We're seeing a lot of attention paid to nonprofit hospitals this week.  A state legislator in Boston is proposing that caps be put in place on executive pay at nonprofit hospitals in the Boston-area.  According to today’s Boston Herald, fourteen top executives at nonprofit hospitals raked in million-dollar-plus pay packages, a sharp increase from just a few years ago.  The article outlines a handful of CEOs at local hospitals who have received over $1 million salary, whereas only one executive in 2004 received a salary  of comparable weight.  State Senator Mark Montigny is raising this issue, proposing that salaries are capped at $500,000 at nonprofit charities whose annual revenues exceed $1 billion.  Nonprofit executive pay has been a part of discussions on accountability for years—regardless of the industry. 

Executive pay isn’t the only being discussed this week when it comes to nonprofit hospitals.  The Wall Street Journal addresses the controversy surrounding the revenue nonprofit hospitals bring in, where the money is being spent, and the tax breaks they receive.  According to the paper, the net income of the 50 largest nonprofit hospitals nationwide was more than $4 billion in 2006, up from less than $1 billion in 2001.  So why the extraordinary growth?  And where is this new-found money going?

That’s where the controversy lies.   The article questions how much money is being spent on free treatment to those in need, or what the hospitals are expected to provide in order to qualify for the tax breaks.  The WSJ points out Northwestern Memorial hospital, that, in 2006, spent $20.8 million on charity care or less than 2% of its total revenue.  Ironically, the hospital’s former CEO received a $16.4 million payout.  The article points out that other hospitals in the same area spent roughly 14% of their revenue on charity care.

The article continues to discuss the tax breaks hospitals receive and the disparities over executive pay and how the revenues of hospitals are distributed, leading to the ultimate question—if nonprofit hospitals bring in so much revenue, receive millions in tax breaks, and don’t deliver on the requirements of benefiting the community—why are they nonprofits?  That question, of course, is left open-ended as there are many hospitals who are providing charity work and the benefit to community requirement set forth for tax reasons is loosely defined, it is hard to say who isn’t making a difference.  

What do you think of the news relating to nonprofit hospitals this week? Should salary caps or tighter restrictions on tax breaks be in place?

As we encounter popular, visible fundraisers, such as this week’s American Idol: Idol Gives Back, we must not forget the importance of measurement in the effectiveness of an organization.  Many people and viewers alike assume an organization is credible, and therefore effective, because they see it on TV or because it is advocated by a celebrity (or talked about in today's NYT). Although these organizations often are able to raise significant funds due to visibility, unfortunately, it is not often the case that they are better just because they are bigger or flashier.

Through our own research, we've found that the organizations supported by this year’s Idol Gives Back represent reputable and moderately effective organizations. But although they are decently efficient at raising as well as allocating funds as compared to other organizations in the space - we must not take this as the norm, we as donors must still be careful to investigate before we pledge money to a cause.  We must seek out organizations using measurement tools to evaluate programs because as with any nonprofit, measurement will only help enhance the good the organization is already doing and help ensure that the organization will meet is goals and ideals.

As donors, we must be smarter than to take tear jerking stories as proof that an organization is using funds as wisely as it should. If we hold these organizations accountable, ask them what they are using the money to do, ask them to show us their measurement system and proof that the programs are working, out money will be better spent.  As a society, if we continue to give blindly, to donate based on photo montages of hungry children we see on TV, we will continue to idle if not take a step backward.  But if we do our homework as donors and support the organizations who are measuring their efforts and relating them to their outcomes, increasing their effectiveness and making the most social change, we will advance the mission of the organization and thus improve the society in which we live.

In a time when hundreds of thousands of nonprofits are asking for support, we must take our job as donors seriously.  We must demand transparency from the social programs we care about both in our communities and across the airwaves in order to foster the effectiveness that will benefit those causes that need it most.

American Idol, Idol Gives Back, measurement, nonprofit, effectiveness, transparency, donors

We talked about ethics in our last post – it’s quite the issue these day in the world of nonprofits. Tuesday’s topic du jour - fraud. 

A recent NYT piece outlined a report by the Certified Board of Fraud Examiners which estimated that the overall cost of fraud to nonprofits was at $40 billion for 2006, or some 13 percent of the roughly $300 billion given to charity that year.  The piece states that if in fact $40 billion was lost to fraud, then the corporations and foundations who gave in 2006 might have just as well burnt their benjamins – it was the same amount.

And we know this report lumps all the organizations together.  But does one bad apple spoil the bunch? In this case, maybe.  How do nonprofits expect donors to give when 13 percent of the donation ends up paying for some employee’s vacation or sports car?  Who do they know who to give to when the report tells us that almost all nonprofits encounter some fraud. The report also told us that ethics or no ethics, most givers don’t have very much faith in the way charitable organizations spend their money.

In the case of all this fraud, accountability might just hold us over. If we don’t have faith in these organizations, why don’t we question them? If we ask them measure their efforts and clearly show us the outcomes, and we like what we see, we might just take that leap and hand over the cash.  Rather than tattling, let’s be the bigger guy . Let’s show nonprofits what they can do to stay good apples and show donors what they need to demand in order to feel good about giving.

A somewhat disturbing study today out of the Ethics Resource Center that brings up a whole other topic of accountability in nonprofits.  We talk about making programs effective, using measurement and evaluation to really know what is going on in your organization.  But what happens when accountability is lacking in the people—not just the organization?

Along with government and business, the Ethics Resource Center has researched rates of observed misconduct at nonprofit organizations since 2000, and the most recent numbers are show the highest rates of misconduct in 2007 than in any other year.  Over half of respondents reporting that they have witnessed an act.  We need to say it again.  Over half.  The study also fond that nearly a quarter of respondents observed their co-workers putting their own interests above those of the organization.  Just over 20% reported observing managers or executives lying to employees.  When it comes to ethics, nonprofits are usually held in a better light than corporations and government.  However, these numbers put nonprofits in the same ballpark.

This study isn’t the only popping up lately showing holes in accountability.  As The Chronicle on Philanthropy points out, recent findings that nonprofits lack the ability to deter theft and fraud and that insider deals with boards are becoming more prevalent, are pointing out holes all over the place.

We talk about accountability in many forms.  But regardless of the form, accountability starts from the bottom up.  Its a shift in culture.  A new way of thinking.  And based on this study, a new way of acting.  

We’d be interested in hearing your thoughts.  Do this recent studies have you concerned for the future of organizations?
 

The world revolves around the Internet.  We send emails instead of cards, book flights in minutes and order food to be delivered to our front door.  We enjoy the ease of never having to leave our seat in front of the computer.  It’s no wonder online fundraising and donations have become so popular. 

Convio, Sea Change Strategies and Edge Research today released results of a national research study that dug into the online behaviors and attitudes of  donors.  It seems that Americans are more and more willing than ever to seek out organizations and donate to that organization all online. In fact, 51 percent of those surveyed said they prefer giving online and 46 percent said that five years from now they will be making a greater portion of their charitable gifts online.  72 percent of those surveyed said they donated online, rather than in the traditional sense, out of efficiency and in order to help organizations cut down on administrative costs. We applaud the interest in making it easier for both parties and the fact that they are taking into account those administrative costs. But does this mean they’re thoroughly checking out the organization before giving? We hope so.

Viral fundraising is taking the sector by storm and will continue to influence donors and publicize nonprofit needs. With the increased role social networking – profiles and groups on Facebook and MySpace, as well as blogs in the sector are making, are we really surprised more donors are contributing online?  

The question we must ask ourselves is, is easier better? Will leaving out the personal relationships between donors and organizations be detrimental in the long run?  How can we be sure accountability is still being taken into account?  As the world lurches forward, let’s not forget to keep an eye on the small things that can make a big difference. 

accountability, viral fundraising,social networking, Facebook, giving, fundraising, donations,

This weekend’s New York Time Magazine article, “For Good, Measure”, very positively advocated the need for measurement and the importance of effectiveness among foundations and nonprofits. It’s about time this topic made its way to national newspapers. After all, it’s been important to participants in the nonprofit sector, and those who really care about it, for years.

Although we are happy that this topic was addressed and brought to the attention of thousands, it’s rather sad that it’s taken this long to make its way to the top of people’s minds – to finally become important enough to discuss openly and among the public. What’s even more upsetting is that even though measurement is vital in understanding organizational impact and ensuring effectiveness, according to the article, barely half of foundations take metrics into consideration, evaluating the effectiveness of those whom they provide grants.   Why wouldn’t they track all 100 percent?  Just like donors, wouldn't they want to make sure their money is well spent? Check out someone who feels similarly, here.

Thankfully, new philanthropists are standing up and asking, Am I making a difference? How do you know?  And the answer provided in the article tells them, “If you really want to change the world, first you need to start measuring how (and how much) you’re changing it — because only a clear understanding of your results will enable you to expand the programs that work and jettison the ones that don’t”. At least they are steering them in the right direction.

Check it out, our own Steve Butz voiced his opinion in the blogosphere here.

New York Times, nonprofit, philanthropist, measure, effectiveness, foundation, metrics, evaluating,

We’re not surprised to hear that the future nonprofit leaders of the world are discouraged by the industry.  In a career full of emotion, compassion, and hope, the reality of money, lack of commitment and empathy, is enough to make anyone discouraged.  A recent study conducted by the Meyer Foundation and CompassPoint Nonprofit Services found that young nonprofit workers are frustrated by the monetary aspects of their work as well as the morale.  Low pay, tiresome work, long hours, the list goes on.  

The study, based on surveys of 6,000 social workers nationwide, found that 64% of respondents have financial concerns about committing to a career in nonprofit work. The issues surrounding pay are not new to the nonprofit world, of course. What was surprising was that just over 1/3 of respondents aspires to be an executive director someday.  And with an exodus of baby boomers leaving current positons to retire, this the time when young persons should be excited about the prospect of moving up.  Its not a matter of having a ceiling, the problem is there isn’t even curiousity to see what’s up there.

We can’t say it enough. Embrace your future leaders. Pay them well.  Take the time to teach and mentor them.  You’ll reap the benefits-as will they.

What are your thoughts on the future leaders of the nonprofit world? What should organizations do in order to encourage and develop younger generations in the field?

Oprah’s The Big Give, a reality show challenging contestants to help a stranger in need, debuted on TV last night. Although it got a lot of hype beforehand, most significant media are today shaking a finger at it, disciplining Oprah for taking an important topic such as philanthropy and turning it into a slightly inappropriate game.  Check it out here, here and even here.

It’s not that the contestants, or Oprah and her network, aren’t helping people in need, but it’s the fact that they’re taking charity and the notion of altruism and exploiting it.  Contestants are sent on a mission – in five days and with $2,500 they must make as significant a difference as possible in the life of a complete stranger – be that a med student in debt or a family in danger of losing their home.  Contestants must work with the community and area businesses to provide the most for the person in need – after which they will be evaluated on what they’ve been able to put together and give away and if it was the best they could do. Unknown to the contestants, at least that’s what Oprah tells us, is that the “biggest giver” at the end of the show will win $1 million. 

What sort of message is this sending to America? What does this mean for the future of philanthropy?

Is Oprah, who is herself known for her philanthropic efforts, telling us that it’s okay to judge people on whether or not their efforts are good enough? Or, that people should be rewarded with cash for helping those less fortunate then them (be it a series of times considering the contestants aren’t lifelong do-gooders)? Isn’t that just a little superficial?

In the end, it will be interesting to see if the show and the involvement of Oprah will raise the awareness of charity and philanthropy among the public or if it has the potential to diminish or have a negative effect on the image of the work social workers and the work they do every single day.  As the season progresses...we will see.

Oprah, The Big Give, philanthropy, altruism, charity

In order to expand their reach and effectively make change, some nonprofits are turning for-profit.  With the help of investors, capital, larger staffs (which they can afford to grow), and budgets for marketing and development, nonprofits turned businesses are finding themselves better able to fulfill their vision.  Is this a means of selling yourself to the devil or merely a way to support your vision and rather than struggle, see it fulfilled?

The New York Times reported today on one such business. Former AOL executive, Miles Guilburne, and his wife, lawyer Nina Zolt, had supported In2Books, a program that used books and the Internet as learning tools for inner city kids. The program was only ever grew slowly. And although the organization was not sustainable, the idea and the mission were.  Together with angel investors, Guilburne purchased a for-profit company, ePals Inc., in 2006 and the mission has boomed. The growth of the company spurred the interest of now partners, National Geographic and Intel.  Now the learning tools are reaching 13 million kids worldwide.  They surely didn’t sell out.

Taking from this example, we need to add that we think some of the greatest ideas for a business come out of a nonprofit venture. Our own Steve Butz is a former case manager who felt the need to really know how much change he was making, so he took a chance and founded Social Solutions.  He didn't cross over to the dark side, he just thought he could make a more significant difference through a business endeavor. Not exactly a mirror image to ePals, but our business allows us the ability - the assets, the funding, the smart people who work for us - to continue to carry out a philanthropic vision and our mission at that. Steve might have been working to better the life of one child at a time as a social worker, but through Social Solutions, he is able to better the lives of hundreds at a time by changing the way the larger organization is run.  Maybe he can take the credit for the trend?

New York Times, nonprofit, National Geographic, Intel, Social Solutions, Steve Butz, ePals, In2Books, Miles Guilburne, Nina Zolt,

D.C. area funders, representatives of nonprofits and those generally interested in accountability and evaluation of organizations met this morning at the National Press Club for an inspiring discussion by Washington’s Latin American Youth Center (LAYC) titled, “Lessons Learned from the Latin American Youth Center’s New Strategic Direction and Tracking Progress with Efforts-to-Outcomes Software”. 

The Latin American Youth Center, a long-time client of Social Solutions, showcased their strategic planning initiatives and the role ETO software has played in their planning and goal setting for the success of the organization.  We heard from Lori Kaplan, Executive Director of LAYC; Isaac Castillo, Director of Learning and Evaluation at LAYC; John Kalafatas, portfolio manager at Edna McConnell Clark Foundation; Kate Robinson, Director of Strategic Initiatives at Social Solutions; and a memorable group of young people willing to share LAYC testimonials.

How inspiring it was to sit in a room full of people charged for the same cause, helping to make our nonprofit organizations more effective in an effort to help our young people.  It was a comfort to know that the LAYC, a leading multi-service nonprofit, was willing to take a leap of faith, use a tool like ETO to learn how to better serve the community and marry their organizational vision with the evaluation of their work. Our own Steve Butz commented, “Working with LAYC has been a remarkable experience. They are a truly commendable service organization whose work to tie their efforts to outcomes can serve as an example to all nonprofits who seek to make a larger impact.”  LAYC is doing everything right. Their commitment to bettering their organization, over time and through evaluation, shows their intent at a lasting relationship with the community and a desire to positively make a difference in the lives of those who most need it.

Latin American Youth Center, Edna McConnell Clark Foundation, ETO, Steve Butz, efforts to outcomes, evaluation, nonprofit