THE BLOG
12/09/2014 06:28 pm ET Updated Feb 08, 2015

How Do We Define Effectiveness for Charitable Organizations?

I've been in the nonprofit sector for a long time and I can tell you this: the vast majority are mission-driven and wholly committed to their cause. The nearly 1.5 million tax-exempt organizations across America do amazing work to the benefit of millions. But they also face unique challenges, especially financial ones.

Like any other business, nonprofits need funding to effectively fulfill their mission and serve their populations. And yet, charitable organizations are too often under fire for fundraising and operating costs. Even the largest, most established charities are not exempt from this scrutiny. The American Red Cross is the latest to face allegations of wrongdoing. Since 1881, the Red Cross has worked to alleviate human suffering through health services, disaster relief and humanitarian efforts. They have a nearly perfect A-rating from CharityWatch, and yet, the watchdog group's President and Founder Daniel Borochoff contradicted his own rating of the charity when he slammed the Red Cross' overhead in a recent ProPublica and NPR story.

According to Borochoff, the Red Cross hasn't been devoting as many donated dollars to humanitarian efforts as supporters may believe. "The difference between the real [overhead] number and the one the Red Cross has been repeating 'would be very stark,'" Borochoff told NPR and ProPublica. Yet CharityWatch itself reports that 91 percent of Red Cross' spending goes towards its programs and services.

It appears that even those organizations that report low overhead are subject to questions on their intentions and operations. Problematically, the charity watchdogs continue to craft a misleading and damaging definition of overhead -- one that tells donors that fundraising is inefficient, if not fraudulent.

During my 20 years in nonprofit management, including my 10 years with Wounded Warrior Project, my organizations have faced similar accusations and questions about how we raise money and operate. But my approach and response hasn't changed: We fundraise solely to broaden our impact and reach, and therefore, chose to ignore the rating systems and the words of misguided charitable watchdogs.

There are a couple things we must remember about making an impact as a nonprofit:

Overhead is not the enemy.
To meet the lifelong needs of at-risk populations, charitable organizations have to invest in themselves - in the staff, programing and tools needed to do good. If we limit growth on infrastructure and fundraising, all we will have are good intentions, instead of groundbreaking and sustaining impact.

Charity rating systems do not accurately define an organization's positive impact. At Wounded Warrior Project we manage our mission, not our ratings. In 2013, we spent $117 million on our programs and services (or 74 percent of our total spend) -- that means 38,704 injured veterans, family members and caregivers had access to our 20 comprehensive programs, free of charge. Our goal is to serve 100,000 warriors by 2017 and raise $500 million for our Long-Term Trust to support the most severely wounded after their caregivers are no longer able to provide the necessary care.

It's time to change the dialogue around charity ethics and effectiveness. The best charitable organizations are those that don't just have good intentions to make a difference, but operate in a manner that enables them to actually deliver.