What Works

In a bad economy, it’s more critical than ever to track the impact of philanthropic dollars, right? Trouble is, measuring impact remains a big challenge for most advocacy groups, but less so for many social enterprises. Why? Mark Kramer of FSG Social Impact Advisors —a nonprofit strategy group founded by Kramer and Harvard Business School professor Michael Porter—says the tools aren't the problem. Blame culture and a fundraising mindset.

Speaking to a group gathered at NYU’s Stern School of Business for the school's fifth annual Conference on Social Entrepreneurs, Kramer says social media are starting to give communities of philanthropists some of the tools they'll need to start tracking the performance of their do-good dollars. But most classic nonprofits still aren't ready for the scrutiny. Kramer's remarks come amid a report to be released tomorrow by the Center on Philanthropy at the University of Indiana showing overall confidence among charity fundraisers is the worst since 1998.

Here are some excerpts of Kramer's talk:

“We all give away money. Wouldn’t it be great to know what we actually accomplish? Evaluation is urgent and essential: it’s through this that we will overcome what I see as the failure of classical philanthropy.
We live in remarkable experiment in the nonprofit sector. No other country has a nonprofit sector as large and vibrant as in the United States.
Philanthropic giving over the past 20 years, in inflation-adjusted dollars, has increased 250 percent; the number of nonprofit organizations has more than doubled. Yet when you look at where America ranks on the problems that the nonprofit sector is trying to address, it has steadily declined compared to other developed nations during that time.

We spend more than any other country in the world on health care but yet in life expectancy, the United States ranks 24th out of 30. Consider education. Out of 100 kids who start high school in America today, 16 will graduate college on time. And that’s nationally. Poverty? We are second only to Mexico for the percentage of children living in poverty. And on crime, we have 5 percent of world’s population yet 25 percent of the world’s prisons. And all of these things have grown dramatically over the last 20 years as philanthropy has burgeoned and as the nonprofit sector has burgeoned. So something isn’t working—and I believe that what fundamentally isn’t working is that we don’t know the impact of our contributions. And if we don’t know the impact of our contributions, we can’t make intelligent decisions about where to direct our money. And that is a failure of the sector.

Achieving greater impact with our dollars is not just about creating new social media tools in philanthropy. We also need to change the culture [of philanthropy], from one now focused on giving—asking how much did we give and how much did we raise —-into one that becomes more focused on performance.

I think social entrepreneurs are a wonderful example of that cultural shift. They are people who are focused on outcomes and performance rather than on the fundraising, alone. We can solve social problems but we need to focus on problem-solving, not just giving money to the nonprofit sector.”

What do you think? Is Kramer right? Is social entrepreneurship, with its focus on evaluation and measurement, the key to unlocking effectiveness in the nonprofit sector? Is it possible to shift toward a focus on performance without having to replace top leadership, and which social media tools can be used most effectively to build transparency and donor engagement?

To watch the video of Kramer's speech, released today, click here. Also check out the Center for What Works.

(Illustration, Investor, by Miroslaw Pieprzyk)