Third Sector Connector Blog

What is the best way for donors to choose a community-based organization to support?

“Charity Rating Systems”? BUZZ! Wrong answer.

• According to a recent comment by Ken Berger from Charity Navigator, “…60% of all the revenues in the sector go to 2/10ths of 1% of all the 501(c)3s.” Berger says, “That is about 2,000 or so organizations. In addition, about 94% of all revenues go to 6% of them.”



• That means that the vast majority of the nonprofit organizations that are at work in your community won’t show up on ratings or top 10 lists even if they are producing outstanding results. For instance, Charity Navigator only reviews ~5,000 of the ~ 1.1 million charitable nonprofit organizations in the United States. In order to be listed, Charity Navigator requires organizations to have more than $500,000 in public support and total revenue of more than $1,000,000 in the most recent fiscal year.
• Most experts agree that the use of “overhead ratios” as an indicator to guide donors has resulted in a mistaken belief that funding “lean” organizations is a better investment than funding organizations who invest in their infrastructure. Yet, most of the existing nonprofit/charity rating systems are still based, in part, on these ratios, and use of these ratios continues to mislead donors and harm the sector as a whole.

What about “Nonprofit Expert Evaluators”? BUZZ! Also wrong.

• In fact, some so-called “evaluation experts” at a new “independent, nonprofit charity evaluator” have only a few years of work experience within the hedge fund industry and have limited experience within the nonprofit sector.
• This can lead to poor advice and reliance by donors on incorrect and uninformed information. For example, this same new evaluator recommends a specific healthcare organization to donors while at the same time saying it has, “little formal evidence regarding the quality and outcomes” of the organization’s programs and believes that they are outside of a reasonable range of cost-effectiveness.

In fact, most rating systems and expert evaluators do not evaluate actual program outcomes produced by the organizations, but instead look exclusively at financial data that is reported on nonprofit tax returns.

There are better ways to choose a nonprofit or NGO to support.

The data points above are included in Ready to Choose a Community-Based Organization to Support? Look Beyond “Charity Rating Systems” and “Nonprofit Expert Evaluators“, a new “tip sheet” designed to help guide donors to better ways to choose which organizations to support. The document is still in draft form, and is being circulated for public input, review and feedback before finalization. Since Third Sector Connector is committed exclusively to helping local community-based organizations thrive, we’re pleased to be part of the growing group of “Supporters of Effective Community-Based Philanthropy” that created the draft and is seeking feedback at our Facebook Group.

Here are some of the current tips for donors who want to support local community-based organizations that are making a difference:

• Reach out to community leaders. Contact program officers at your local United Way or community foundation and ask them which organizations are doing innovative work in your areas of interest (e.g. arts, basic needs, education, employment, environment, children and youth).
• Review nonprofits’ websites, annual reports, and other materials. Locate information about their visions, missions, goals, and programs. Check their rosters of Board members and directly contact any that you know.
• “Google” the organizations that best match your interests. Get on the Web and look for positive press and discover any concerns that have been publicly raised. Do a general web-based search and also search for recent news.
• Make direct contact with organizations. Once you have a few organizations identified, contact staff leaders and ask to be put in touch with one or two current donors who are giving at the level that you intend to give. Ask them what their experience with stewardship has been. Have they received timely acknowledgments of their support? Do they get updates on how the funds were used? Is the staff team responsive?
• Take a field trip. If possible, visit the programs and services provided by the organization to experience their work directly. If it is a direct service program, speak directly with people who have received services to understand their experiences with the program.
• Look for evidence of community engagement, collaboration and impact. Ask for copies of any public planning documents, results from community surveys, and outcome measurement reports. Contact partner organizations and other community collaborators to ask about their working relationships.
• Ask for a copy of the organization’s most recent budget and financial data. If you are making a substantial gift, consider asking your financial advisor to review it and share any questions or concerns with you.

What would you add to this list or change? Either comment below or join the Supporters of Effective Community-Based Philanthropy Facebook Group, and provide your input there.
Further Reading

My worst nightmare is now true: sloppy ratings of nonprofit effectiveness in Haiti by Gayle Gifford (which catalyzed this current initiative)

Beware The Nonprofit Watchdog – Charity Navigator by Don Griesmann

The Overhead Question: The Future of Nonprofit Assessment and Reporting – A February, 2010 conference call sponsored by NTEN. Get the recording here.

Charity Navigator Fixes Its Compass by Dan Pallotta (make sure and read the comments, too)

Do you ever have moments where all of the signs, arrows, and flashing lights keep pointing in the same direction no matter which way you turn? That’s what happened to me recently, and they were all pointing toward the flashing neon sign in my brain that said (blink-blink, blink-blink) “Servant Leadership.”

First, I received a ton of great feedback on my recent post about “18 Traits for Successful Nonprofit and NGO Leaders.” Some folks thought that the list set the bar too high, but most of our site members and social media pals thought that the list could still be further enhanced so they added even more traits like compassion, empathy, and humility, just to name a few. Upon reflection, I realized that even if executive search teams aren’t specifically identifying these additional traits in job postings, it may be because there is an assumption that nonprofit and NGO leaders already possess the common characteristics of “servant-leaders,” a term first-coined by Robert Greenleaf in the late 1960s.

Next, I read an interesting post by John Copps on the New Philanthropy Capital blog called,”Are charity CEOs too powerful?” , that expressed worries that if shared governance is not present, then “it risks a situation where the CEO is the undisputed top dog and doesn’t receive enough challenge to his or her decisions.” It left me wondering about how the nonprofit shared governance model impacts the concept of servant-leadership, and how to cultivate servant-leaders, not just in our CEOs, but also in our Boards so that this fear simply becomes unfounded.

The third arrow in the quiver was a delightful phone conversation yesterday with Michael Kumer, who is the associate dean of the School of Leadership and Professional Advancement at Duquesne and is also the Executive Director of Duquesne’s Nonprofit Leadership Institute. Every word spoken during our entire conversation reminded me that I choose to teach for Duquesne because of their emphasis on cultivating authentic, capable leaders who are committed, excited and prepared to serve in their communities. How do they do it? They intentionally model servant leadership at an organizational level…no small feat within a large educational institution.

Since the neon sign in my brain was now blinking at strobe speed, I dusted off my copy of Robert Greenleaf’s seminal essay, “The Servant as Leader,” which was written in 1970 and which strongly influenced me during my early days as a young nonprofit leader. Although something new stands out for me each time I read it, the most well-known quote from the essay always has the most impact on me time and time again (perhaps that’s why it so well-known, huh?):

“The servant-leader is servant first… It begins with the natural feeling that one wants to serve, to serve first. Then conscious choice brings one to aspire to lead. That person is sharply different from one who is leader first, perhaps because of the need to assuage an unusual power drive or to acquire material possessions…The leader-first and the servant-first are two extreme types. Between them there are shadings and blends that are part of the infinite variety of human nature.

The difference manifests itself in the care taken by the servant-first to make sure that other people’s highest priority needs are being served. The best test, and difficult to administer, is: Do those served grow as persons? Do they, while being served, become healthier, wiser, freer, more autonomous, more likely themselves to become servants? And, what is the effect on the least privileged in society? Will they benefit or at least not be further deprived?”

10 Characteristics of Servant-Leaders

In the many other works that followed Greenleaf’s first essay, these traits and characteristics of servant-leaders were further fleshed out. They include:

1. Listening
2. Empathy
3. Healing
4. Awareness
5. Persuasion
6. Conceptualization
7. Foresight
8. Stewardship
9. Commitment to the growth of others, and
10. Building community

5 Cross-Sector Servant-Leadership Questions
Anyone who knows me also knows that I believe that asking questions provides a powerful opportunity for introspection, reflection and learning. So, Greenleaf’s questions and a refresher on the 10 characteristics above stimulated yet another set of questions from me about servant leadership across all sectors (government, for-profit, community-benefit/Third Sector, and the emerging 4th sector).

• What if every local community made it a priority to identify, cultivate and reward true servant-leadership in businesses, government, and the nonprofit/NGO sector?
• What if local nonprofit leaders (both Board and staff) had a safe “place” to gather to talk about how best to serve their communities collaboratively, without the defensiveness and territoriality that frequently comes with such meetings?
• What if local foundations, business leaders and human services coalitions joined forces to provide ongoing training to existing and next-generation leaders in all sectors about servant-leadership?
• What if, alongside Math and English, Servant-Leadership became part of the core curriculum for all middle-schoolers, high-schoolers and college students?
• What if servant-leadership became the norm in our society?

Wouldn’t servant-leadership lead to stronger, healthier, more vibrant communities? Couldn’t servant-leadership connect all of our sectors with a shared leadership agenda? What do you think?