It has become the holy grail of philanthropy: measuring the impact of a charitable contribution. Donors don't want their money to be misused or used less effectively than it could be. But how can the effects be measured?
A new rating system, ImpactMatters, aims to do just that. It rates similar nonprofit groups in a number of areas, all with an impact. The first large series of 1,078 reviews were published on Friday before Christmas.
Donors want an answer to a key question: "WWhich nonprofit organization spends its money wisely? " said Elijah Goldberg, managing director of ImpactMatters. “We wanted to understand the effects quantitatively and strictly. We went out to solve this problem. "
The Manhattan-based company ImpactMatters examines how much performance a company makes per dollar. For example, a group that offers a meal for $ 2 when the cost in the region is $ 4 will receive a higher rating than a similar group that offers a meal in the region for $ 5.
They are already well established Charity-evaluation systems. But Mr. Goldberg, who founded ImpactMatters with Dean Karlan, an economics professor at Northwestern University who taught Mr. Goldberg at Yale, said the other ratings don't measure the impact as maximizing a donor's dollar.
GuideStar collects tax forms for nonprofits (990s) and makes it easier to find financial information. Charity Navigator uses the amount that a charity spends on overheads as a key metric for evaluating the effectiveness of a charity.
GiveWell takes a more detailed approach and names the best charities by how much an extra dollar will bring. Then there are crowdsourcing sites like Great Nonprofits.
All have their defenders and critics. How much a charity spends on overhead is important, but it tells a limited story. A small list of top charities can isolate those who do the best, but some donors may want a wider choice of options,
ImpactMatters tries to highlight a comparison of apples to apples from organizations in a sector like food or healthcare. It is claimed that his approach will channel more money to the charities that have the greatest impact in their field, while pushing laggards to reinforce things.
Several philanthropic advisers questioned the usefulness of an impact measurement that focused on individual organizations when problems like hunger require many different approaches.
"It is important to exert influence, but it is not the only driver of philanthropy," said Dianne Chipps Bailey, national philanthropy strategy executive at Bank of America. "The most interesting question today when measuring impact is to promote advocacy beyond this framework of efficiency and effectiveness and to change basic attitudes to make long-term commitments."
This requires many nonprofit groups to address the same issue from different directions – for example, hunger in a single neighborhood – Bailey said.
"If you just look at the cost of each meal, you are missing out on the more general point of why that meal should be offered," she said. "Why isn't it prepared in affordable and safe homes owned by the person?"
ON The Wells Fargo / Gallup Investor and Retirement Optimism study published on Wednesday interpreted the effects differently. It turned out that the greatest current motivation for wealthy individuals was that the broken political climate affected services. Forty percent said they were driven by the political climate to give more; Wealthy donors in the second largest group, 26 percent, said tYou were motivated give more through economic conditions.
"The clients we deal with spend more money on complex issues," said Beth Renner, national director of philanthropic services at Wells Fargo. "The complexity goes hand in hand with the difficulty of being successful."
It is challenging to find an easy way to evaluate charities that deal with complex issues. ImpactMatters said it abandoned a more complex framework and replaced it with a five-star rating system.
"When we moved one after the other, we found that we would never put philanthropy on a large scale," said Goldberg. "But we could use the same tools and reach more philanthropists who use publicly available data without the one-to-one core analysis." The current rating system is much less labor intensive than the previous one.
Goldberg said the goal is to help donors find at least the best nonprofit groups in eight areas where impact can be measured: veterans, clean water, homelessness, health, poverty, hunger, education, and climate change.
"We introduced a benchmark for every result," he said. "In some paths, our estimates are better because we do 300 food serving and soup kitchens at the same time. "
In the first batch, 59 percent received five stars, 28 percent four stars, 13 percent three stars and only one star, e.g. Report inappropriateness. (Two-star ratings that will appear in future releases as ImpactMatters rates more charities are reserved for groups that haven't reported enough information.)
The number of good grades raises the question of excessive ratings. Are the reviews worth the effort when most nonprofits reach a five?
"It reflects the fact that these groups are doing well," said Goldberg. In addition, ImpactMatters still has tens of thousands of charities to evaluate.
For organizations on the recipient side, a high rank is welcome and can help them stand out.
Sightsavers, which works internationally to prevent blindness and works for the blind, received five stars. Caroline Harper, managing director of the UK organization, said that she had worked on self-assessment for a long time, but that it was outside of validation.
"We are not as well known as I would like to be," she said. "It's just one more thing that strengthens our reputation."
This is already the case with D-Rev, which develops medical devices such as knee prostheses and lamps to cure jaundice in newborns. It already sees the benefit of the earlier iteration of ratings that have received limited approval.
"It has expanded our audience," said Sara Tollefson, director of impact at D-Rev. “We have new donors worldwide. People have reached me ever since. "
Dianne Calvi, managing director of Village Enterprise, who works with entrepreneurs in Africa, praised the rating system with caution, although her organization received five stars.
"It's difficult for a rating system to be perfect," she said. “Donors have to find out where to put their money. Otherwise, they only listen to the nonprofit organization and have no way to compare it to another nonprofit organization. "
The nonprofit groups that have received less than five stars are concerned. Liz Plachta, who founded Ruby’s Rainbow to help young adults with Down syndrome, said she didn’t understand why her organization received four stars. She said she was concerned that the rating would affect her fundraiser and her ability to support programs for teenagers with Down syndrome who seek higher education.
"I think four out of five are OK, but we are so passionate about what we do and very little flows over us," she said. "We rely on people to believe in us and know that we are doing what we do authentically. I don't want anyone to look at it and say," Why are they four, not five? "
For most donors, however, the impact is only a measure. Ms. Bailey said having an objective source is a better option.
"Most wealthy philanthropists, 71 percent, rely on the organizations they give," she said, "to let them know if they have an impact."