Timely Evaluations Still Rare in the Nonprofit World

Information on whether nonprofit programs produce results is hard to come by, making it difficult for charities to improve their performance and for donors to make informed giving decisions, says a new report.

“The nonprofit marketplace lacks the robust flow of timely, accurate information that is a hallmark of high-performing markets such as stock exchanges, commodity markets, or eBay,” the report’s authors write. “To bridge this gap, the sector must capture, analyze, distribute, and use information on nonprofit organizational performance and social impact more effectively.”

The new report, “The Nonprofit Marketplace: Bridging the Information Gap in Philanthropy,” is the result of a year of study by McKinsey & Company, the management-consulting firm, and the William and Flora Hewlett Foundation, in Menlo Park, Calif.

Donor Demands

While charities have advanced their efforts to assess their results, real progress will require standards for performance assessment that are widely accepted across the nonprofit world, the report’s authors argue.

Donors, they say, need to demand more information from the charities they support. No single step would do more to improve the quality and flow of information on nonprofit performance than donors making their giving decisions based on results, say the report’s authors.

“This requires asking sophisticated questions around nonprofit impact and clearly communicating (in person, on Web sites, through advisors) that performance data and transparency will affect donations,” they write.

Nonprofit groups and philanthropic advisory companies that seek to connect donors and charities, collect and distribute meaningful information, or provide advice, education, and opportunities for donors to connect with potential grantees have brought about some promising innovations. But for the most part, these organizations are “small, isolated, and not as effective as they could be.”

“Intermediaries need scale to have impact: Databases are not very useful until they are full of data; mechanisms to connect nonprofits to donors are not appealing to nonprofits until enough donors use them; standardized reporting formats are only helpful if many institutions adopt them,” write the report’s authors.

These organizations could reach many more donors by forming partnerships that would allow them to post performance data on the Web sites of financial institutions and large community foundations, places where many affluent donors already go to manage their charitable contributions.

‘Hard to Access’

The report also calls on foundations to do a better job sharing the information they gather in the course of their grant making.

“Squirreled away in filing cabinets is a huge volume of social-issue research, sample strategic plans, evaluation data, and lessons on what works in areas such as homelessness and education,” write the report’s authors. “While these materials probably vary in quality, they are uniformly hard to access and underleveraged.”

The report is available online.

The Web site also includes a message board that the Hewlett foundation hopes readers will use to discuss the issues highlighted in the report.