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Measuring Impact
The Economist recently ran a special report on “The Business of Giving: A Survey of Wealth and Philanthropy” (25 February). Prompted by the “new enthusiasm for philanthropy,” the half-dozen articles explore the shift of ground being experienced by everyone in the non-profit world, from foundations to the grassroots organizations in whom they invest.
The key word is “invest.” The entry of uber-businessmen from Microsoft, Google, and eBay into the philanthropic sector is putting pressure on the field to reassess its accepted practices. The big question: How can money be leveraged more effectively by introducing market strategies from the for-profit world?
This bodes well for small- to mid-sized arts groups, which have been hamstrung by traditional grantmaking that demands “capacity-building” and “growth” without offering the capital required to scale up.
The new philanthropists are critical of short-term, project-oriented, “chop and change” grantmaking. Infrastructure is key, they say, overheads are necessary, and sustainability is the goal. Revenue is distinguished from investment capital. Structuring that capital means more than simply paying all the bills.
The good news is that the new philanthropists understand why you need capitalization to hire a full-time manager, update your new donor management software, or expand the facilities.
The bad news is that, in return, you’ll need to be able to demonstrate the return on that investment.
Even in the arts, we need to cultivate the habit of articulating our impact, or projected impact.
Here is a simple exercise you can do to jump start that habit.
When New Philanthropy Capital (the equivalent of an equity-research firm for the philanthropic marketplace) reports on a nonprofit, it first asks the organization these four questions. How would you answer them?
- What is it you do?
- Why?
- What is success?
- What is evidence of that success?
Best,
Ann
March 2006