Effectiveness for Private Foundations—the Obscured North Star
It has been said more than once that effectiveness should be the North Star of private foundations. Alas! If only there was a bright guiding light to follow! The problem is that measuring the effectiveness of private foundations and public charities is exceptionally difficult. A good gauge of effectiveness would allow private foundations to course correct as needed and help inform where future resources should be deployed. Unfortunately it is all too easy to measure the wrong thing or not measure anything at all.
In contrast to the world of nonprofits, the business world does have a quick and easy gauge of effectiveness—it is a company’s bottom line. Did the business make a profit? How much? But using profit as an indicator simply is not applicable for private foundations and public charities.
Some unwary observers have suggested that it is possible to measure the effectiveness of foundations and public charities by looking to the overhead ratio; i.e., the percent of overhead costs over the total expenses of the organization. However, it is easy to see that this indicator cannot be a good stand in for effectiveness because it assumes that all overhead expenses are non-productive. It is abundantly clear that overhead costs help organizations pursue their charitable mission. Furthermore, the overhead ratio does not measure effectiveness because progress and impact are altogether absent from the equation.
In light of this situation, what can private foundations do to better understand their own effectiveness?
Clearly Articulate Goals
In order to get a better handle on effectiveness, private foundations should start by clearly defining the problem they wish to ameliorate or solve. Many foundations have a lot of balls in the air and a very scattered mission. Undertaking many disparate initiatives usually results in doing none of them well.
If a foundation narrows its focus, it has a much better chance of increasing its effectiveness. Vague goals lead only to vague progress. Having an ill-defined goal like “disrupting poverty” may sound praiseworthy but it is very general and is entangled with many other ancillary issues like substance abuse and homelessness. Foundations tend to be far more impactful when they spend an appropriate amount of time on the front end defining their goals as stringently as possible. With clearly defined goals, it should be relatively easy to find public charities that conform to the foundation’s primary mission.
Measuring Effectiveness—There will be Fuzziness
After finding public charities that share a foundation’s goals, the next step is measuring their effectiveness. Unfortunately evaluating public charities is a very contested discipline and is perhaps more art than science. There is an ongoing and vigorous debate about how evaluations should be done and what type of evidence is accurate and useful. Is qualitative or quantitative data and analysis more important? There is no definitive answer. As such, methods of measurement will vary considerably and each situation requires unique professional judgment—in other words, there will be fuzziness.
Yes, it is possible to measure tangible items like the acres of wetland protected or winter jackets distributed, but for most issues, especially those in the social and cultural realm, progress is not easily quantifiable. Each issue has its own unique variables, an evolving landscape, and autonomous players all interacting in a mosaic of complexity. Measuring the effect of a specific intervention within its unique ecosystem is oftentimes futile. Even though finding direct causal relationships is not always feasible, it is generally possible to at least make some directional assessments from a bird’s eye view.
Here are a few pieces of advice that may be helpful for foundation leaders. First of all, evaluations should be designed to guide future decision making. Seeing that many types of evaluations are expensive and time consuming, they should only be undertaken if they are practical and useful. Second, foundations should generally work with the public charities themselves in order to come up with indicators of progress and success. For small foundations this might mean simply looking at a charity’s website to review their self-proclaimed accomplishments, but for larger foundations this can be an active and thoughtful collaboration. Lastly, foundation leaders should be careful not to demand more than is reasonable—both from themselves but also from their public charity partners.
Evaluating the effectiveness of private foundations and public charities is not an easy task. Foundation leaders must blend together art and science and sometimes their findings will not be very profound. Nonetheless, foundation leaders should do their best to evaluate their impact and be rigorous in their self-assessment as they chart their way forward.
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