How Do You Decide How to Give?
This Passover we celebrate our freedom, give thanks for the blessings we’ve received —and renew our commitment to paying it forward. Healing the world, Tikkun Olam, is our eternal project. But the needs are so great. We can’t support every good cause or accommodate every nonprofit’s requests. How can you decide?
The options are limitless. There are hospitals, universities, advocacy organizations, theaters, food pantries, after-school programs, synagogues, and so on. Over 1.5 million nonprofits are just in the United States. They range from sophisticated multi-billion dollar conglomerates to tiny volunteer-led virtual mom and pops. They serve constituents on the other side of the world, in your neighborhood and everywhere in between.
With so many possibilities there’s obviously no one-size fits all. So, the first task has to be to narrow the field. Ask yourself three questions:
What do you care about?
Why are you giving?
What gets you excited?
The relationship between donor and nonprofit is reciprocal: the nonprofit relies on donor contributions to perform its work; donors act on the world through the work of the nonprofits that they support. The nonprofits you choose to support should reflect your personal priorities. Philanthropy is not the science of objectively determining and then funding humanity’s most pressing needs or intractable problems. It’s about engaging with an organization that’s committed to the same things you are. The closer the work of the nonprofit aligns with your own priorities and values, the more satisfied you’ll be as a donor.
Why are you giving?
You don’t necessarily have to be obsessively focused on the achievement of a nonprofit’s mission. There are plenty of other reasons you may wish to give—to demonstrate your solidarity, in gratitude for past services received to support neighbors and the local community (your local Jewish Federation), to expand their personal or professional networks, to be part of something larger than themselves (your friendly neighborhood synagogue) because they like going to galas, because their parents did. Donors may see their contributions as investments, expecting the nonprofit to deliver a specific result in exchange for their gift. Nonprofits often lean into this desire, equating specific service deliveries to different levels of contribution. Knowing what you expect from your giving provides a lens for determining which nonprofits are best able to meet your expectations.
Answering these two questions may give you as much clarity as you need. If your priority is to support the local Jewish community so that you feel like you’re doing your part, please consider a gift to the local Jewish federation or to your temple’s community outreach program. You’re good to go.
But for many, these questions are just the initial screens, leaving you with a list of possible recipients. At this point, you may want to know which of these nonprofits will make the best use of your money, which are able to make the greatest impact. This is where things become difficult.
As a consultant and advisor, I work with nonprofits specifically for the purpose of maximizing their impacts. So I’m regularly assessing organizational capacity with respect to impact. I’ve come to realize that maximizing impact comes down to three critical factors:
Commitment to Mission.
Outstanding Staff Leadership.
Commitment to mission. When I was new to the nonprofit sector, I just assumed that everyone to be obsessively focused on impact. It didn’t take long to realize that life in the nonprofit world is far more complicated than that. Impact competes with other important organizational priorities including sustainability, staff needs and funder priorities. Focusing on impact requires prioritizing the interests of constituents—those who the nonprofit serves—over others with louder voices. It’s not always an easy choice.
A deep commitment to impact also requires a willingness to learn, which entails collecting information on what’s working and what’s not. It means sometimes getting it wrong. Acknowledging error or ineffectiveness and then being willing to address it is not as common as you might think and nonprofits that do so are worthy of your support—if you can ferret them out.
Outstanding Staff Leaders. The single most important factor in a nonprofit’s success is almost always the senior staff leader, the Executive Director or CEO. While nonprofit Boards often take the spotlight, the ED is the indispensable person responsible for turning donations into impact.
Successful EDs don’t need to have a specific skill set. They are often pretty bad at any number of things, but as long as they’re self-aware and able to get the support they need, that’s not necessarily a problem. What does set the best of them apart is extraordinary determination. They are able to prioritize, to set expectations and hold others (and themselves) accountable, and to model the values and the behaviors they expect their staff to exhibit.
Financial competence. A nonprofit’s commitment to impact is generally in tension with sustainability, its ability to stay in business. Going all in for impact puts the nonprofit’s survival at risk while overemphasizing sustainability means that the organization is likely to underperform its capacity. Getting the balance right requires the nonprofit to have a good understanding of its financial circumstances and then to apply that understanding to its decision-making.
Successful nonprofits have a solid understanding of their present financial situations. Whenever I start work with a new client, I generally request the latest financial statements. If they’re three months old, pages long or lacking comparative information, that’s a problem. Equally important is the ability to make well-informed predictions about the future. Like all businesses, nonprofits need the capacity to assess upcoming risks and opportunities so that they can make strategic financial decisions.
Parsing the Clues
Looking in from the outside, each of these elements is extremely opaque. But there are clues to guide you if you know where to look.
Commitment to Mission? Each nonprofit has a story to tell about its impact, and—not surprisingly—it tells that story to its best advantage. It highlights successes, not failures. It makes promises of future results. So how do you distinguish the stronger claims from the flakier ones? What’s solid program results and what’s crafty marketing? It can be virtually impossible to tell.
You can learn quite a bit though from focusing less on the truth of a nonprofit’s presentation and more on how effective you find it.
Are the claims compelling? If they were true, would I be excited about them?
Do they seem realistic? Not too vague or overly ambitious?
Is the focus on the non- profit (who it is/what it does) or its work (why what it does matters and to who)?
Does the messaging give you a sense that the organization really under- stands its constituents?
Are the claims well communicated? If you find the messaging compel- ling, that speaks to the general competence of the nonprofit.
An effective presentation doesn’t guarantee impactful programs, but if the presentation isn’t compelling you reason to doubt that the work will be.
Outstanding Staff Leaders? The challenge of evaluating a leader based on what you can see as a potential donor is not unlike determining whether someone is a good spouse or parent based on meeting them at a cocktail party. For five minutes. Good luck.
While the essence of a leader’s work is behind the scenes, what you can see is not trivial. Public presentation matters not just to potential donors, but to constituents, foundations, and community partners. Are you impressed by the leader? Are they charismatic? Are they compelling communicators? Are they self-aggrandizing or do they share credit lavishly with others? And how are you experiencing their donor outreach and engagement? As when you’re evaluating commitment to mission, this may not be enough to form a positive conclusion, but you can certainly see if there are problems.
Financial competence? Nonprofits share historical financial information with the IRS in a 990 filing which offers a few clues to financial competence. There will be two fairly recent years to assess revenues, expenses and net income.
Pay attention to the disclosures about available assets. Money in the bank enables nonprofits to focus more on impact since they have to worry less about sustainability. Salary information for the highest earners is also reported, which doesn’t speak directly to impact but at least gives some sense of whether resources are being spent in a way that fits your expectations of what’s appropriate.
Unfortunately, 990s and even audits can only reveal hints about the nonprofit’s financial competence, subject to interpretation. While you might love to see a cash flow projection, that’s unlikely to happen. Like all businesses, nonprofits hold such information tightly so there’s no reason to infer anything negative from the fact that you aren’t privy to it.
The Way Forward
The hints and inferences you can gather are insufficient to support a confident choice to donate to a particular nonprofit. These can only help to further narrow the field more than they’ll let you know you’ve arrived at a good decision. And that will have to be enough.
If a contribution were a switch— yes or no—the lack of information would be a problem. But try thinking about it as a dial. You can calibrate the amount of your donation to your level of confidence. The greater the confidence, the higher the contributions might be.
This works particularly well if we frame an initial donation less as a transaction and more as a first step in developing a potential relationship with a nonprofit. Relationships normally start with more questions than answers. And the longer the period of engagement the more you can learn about commitment to mission, the senior leadership and financial decision-making. If you don’t like what you learn, you simply move on to other nonprofits. But at least initially, there’s no reason to treat your philanthropy as either/or, all or nothing.
Relationships evolve. You may become a regular donor; maybe increasing your contributions over time. You may read the newsletter. Many nonprofits depend on the work of volunteers in addition to paid staff. While that may not work for you, a good relationship questions to ask yourself is whether you would be interested in volunteering if you had more time. Is this a group with which you like to be associated?
The good news is this is what smart nonprofits want as well. Finding new donors is more expensive and difficult than retaining existing ones. Nonprofits understand that donors will likely want to dip a toe in before they commit to getting in the water. They’ll appreciate your one-time gift, but what they’d really love is for you to stick around for years to come.
Gary Gold-Moritz has been helping nonprofits through his work at ggm Nonprofit Consulting.
For more information visit: ggmnonprofitconsulting.com
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