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Rick Parnell

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Key Nonprofit Metrics: Trust and Results

Posted: 10/07/2013 10:12 am

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Confession: I love my job. Some people don't, I get that, but in my job -- working with the United Nations to improve the lives of people around the world -- I get to work every day with people who are making a big difference on big issues. Not surprisingly, I count myself lucky.

Last week I had a great reminder of just how lucky I am. I attended the Independent Sector conference in New York, a gathering of leaders representing nonprofits from across the country and around the world. The conference offered a chance to share best practices and hone our approaches to meeting our organizations' missions. My organization, the United Nations Foundation, catalyzed a first-ever track of sessions at this annual conference designed to help those in nonprofit "C-Suite" positions -- those with "chief" in their titles -- as they help lead their organizations in amazing efforts to change the world for the better.

Of the many takeaways, two things really stuck out for me. First, Americans have a high level of trust in nonprofits, which I thinks reflects the fact that our missions align with American value and we are known for delivering results. Second, while a nonprofit's overhead is useful, it is just one factor in the complete picture of an organization's effectiveness. As a community we should be careful not to let a focus on overhead overshadow what our donors expect from us: impact.

The nonprofit sector is a unique reflection of American values. In the midst of a U.S. government shutdown, nonprofits are -- as always -- fulfilling hopes and dreams Americans hold dear, from increasing participation in the democratic process at home, to growing democratic institutions abroad, from teaching American kids the basics of healthy living, to delivering interventions to keep kids safe and healthy in developing countries. Both government and the for-profit sector play integral roles in taking on our biggest challenges. Yet the nonprofit sector sits in a unique and integral position -- delivering services government and corporate entities cannot provide and acting as a connector between the sectors to shape the public-private partnerships that are on the leading edge of tackling our toughest challenges. The unique role of the nonprofit community is not talked about enough, but it is reflected in public perception. In fact, the most recent Edelman Trust Barometer showed that nonprofits are the most trusted of all institutions. That is a position of trust we welcome and hold dear. As we face difficult societal challenges, the nonprofit sector is here to work with partners and supporters across the spectrum -- individuals, elected officials, foundations, governments and corporations -- to take on our toughest challenges.

Nonprofits must engage supporters in defining success. Systems that rate charities have grown in popularity in recent years; donors like accessing unbiased information on how nonprofits use their resources. Yet rating services only provide a partial picture. To hold tens of thousands of organizations -- each with their own missions and business models -- to the same operational standard is a one-size-fits-all approach that doesn't give potential supporters enough depth to make truly informed decisions. By basing those evaluations on standard metrics that compare operating costs to revenues, most standard metrics assume a nonprofit's main mission is to minimize costs. In the nonprofit world we see this the other way around -- and so do our supporters: reduction of costs is important, but it's not our mission, rather it is a tool to help us meet our mission. Do people donate with the expectation that we effectively manage our costs? Yes. Is that the reason they donate? No. Supporters donate because they trust us to take on important challenges.

With that distinction in mind, I spent a lot of time last week talking with colleagues about how we measure our bottom lines. My counterparts at nonprofits around the world frequently pointed to private higher educational institutions and government contractors. They noted that these institutions often carry ratios of dollars spent on overhead to dollars spent on programs that are four or five times higher than the minimum standard we strive for in the nonprofit world.

As we dug deeper into these discussions, one thing became clear: Our standard should not be set in the form of a simple number. Nonprofit donors give because they want to affect change. Let's not undercut their motivations or expectations by focusing excessively on overhead. Instead let's focus on the same metrics that motivate our donors: impact. If we restructure the conversation to center around our effectiveness in realizing mission and how donor dollars drive results, we will be more successful as a sector -- better positioned to meet under-met needs in our communities, states, country and world and well-equipped to fulfill the trust invested in us by our supporters.

 
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