The theory and practice of professional strategy is reaching into the world of philanthropic and nonprofit organizations and driving the creation of new strategic performance measurement systems that promise to optimize the delivery of social and cultural benefit to society.
Until recently, executives and leaders in both philanthropic and nonprofit organizations have not typically set strategic performance objectives nor employed formal performance management and measurement systems. From the philanthropic side of the equation, this has often led to “throwing money” at social problems without achieving the desired societal benefit. From the side of the nonprofit organizations, this has largely led to noble intentions with limited accountability to donors, society, or culture.
In consequence, the lack of meaningful or consistent performance information has delayed the development of a highly efficient philanthropic marketplace, one that would be characterized by effective giving and the delivery by the nonprofit sector of measurable benefits and the solid accomplishment of specific goals.
In 2000, there were over 57,000 nonprofit foundations in the U.S. and a philanthropic marketplace exceeding $160 billion, all promoting the social and cultural good in some respect, but with little sense of whether or not good was being achieved. Larry Ellison, the well-know CEO of Oracle Corporation, gave voice to this uncertainty when he recently commented, “I’ve given away a half-billion dollars, but I’m not particularly proud of that because I can’t point to a single truly great accomplishment yet.”1
The classic “good works” business model, based upon giving and feeling good about it, and receiving and doing good with it, is coming under a new scrutiny. Today, both philanthropists and nonprofit organizations must demonstrate, to themselves and others, that good has been done, results have been achieved, and money has been well-spent. This complementary new demand for philanthropic results and nonprofit accountability promises to revolutionize the nonprofit sector through the development of new ways to achieve and measure the delivery of social and cultural benefit.
Many believe that nonprofit inefficiency exists because both nonprofits and their supporters have failed to think strategically about their goals and to set the right performance measurements for their enterprises.
Of course, philanthropists can report to whom they have granted funding and how much they have given, and nonprofit organizations can report their fund-raising success and how they have used their resources. However, the success of “good works” should not be based upon either measures of how much was given or how much was raised.
Rather, the real measure of both philanthropic and nonprofit success should be the actual delivery of meaningful social and cultural benefit.
This then raises the question: How can philanthropists and nonprofits effectively measure social and cultural contribution and enterprise performance?
The simple answer is through the rigor of strategic thinking and planning, as practiced in the most successful U.S. corporations.
At present, most philanthropists and nonprofits lack a sense of how to grasp and report their often intangible and elusive goals and contributions. This is because they lack a formal practice of strategy and an understanding of how it can generate more effective and accountable action in the world. Strategy in the nonprofit sector is often non-existent, partial, or weak, by the standards of successful, strategy-focused for-profit organizations. Nonprofits often think strategy begins and ends with the creation of a mission and a statement of their values. Even when there are specific strategies, objectives, and plans, they often are poorly aligned with the mission, they lack orchestration, and they are not crafted to allow meaningful measurement and full accountability.
However, many nonprofits, as they struggle to become accountable and to deliver results, are changing in ways that can bring new stature and significance to the entire sector. By striving to demonstrate cash-value societal relevance and operational effectiveness, they are adopting the strategic thinking that has achieved success within the for-profit world.
Leaders and executives in the nonprofit sector are increasingly realizing that accountability holds the promise of the greater social effectiveness that has always been expected from both nonprofits and philanthropies. Simultaneously, donors are bringing strategic precision to their philanthropic goals and nonprofits are discovering how to target and measure their delivery.
In the past, traditional strategy models have not seemed applicable to the nonprofit world, mainly because the primary objective of nonprofits has been social and cultural good, and not financial success. However, as professional strategy becomes more about optimizing intangibles like brands, intellectual property and knowledge, the traditional presentation of strategy has changed to encompass the delivery of the intangible benefits that also characterize nonprofit activity.
Whether for profit or social benefit, strategy is essential to achieving the clarity and focus necessary to define enterprise deliverables and achieve success. Today, nonprofits are adopting sophisticated strategic planning tools to craft objectives and strategies, and to provide the metrics necessary to enhance managerial effectiveness, fund-raising, and to achieve their social and cultural goals.
What is becoming important for nonprofit organizations is the ability to benchmark and improve performance against metrics that allow donors to assess the wisdom of their support, and society to see the degree of social and cultural good delivered.
1) “Larry Ellison Has A Science Project: Courting Biologists,” by David Bank, Wall Street Journal, January 9, 2003, page 1
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