Category Archives: Evaluation

Information Sharing in Philanthropy

January 23, 2008 – 11:45 am

I wrote a post a while ago called Paul Brest Needs a Blog (Paul is the head of the Hewlett Foundation). I’ve been an advocate for more people in philanthropy to start blogging in general. In the above mentioned post I wrote:

So why should foundations blog? It seems to me that the imperative is not for them to embrace technology so much as it is for foundations to join and begin to drive the online philanthropy conversation. [But] it is the two-way flow of information that blogs encourage that is important, not blogs themselves.

Even so I’ve noted recently that some people feel that I’ve pushed blogging rather than information sharing. As the conversation we’re all having unfolds I think it is important to take a step back and make sure we haven’t missed the forest for the trees. I wish I had expressed my thoughts with more clarity.
When Phil Cubeta recently asked why nonprofits should blog, astute reader Michele Moon asked:

I’m not entirely sure why it’s blogging, in particular, that’s the focus of discussion, especially because it’s now considered a little bit old-hat, Web 1.5. What is it about the format that makes it so essential to transparency and its tyrant? Is it actually blogging you want to see - personal, real-time updates and editorials, followed (if you’re lucky) by people who read, comment, and sometimes stick around to converse?… Why should it be blogging that we aim to do, or is that shorthand for more complicated online interactivity?

I’m guilty of using “blogging” as short hand for information sharing. I’ll stop making that mistake.

When economists speak about efficient markets they are talking about a situation where money flows to the organizations that can put it to the best use. Widely available, robust information is a critical factor for a functioning efficient market. Recently, in a conversation with Phil Buchanan and other readers on this issue I wrote the following (you can find the full thread here. The Chronicle of Philanthropy recently highlighted the conversation):

In an efficient market, investing is a zero sum game. Maximum returns are generated globally so the only question is matching an investor’s risk/return preferences. In inefficient markets, higher returns accrue to more “effective/smarter” investors. In a public benefit market, since all returns accrue to everyone, investors should desire an efficient market within which they could align their social investments with their personal values/goals.

The philanthropic capital markets are highly inefficient. Far more inefficient than any for-profit marketplace.

Therefore, it seems to me that making the philanthropic capital markets more efficient should be the number one priority of large funders who desire to be effective…

I’m not arguing that the public will make better decisions than the “experts”. I’m saying that efficient markets will produce better outcomes than inefficient markets. In the for-profit world, inefficient markets are great for “expert” investors because they can exploit superior information to generate outperformance of investment returns. But these inefficient markets reduce the total returns in the market by preventing capital from flowing to the best performing investments.

What I’m saying is that unlike in the for-profit market, “expert” philanthropist enjoy no advantage from superior information. The returns they generate accrue to the public, and so no “outperformance” is possible. Instead, they should be interested in the total market functioning at a higher level, since that is the only way to increase the social return on investment that accrues to everyone.

This is the challenge we face as a field. How can we ensure that the $300 billion that is given to charity each year is flowing to the organizations that can put the money to its best use? The key will be our ability to supply market participants with widely available, robust information. Blogs are one tool in this work. There are many others.

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Effective Giving, Foundations, Giving Blogs, Grantmaking, Impact Measurement, New Philanthropy, Open Source Philanthropy, Philanthropic Capital Markets, Philanthropic Technology, Philanthropy, Transparency | Comments (18)

Should Foundations Fund Philanthropic Information?

January 16, 2008 – 1:49 pm

An interesting conversation is beginning to unfold in the comments to Phil Buchanan’s podcast. The point I’m making is not that foundations have some sort of obligation to fund nonprofit information for public use, but that doing so is in their best interest. This conversation ties in directly to the conversation we’ve been having about Google Finance and Google.org.

If a foundation can give $1 that creates $2 of social benefit, or give $1 that spurs the public to give $10, which creates $20 of social benefit, which one should they choose? This ability to give $1 and get $10 of social benefit instead of $2 is the “leverage” that so many philanthropist and foundations say they want to employ.

Here’s the big leverage opportunity of this decade: Provide the individual donors (who every year give seven times more than all the foundations in the country combined) the information they need to make better donation decisions.

Join the conversation with Phil Buchanan and let’s work this problem out!

PS: As background it might be useful for readers to note the essay by Paul Brest, the president of the Hewlett Foundation, in which he discusses “the advantages of good information” in philanthropy. In the essay he mentions Great Nonprofits, whose founder Perla Ni is participating in the conversation with Phil Buchanan. Hewlett is, to my knowledge, the most forward thinking foundation on these issues. Hewlett is also considering funding GiveWell.

By Sean Stannard-Stockton | Also posted in Effective Giving, Foundations, Grantmaking, Impact Measurement, New Philanthropy, Philanthropic Capital Markets, Philanthropic Technology, Philanthropy, Transparency, nptech | Comments (0)

PhilanTech

January 14, 2008 – 9:11 am

Dahna Goldstein, the founder of PhilanTech, sent me the following email. She didn’t post it as a comment because she didn’t want to appear to be plugging her company, but I asked her for permission to share it.

I’ve just caught up on the discussion on your blog about Google Finance and nonprofits, and wanted to share my $.02.  Google is potentially in a unique position — as are you, by virtue of your thought leadership and initiative on this front — to positively affect how information is shared with the sector at large, with donors, and with other interested parties.

The absence of standardized information about nonprofits makes it difficult to suggest a set of metrics or a pre-defined combination of quantitative and qualitative analyses, as a number of your readers have pointed out.  And asking for new types of reporting from nonprofits risks placing an additional burden on already-burdened nonprofits.

PhilanTech has taken a step towards addressing this issue.  We created the PhilanTrack online grants management system to centralize and streamline the grants management process — creating centralized reporting about nonprofit organizations, activities, outcomes, and finances.  Our vision is for a centralized reporting for all donors (institutional and individual) and other interested parties (researchers, the nonprofits themselves, etc.) to obtain information to inform funding decisions — without creating additional hoops through which the nonprofits must jump.  I’d be happy to tell you more about how it is structured, but in a nutshell, PhilanTrack helps foundations request the information they want to receive from nonprofits (to help them evaluate their effectiveness as grantmakers and to help evaluate potential grants) while helping nonprofits avoid reinventing the wheel each time they report to a different funder.  The types of information that the system manages (activities, outcomes, finances, lessons learned, etc.), I believe, are the types of information that Google should consider posting about nonprofits.

While expense ratios, as you have pointed out, have significant shortcomings, there is still a lot that can be learned about the financial health and stability of an organization (if not its effectiveness) by looking at its finances.  It requires looking beyond CharityNavigator and beyond 990 data in ways that are not familiar to many (both individuals and institutions) who are considering gifts to nonprofits.  At PhilanTech, we have addressed this issue by developing a financial analysis tool that uses basic financial statements to provide six analyses (financial mix, efficiency, debt servicing ability, liquidity, long-term viability, profitability) with a number of different metrics and explanations of why each metric is important and useful in evaluating the financial health of a nonprofit.

Google Finance pages (or Google Knol) should, in my view, combine these financial analyses with the following:  quantitative information about outcomes (where available and qualitative where quantitative info isn’t available); qualitative information about activities, programs/projects, mission, people, sustainability, replication (where relevant), lessons learned, challenges faced and overcome; related organizations (including any partnerships/collaborations); news; funders; discussion (like the type of discussion you prompted about the Red Cross), and perhaps something like the 360 degree views GreatNonprofits is working to create.  And there are ways it could be done without placing too great a burden on nonprofits by leveraging some of the reporting nonprofits are already doing.

By Sean Stannard-Stockton | Also posted in Effective Giving, Impact Measurement, Philanthropic Technology, Philanthropy, nptech | Comments (0)

Measuring YOUR Nonprofit

January 9, 2008 – 10:24 am

During the conversations about what to measure in philanthropy, a dominate theme has been that no universal metric will ever work (although some participants do not agree). This idea is validated by measurement practices in the for-profit markets where different metrics are believed to be important for different companies.

So how should an individual nonprofit think about measurement?

I got the following email from a reader recently:

Your blog. I read it every day. It’s great. But frustrating.

How do WE measure success? We’re trying to implement a program like [deleted to protect privacy]. It will be difficult to quantify success, especially short term. We could have 5 students and really change their lives now–or maybe not be able to point to the impact for years. We could have 50 students and not connect at all. When we discuss this among the staff and with well-meaning supporters, everyone says to just make something up. That really grates on me. And we can’t be the only program with the same problem.

This was my answer:

For a minute, don’t think about numbers. Just tell me what you think your organization would look like in five years if it were successful. For instance, if you raised and spent $1 million and during that 5 years worked with 5 students. Would that be a success? What about 500 students? Or 5,000? If you had a choice between working with 500 students and feeling like you exposed them all to music, but didn’t really change their lives would that be better or worse than working with just 5 students and feeling that you totally changed all of their lives for the better?

After you have an idea of what success would look like, then we can think about ways to measure it.

By Sean Stannard-Stockton | Also posted in Impact Measurement, Philanthropy, nonprofits | Comments (4)