naturally tends towards, well, refugees. But the host communities where refugee camps are located can grow to resent the complexities the camps create, and frequently have distinct challenges of their own. Feedback should belong to the people who gave it. Labstorm participants agreed that, however it is collected, feedback must end up in the hands of the refugee community. In large part this is because the circumstances and needs of highly mobile populations change quickly and drastically. Read the full article about amplifying feedback in refugee communities at Feedback Labs.

Looking for a way to get involved?

A good way to complement your interest in Effective Altruism is to connect with others. Check out these events, galas, conferences or volunteering opportunities related to Effective Altruism.

Learn More

Are you ready to give?

If you are looking for opportunities to take action and give money to Effective Altruism, here are some Giving Funds, Charitable Organizations and Projects aggregated by Giving Compass where you can take immediate action.