One of the main chapter of the 6th June Law, n. 106 reforming the Italian social sector focuses on the creation of a comprehensive national register of non profit organizations that should be available at the Labor Department and online for public use.
While the actual final output – and consequently the possible growth in accountability of the Italian social sector – will be clear only once the implementative decree is issued, in the US a powerful tool is already available to make information about registered nonprofits accessible to everyone and allow a more and more reasoned and impactful approach to philanthropy.
I talked with Jacob Harold, GuideStar CEO and Leap Ambassador, to go deeper on the state of the US social sector and highlight the trends that are shaping individual and foundations’ giving.
GuideStar works as a data collector and curator to make funding more effective. Which kind of organizations benefit from your work and for what purposes?
As a matter of fact our beneficiaries have evolved during our 22 years of history: when GuideStar was first formed our primary target audience consisted in individual donors trying to decide which non-profit to give to. Over time we realized that, even if that was an important constituency for us, the majority of our users were not individual citizens deciding whether to make a donation but actual professionals using our resources for their job.
Our audience is composed by four categories in particular: Foundations’ staff in charge of grantmaking decisions; journalists trying to understand the non-profit sector; people in professional services, as bankers or lawyers working on behalf of their clients; and finally non profit organizations using data to benchmark with other organizations, trying to find partners or to understand competitors.
From your privileged perspective could you give us a glance of the US scenario, for what concerns the dimension of the social sector and the state of the art when it comes to accountability?
The US social sector is quite rich – and complicated. Overall there are about 1.6 million non-profits in the US of which about 800,000 registered 501(c) charitable organizations allowing donors to benefit from tax deductibility (in analogy with Italian “onlus” – n.d.a.).
Of that set a smaller part, approximately 100,000 organizations accounts for the vast majority of activities: many of the organizations providing extra data to GuideStar are part of this last cluster. In our database we have about 128,000 non-profits providing at least some additional data with about 40,000 providing enough information to achieve what we call the “transparency seal”, a label non-profits can displace as a sign of their transparency. But if you want to get to the subset with clearly articulated goals and strategy, that’s about 10,000 and under 2,000 if you focus on programmatic qualitative metrics to track mission progress.
“Many organizations are quite transparent about their work but they do make a minority. Growth is happening but never as fast as we would hope.”
What sources of information are you bringing in? Has there been an evolution in the typology of information and in the modalities you collect it?
There has definitely been an evolution: most non-profits in the US are required to file a regulatory document with our Internal Revenue Service (the US tax agency – n.d.a.) and that document is in the public domain. The challenge is that it’s not easily accessible, so much of our work has been around making it easier to access, digitalizing forms and creating search engines. That data are incredibly powerful on the accountability and transparency side, but mostly they focus on financial and operational data without including many questions about the goal, strategy, or measurement system of a non profit organization – and relatively little about their governance mechanisms or the demographics of their staff and beneficiaries. It’s a useful but limited data source as it does not tell you the complete story. So we have been increasingly investing on collecting data directly from non-profits for two reasons: to find the missing pieces and also because IRS data tend to be about two years old.
Have you noticed a shift in institutional grantmakers’ attitude towards more effective way of giving? Do you think results-based giving is gaining momentum?
We see an immense amount of variety among donors about what they look for: there are many more sophisticated, looking for tools as a Theory of Change, really trying to understand the measurement systems used by non-profits. We do encourage that; we think that’s an indication of high-quality data-driven philanthropy.
As best practices I would surely note the Hewlett Foundation, among the most enlightened approach in the US – if not at a global level. Another great example is the Edna McConnell Clark Foundation in New York City. They are innovative in a series of ways: first they are profoundly outcome-oriented, they really structure all their grantmaking on lasting results. They are also really focused, working on one goal (i.e. disadvantaged youth development). Finally, they spend a lot of time pooling money among multiple grantmakers in order to catalyze resources for bigger impact.
There are other great examples, as the Weingart Foundation in Los Angeles which essentially gives general operating support and has a deep understanding of its grantees’ organizational needs. Other are more focused on media and technology as the MacArthur Foundation or the Knight Foundation: they may not be as much dedicated to long-term organizational support but they are really looking for the right points where change can happen.
“Smart giving models are different but they all have in common some points: a sense of ambition; an understanding that grantees’ organizational health matters; a serious concern about clarity of goals and strategy; and a strong focus on measurement systems to track progress”
Talking about individual giving, what are the main drivers shaping people’s donations?
The first layer of analysis we often see is around legal compliance or financial analysis. Unfortunately, that financial analysis is often simply the overhead ratio which we at GuideStar consider at relatively meaningless indicator, at least if considered by itself.
On the other hand there is a raise in more strategic-like approaches to philanthropy: a simple frame I often use is “choose your issues with your heart but choose the organizations you donate to with your head”. Some donors go even past that, as Facebook co-founder Dustin Moskovitz and his wife Cari Tuna who argue that you should pick your issue with your head as well. That’s a high level of rationality of giving.
I think our challenge is to support the emotional side of giving not to turn donors away but to give them a tool to rationally support high-performing organizations. Our goal is to focus attention on results and for that we need more and better data from non-profit organizations about their goals, strategy, their ToC, what the internal and external measurement systems are and how they are using them to track progress and make course corrections. We have seen some real progress, especially among larger institutional funders and in a significant minority of individual donors as well: we are headed in the right direction even if with still a long way to go.
Is legacy giving a powerful asset for the social sector?
Legacy giving is quite common, fostered by tax benefits and by a natural sense of duty. What it’s also being happening very much in the last years, especially among wealthy individuals, is the giving while living phenomenon – which is a recognition that philanthropy is exciting and meaningful and that donors want to see the impact of their gifts when they are still alive. This is growing and I don’t see it as something that will decrease the practice of legacy giving.
Another interesting driver, which is happening at a higher level and could influence the previous two, is the desire among wealthy individuals of leaving money to their heirs – but not too much money. I think this is contributing to both giving while living and legacy giving because of an increasing desire of seeing money used for benefitting society.
As Warren Buffet put it “I want to leave my kids enough money so they can do anything but not so much money so they could do nothing”
For further information: www.guidestar.org