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Lessons from the Not for Profit Sector

15 years ago charitable organizations were being compelled to take a more business-like approach to their operations. In particular, organizations such as United Way and governments wanted more accountability for the money they donated to these agencies. This movement actually started before Enron and Worldcom brought about the Sarbanes-Oxley act and increased scrutiny on financial reporting for publicly traded companies. Charitable organizations were pretty much free to raise funds and disburse them on programs as they pleased. Agencies that registered with governments for the purposes of issuing tax deductible receipts did have some simple criteria to meet in order to have their applications for registration accepted but that was pretty much it.

Federal, state/provincial and municipal governments, as well as fund raising organizations like the United Way were left to their own devices to figure out if the agencies they funded were producing satisfactory results with the money they were given. This left them at risk of giving money to agencies that promised a result but were ineffective at delivering on the promise, or agencies that misspent the money. The media focused public attention on some of the more extreme abuses folks at some agencies perpetrated. These abuses were mainly the agencies spending a small fraction of the funds spent on their charitable programs and pocketing the rest. This attention had a chilling effect on the United Way: doubt about how money donated to the United Way was used threatened fund raising campaigns which in turn threatened the agencies the money funded. Governments took notice of the need for oversight as well.

Increased oversight began with the money. There was an increase in scrutiny on the part of governments at the federal level which led to an increase in the information charitable organizations were required to report to the IRS in the US and the CRA in Canada. Financial reporting for charitable organizations has been done by the 990 form in the US since 1941, and still is, but the form went from a simple form which included 3 yes/no questions, a balance sheet, and an income statement to its present form of 8 full pages and a 42 page instruction booklet. The form changed significantly in 2000, partly in response to the Sarbanes-Oxley act. In Canada the CRA requires organizations to complete a 9 page return form.

The drive for accountability has not stopped there. There are many organizations and associations who have drafted codes of ethics, standards, guidelines, and other reference materials offering criteria for ethical management of charitable organizations. These cover every aspect of operations from finance to selection of board members, to hiring external fund-raisers, to staff training, to ethical treatment of donors.

Although financial oversight has received its fair share of attention, just as important to the ethical operation of charitable organizations is their effectiveness at delivering the programs they exist to deliver. United Way began working with various government organizations (in Ontario, Canada they work with Trillium) to draft a set of criteria that would help charitable organizations establish a set of clear goals and objectives and then measure their progress towards these goals. This collaboration has extended to the establishment of a fund (Strengthening Organizational Effectiveness Fund) to pay for the changes organizations must make in order to meet the criteria.

The United Way has also established a set of criteria for measuring outcomes and has established a resource network (Outcome Measurement Resource Network) to help charitable organizations implement this piece of their effectiveness program. Outcome Measures establish goals for the organization beginning with a clear, concise Mission Statement. The Mission Statement generates a set of goals and objectives at the program level and these will generate a set of goals and objectives at the project level which support those at the program level.

The way in which charitable organizations put together programs which are broken down into projects looks a lot like the way for profit organizations define programs to meet their strategic goals and then define the projects that will deliver the programs goals and objectives and in fact the not for profit sector relied heavily on volunteers from the for profit sector to define these criteria and continue to rely on for profit consultants to help implement Outcome Measurements. Organizations like Trillium and the United Way have an extraordinary amount of influence over the organizations they fund because they fund based on the organization’s success at meeting their criteria which include organizational effectiveness and outcome measurement. This carrot and stick approach, funding and free resources to implement, denial of funding for failure to implement, has enabled the not for profit to develop organizational skills in the areas of identifying client needs, establishing programs and projects to meet those needs, and measuring their success at meeting the needs with the projects they deliver. I’m speculating here, but I would be surprised if these skills did not surpass the skills available in many for profit organizations.

It may be time for the not for profit sector to give a little back to the for profit community. I don’t mean that these organizations should treat the General Motors or Bank of Americas of this world as fit objects for their charity, but that they view this as an opportunity to do a little coaching to pass their skills on to workers in the private sector. You may not think that anyone involved in the business of delivering breakfasts to school kids, or meals to the elderly would have anything to teach a project manager, but think again. These folks created projects and programs to deliver those meals. They didn’t define the programs and projects haphazardly, they gathered requirements from their client base using scientific methods, then they organized the project work the same way you do, and they may be able to teach you a thing or two about measuring a project’s progress towards meeting its goals and objectives.

Think about availing yourself of this expertise, but don’t expect to get it free; these folks are in the business of benefiting their clients after all so expect to pay something for the opportunity. Payment will not be in the form of a charitable donation, although you will probably want to make one when you see the beneficial effects these organizations have on your community. Look for opportunities to volunteer and then communicate your interest in learning how they went about implementing their organizational effectiveness and outcomes measurement programs. The United Way is a good place to start. The United Way provides many different volunteer opportunities (United Way Peel Region in Ontario Canada has 23) and encourage volunteers to learn. If you are willing to take the time to meet your volunteer commitments, I’m sure the folks at these agencies will educate you in their methods; in fact some volunteer positions will require you to learn these practices and measure funded agencies success with them!