Opening the Corporate Checkbook

It's that time of year when many Colorado companies consider making charitable donations. Your corporate giving committee sits down to determine where to allocate your annual contributions and something suddenly stops you. How do you know if your donation is actually making a difference? How do you determine which organizations should get your corporate donation dollars? Many of us make our own donations based on feelings, attachments to a cause or even just good marketing. But social issues are complex and it's not as easy as we'd all like to understand which changes in a community are due to a particular organization's work. As people, it is our tendency to grasp onto things we can capture such as testimonials from program participants, a nonprofit's overhead or the number of individuals an organization serves.

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However, these metrics don't always paint a clear picture of an organization's effectiveness. That's where evaluation can help narrow down whose name you put on a big check. Evaluation is how nonprofits understand what works and what doesn't so that they can make a bigger impact in the communities they serve.

Here are a few things to look out for when deciding where to donate this season and beyond:

1. TESTIMONIALS

Emotional pleas from individuals who have benefited from a nonprofit’s work tug at your heartstrings, but do they really demonstrate that a program is effective?

No.

Participant satisfaction is not the same as program effectiveness. Just because it sounds like a nice idea does not mean that it works. At their core, nonprofit testimonials are giving someone something for free and then asking how much they liked that free thing: of course they did! D.A.R.E. provides an illustrative example. Remember D.A.R.E. – the drug use prevention program beloved by parents, teachers and even presidents and first ladies? Despite its popularity, eight-figure budget, political support and near 30-year tenure, several studies on the efficacy of the program, as outlined by the Washington Post, show that not only did D.A.R.E. fail to reduce drug use, it may have slightly increased drug use among participants.

2. OVERHEAD MYTH

So, testimonials aren’t great for measurement, but the numbers don’t lie, right? The next common stop for donors seeking to assess nonprofit fitness for financial contributions is its overhead rate. Organizations like Guidestar report the percentage of an organization’s budget that goes toward programming. The higher the better, so goes the folklore.

But good nonprofits, like any business, take money to run. They require good office space and salaries for high-quality operational staff. Financial efficiency is not the same as program effectiveness. You can have a program that has a tiny overhead rate but makes no difference in the community. Even the organizations that report overhead rates (GuideStar, Charity Navigator) have publically highlighted the lack of relationship between financial ratios and effectiveness. So why are donors still using this as a proxy?

3. PEOPLE SERVED

A common red herring when evaluating a nonprofit is looking at the number of people served. Donors look at a big number of people that a nonprofit reaches and think, "Oh, that must be a great program."

But broad reach is not the same as program effectiveness. Consider a program that reaches thousands of people but with a very light touch. Compare that to a program that reaches only 50 people but provides comprehensive wrap-around services. Which is more effective?

If testimonials, overhead rates and reach are not a good way to assess whether your money is making a difference, what should you look at?

Based on years of experience and working both with nonprofits and internally at a foundation, my advice is to seek the answers to a series of questions about nonprofit impact:

• How are people (individuals or the community) different as a result of their work? Organizations should be able to identify specific behavioral changes they are working towards and this goal should align with an issue you care about solving.
• How do they demonstrate positive change? Look for processes and metrics that show they are hitting the mark as opposed to testimonials singing their praises.
• Look for signs of adaptation. No programs are perfect and our communities are not static. The measure of the most effective nonprofits is the ability to strategically course correct in response to imperfect results or a changing environment. Beware of nonprofits that are firmly committed to their way of doing things even in light of contradictory evidence; instead, look for signs of adaptation.

Now, these observations certainly shouldn’t be seen as a criticism of the nonprofit organizations that work in and for our communities. There is much good work, and certainly good intention, behind almost every organization. But as a business owner or corporate giving committee determining where to allocate corporate donations, you can use these tools to make an informed decision about where your valuable donation will have the most impact.

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Elena Harman is the founder and CEO of Vantage Evaluation, Colorado’s leading partner, resource and voice for evaluation. She founded Vantage Evaluation to help organizations understand what’s working and what’s not, so they can make strategic improvements based on findings in their evaluation.