Measuring Quality in Nonprofits

July 7, 2009

One of the central issues for donors to nonprofit organizations is how to assess the quality of organizations in order to make somewhat evidence-based decisions about contributions. Guidestar, one of the better known organizations, for example, makes its assessments almost entirely on publically available financial information. The relationship between the salary of the CEO or the rate of administrative cost and the impact is not assessed, for example, but the effects of a Guidestar rating can be dramatic, demonstrating the hunger for such information among donors. Data to provide information to make more sophisticated assessments of quality is being developed by several organizations. In Israel, Midot is a relatively new nonprofit whose mission is to promote the professionalism of nonprofits and enhance donor decision-making through comprehensive evaluations. Zvika Arran, the young CEO, one of now many engaged, energetic social entrepreneurs that I have had the pleasure to meet, has a passion for getting this assessment business right. Midot looks at over 100 indicators, some ascertained through standard reporting forms and others through interviews with organizational officials. Midot divides these indicators into seven major fields—effectiveness, leadership, horizon (planning), people (human resource development), systems, finance, and ethics. On average a nonprofit spends 35 hours in this intensive evaluation and Midot an additional 100 hours analyzing the data and producing a report, resulting in costs of $3000-$6000 for an organizational assessment. The process is transparent and the reports are publically available, encouraging nonprofits to use these assessment to their benefit, due to this transparency. In contrast to Maala, which does similar types of assessments on the social responsibility of companies, Midot itself is funded primarily by donors, raising the question of who should be financially responsible for the costs of evaluation. For nonprofits, of course, donors play a major role, so whether an evaluation is “free” to them or they have to pay for it themselves, the ultimate source is a donor or donors. One wonders, however, what effects taking direct responsibility for financing their quality control efforts would have on nonprofits. Given the desire for credible information and the narrow and unvalidated assessments by organizations such as Guidestar, Midot is making an important contribution to the lively world of funding Israeli nonprofits.