©2010, 2011

The United States is the most charitable country in the world.  In 2010, $323.86 billion was contributed in support of charitable causes.  But it should be better…

It’s time to reshape and expand American philanthropy.  With a simple new tool for measuring the effectiveness and efficiency of every charitable organization and church, Americans can make informed decisions about which charities and churches deserve contributions of money, products, services, volunteer time and tax exemptions.  Renewing and expanding confidence in America’s charities and churches will inspire additional contributions of money and time. But, more importantly, charities and churches will become more effective at solving problems and improving the quality of American life.

The Nonprofit Effectiveness Measurement is anchored in a realistic evaluation of a nonprofit’s effectiveness at delivering its stated mission.  Solving a health problem, providing educational opportunities for promising students, eliminating hunger, providing affordable housing, giving meaningful employment to the blind, or enriching a community with the arts – these kinds of things should be the focus, not how much it costs an organization to raise a dollar.

Currently, there is no system for measuring impact and effectiveness of charities and churches that enjoy tax exempt status.

Under current rating guidelines by charitable evaluators, an organization with a low cost per dollar raised and a low cost of management is rated favorably while a charity that raises more at a higher cost is considered unfavorable… even if it is more impactful in accomplishing an important mission. 

Here is an illustration of the absurdity of the current ratings.  Assume there are two disaster relief organizations. “Helper” raises $1 million by doing lemonade sales with all the supplies and labor donated while “Aider” raises $10 million through a celebrity concert but spends $5 million to get it.  Which organization will be able to provide the most disaster relief?  “Aider”, the $10 million organization with the celebrity concert has netted $5 million to use in assistance as opposed to “Helper” that now has only $1 million to use.

Under the current rating systems, “Aider” with its celebrity concert would rate poorly because its cost per dollar raised is 50% - significantly higher than the acceptable percentages.  “Helper”would receive a stellar rating even though it can’t possibly have the same mission impact as the other organization.  This is outrageous.

The solution is simple.  Measure the mission effectiveness of charities with Units of Mission Delivered (UMD).

It works like this… Each non-profit defines and measures its Units of Mission Delivered.  The only restriction on defining Units of Mission Delivered is that they must be empirically measurable using consistent, published formulas to calculate.

The more Units of Mission Delivered by a nonprofit - the better.  Period. 

The more money that an organization has to invest in the mission, the more impactful it should be.  So, instead of setting some artificial acceptability measurement for cost for fund raising and management, measurable mission result is the only thing that matters. 

Consider a disease related charity (like cancer, heart, diabetes).  The charity could establish Units of Mission Delivered in several categories:

Number of patients provided with guidance/information

Number of lives saved (must be measurable and provable)

The new effectiveness measurement will work for an arts organization like a symphony.  Its Units of Mission Delivered (UMD) could be:

Percentage of targeted population exposed to a live musical performance

Number of students introduced to classical music

Colleges and Universities might measure:

Number of financially challenged students that graduate

Number of solutions to real problems solved through successful institutional research

The list of different Units of Mission Delivered (UMD) for each organization can be long or short.  The UMD could be defined by an individual non-profit or by a coalition of similar organizations – museum group, health charity consortium, college and university council, church diocese, etc.

Each charity, church, and foundation will regularly publish their Units of Mission Delivered results with definitions so that comparisons could be made with other similar organizations.  This new system intrinsically rewards effectiveness in mission activities and penalizes poor performance or lack of real measurable results.  Ambiguous, hard to measure missions will not stand up to external scrutiny.

More efficient income producing activities produce more net revenue which will produce more Units of Mission Delivered. Using volunteer labor and contributed goods and services will decrease costs. Increased net revenue will provide more effective mission delivery.  Conversely, over-valuing contributed goods and services will have a negative impact on Units of Mission Delivered.  Some fund raising focused organizations might not be able to deliver a competitive number of Units of Mission Delivery and will be viewed as ineffective.

Perhaps the best benefit of this new system is that donors, potential donors, volunteers, watchdog agencies, government officials, journalists and other stakeholders validate The Nonprofit Effectiveness Measurement because they will vote with their dollars, time, goods, publicity, ratings, reviews, and tax exemptions.  Over time, the most impactful nonprofits will be rewarded and the least effective will be eliminated. 

Some will argue that it is not a good idea to let the charities define their own Units of Mission Delivered.  Charities and Churches are in the best position to define their own Units of Mission Delivered because no government regulator, watchdog agency representative, or lawmaker will ever have enough insight into each charity or church to fairly create competitive definitions or measurements.

Charities and churches will be forced to examine and clearly define how to measure their mission effectiveness.  It will be in their best interest to provide solid definitions with measurable and verifiable results so that they can compete effectively for dollars, volunteer time, publicity, favorable ratings, and tax exemption.  The definitions that they devise will be published and scrutinized.  Squishy, hard to quantify, and hard to justify activities like brand advertising, morality influence and political lobbying will be mercifully euthanized. 

Every organization that benefits from tax deductible contributions will be required to participate… and should welcome the opportunity.  Churches, private foundations, and faith based organizations should be held to the same standards as all other organizations that enjoy tax exempt privileges.  Constitutional religious liberty does not guarantee tax exempt status. 

Getting this started could be difficult.  Many churches and charities will oppose anything that will force them to measure effectiveness.

Please join me in calling on the President to assemble a special presidential commission that includes representatives of charities and churches, watchdog agency representatives, the commissioner of the IRS, the head of the Federal Accounting Standards Board (FASB) and – most importantly – donors and volunteers.  This group could produce guidelines and guidance for non-profits to use in defining, maximizing, and reporting their Units of Mission Delivered and implementing The Nonprofit Effectiveness Measurement.

The Nonprofit Effectiveness Measurementwill change American philanthropy.  Non-Profit effectiveness will be measured and appropriately rewarded. Ineffective, dishonest, and inefficient organizations will be eliminated or replaced.  The United States leads the world in philanthropic pursuits.  The Nonprofit Effectiveness Measurement will insure that it continues to set the philanthropic example for the world.