High-impact nonprofits are rare, but worth funding


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Following up on Thursday’s Alliance for Effective Social Investing meeting, Sean at Tactical Philanthropy writes:

A high performance nonprofit is a very well run organization. It has outstanding leadership, clear goals, an ethic of monitoring performance and making adjustments as needed, and it is financially healthy.

A high impact nonprofit is one whose efforts have been proven to cause sustainable, positive change.

Impact can be seen only in retrospect. Often many years later. Performance can be directly observed.

I think high impact nonprofits are the holy grail of philanthropy. But like any holy grail, it is something to journey towards, not something you demand now.

Sean goes on to argue that funders should put more focus on “high-performing,” as opposed to “high-impact,” nonprofits. At GiveWell, we focus on “high-impact” nonprofits, in that we look for evidence of past impact and not just future promise. Our response to Sean:

1. Assessing “high-performance” is much harder than assessing “high-impact.” This isn’t to say that either is easy. But we feel it’s very doable for charities to take the “form” of a “high-performance” nonprofit – collecting large amounts of data, executing activities competently, and describing those activities in a compelling and money-raising way – without actually being on a path toward impact (which requires that the data be the right data and that the activities be the right activities for the goal).

We see many charities with impressive-looking evaluation systems; far fewer with actual past outcomes to show. If anything, this makes us suspect that other funders are looking for the form and appearance of good evaluation, without holding charities accountable for actual results.

2. Because of this, funding “high-performance nonprofits” is not something that casual donors (as opposed to subject matter experts) are well positioned to do. This point parallels our argument that casual donors aren’t well positioned to fund the unproven and innovative. Like funding a small and unproven charity, funding a “high-performance” but not “high-impact” charity means trying to do something that hasn’t been done before, and introduces a greater need for understanding the full context of a program.

3. “High-impact” nonprofits might be rare – but that doesn’t make them overfunded. We believe that our top-rated charities can productively use more funds than they’re currently getting. As long as that’s the case, why should a casual donor give to a charity without past impact rather than a charity with past impact?

Comments

High-impact nonprofits are rare, but worth funding — 3 Comments

  1. Holden,

    Thanks for your work with GiveWell. While I agree with you that funders should focus more on “high impact” organizations in order to make the greatest social impact, I think assessing “high performance” is harder (vice much harder), due to their ability to just take the form of one, but not much harder to assess. “High impact” looks at a non-profit’s external effectiveness and “high performance” looks at its internal effectiveness. Internal effectiveness can be harder to measure, but with some good surveys, interviews, etc, a picture can be created. But what makes it harder to assess is the subjectivity of the guidelines to call an organization “high performance”. When looking at “high performance” organizations, I agree that it’s important to look at the whole picture of the organization – good call.

    As a donor, I think the holy grail is a “high impact, high performance”. Yes, I want both and that’s why I’m skeptical to give.

    Could you please define both terms “high impact” and “high performance” for us? It would be helpful to have a baseline of expectations.

    Thanks,
    Kristen

  2. Hi Kristen,

    Thanks for the thoughts. As to definitions, I think Sean gives reasonable and succinct definitions:

    A high performance nonprofit is a very well run organization. It has outstanding leadership, clear goals, an ethic of monitoring performance and making adjustments as needed, and it is financially healthy.

    A high impact nonprofit is one whose efforts have been proven to cause sustainable, positive change.

    Impact can be seen only in retrospect. Often many years later. Performance can be directly observed.

    The Alliance for Effective Social Investing is working on a more formal and complete definition.