Ratings,  Overhead,  and  Measuring  Impact:    How  to  Use  Your  Social  Sector  

Excellence  to  Attract  and  Retain  Donors  

2/25/16  1pm  Eastern  

The  presentation  will  begin  shortly.

3

This  presentation  is  being  recorded!  The  recording  and  slides  will  be  emailed  to  you.  

Please  chat  in  any  questions  for  our  guest.    We  will  answer  them  in  the  formal  Q&A  session    

at  the  end  of  the  presentation.  

Follow  along  on  Twitter  with  #Bloomerang  @BloomerangTech.  

For  best  audio  quality,  dial  in  by  phone. (check  your  email  for  dial-­‐in  info  from  ReadyTalk)

Before  we  get  started  »

3

https://bloomerang.co/demo/video

3

Our  guest  presenters  »

Barbara  O’Reilly,  CFRE  -­‐  @BOReillyWHC  

Richard  Neustedter

U S I N G S O C I A L S E C T O R E X C E L L E N C E T O A T T R A C T A N D R E T A I N D O N O R S

W E B I N A R

F E B R U A R Y 2 5 , 2 0 1 6

Ratings, Overhead, and Measuring Impact

Presenters

Richard Neustedter Barbara A. O’Reilly, CFRE

Agenda

I. Introduction

II. Understanding What’s Important to Donors

III. Defining A High Impact Organization

IV. Creating New Donor Conversations

V. Conclusion

Introduction

“The Age of Assumed Virtue is Gone”

Key Messages

With a crowded nonprofit market, donors want to invest in successful organizations that have sound business practices for sustainability.

This means that donors will support nonprofits that:

• know where they’re going (vision and strategic plan)

• manage to outcomes (impact, demonstrated results)

• understand their true costs and funding needs (operational performance)

• know if they’re making progress and how to adjust if they’re not (metrics, evaluation, learning)

Key Messages

Responding to a need for donor guidance in philanthropic decisions, charity validators have created metrics to determine nonprofit performance.

• However, these metrics are often limited as true indicators of a nonprofit’s effectiveness.

The result is confusion and misperceptions about the need for ratings and how to effectively incorporate them into a nonprofit’s story-telling to attract and retain donors.

Best Practices Ensure Greater Financial Sustainability

Vision and Strategic Plan

Culture of High Performance

Plans to Evaluate & Grow

Greater Financial

Sustainability Through Donor Investment in

Your Cause

Understanding What’s Important to Donors

Data Influences Social Investment

• Very important the charity has evidence that its programs are effective. Nearly 70%

• Good charity ratings from watchdogs. 54%

• Very important to know that charities spend a low amount on salaries, administration, and fundraising

50%

Source: 2015 Chronicle of Philanthropy poll

VALIDATORS ATTEMPT TO DRIVE

BEST PRACTICES THROUGH

RATINGS.

INSTEAD, THEY CAUSE CONFUSION

AND FEAR AMONG NONPROFITS.

Public Data is Confusing

Fundraising Costs

• 37% reported having no fundraising costs whatsoever.

M&G Expenses

• 13% said that they had no management and general expenses.

Does 90-100% of every dollar raised really go to programs?

• Yes and No. Other unrestricted funding can help to offset administrative expenses. Or non-program costs are built into larger major gift asks.

Lean and Mean=Nonprofit Starvation

Misleading reporting & overhead “phobia”

Unrealistic funder expectations

Pressure on nonprofits to conform

And yet…

“Organizations that build robust infrastructure—which includes sturdy information technology

systems, financial systems, skills training, fundraising processes, and other essential

overhead—are more likely to succeed than those that do not.”

Source: The Nonprofit Starvation Cycle (SSIR, Fall 2009)

RATINGS ARE JUST ONE PART OF THE

STORY.

Defining a High Impact Organization

Social Sector Excellence Defining what it means for you

• Passion & Experience • Strategic & Creative

Leadership

• Financial Health • Capable & Sustainable

High Performance

• External validation • Evidence of success

Evaluation for Impact

• Internal Assessment • Drives strategic changes

Monitoring for Improvement

THE PERFORMANCE IMPERATIVE = HIGH IMPACT ORGANIZATION

Source: Leap of Reason, Mario Morino

Accountability & Transparency More than buzz-words to educated donors

Accountability

• Defined Board of Directors and Staff

• Defined Governance Structure and Policies

• Defined Ethics and Limited Conflict of Interest

• Audited Results and Performance Reporting

Transparency

• Fully disclosed financial information

• Formalized operating policies

• Formal Articles & Bylaws

• Disclosed compensation

• Information publically available on organization website

BEST PRACTICES FOR A & T = DONOR TRUST AND CONFIDENCE

Taking the Mystery out of Ratings Validators drive best practices through performance metrics

Charity Navigator

• 0-4 Stars system is simple for donors

• Rated charities receive 50% of annual giving

• National organizations with operating revenue of $1 million or more

Better Business Bureau Wise Giving Alliance

• Charity Seal program defined to measure operational excellence through accreditation

• Self-application process open to most nonprofit

DIFFERENT VALIDATORS USE MANY OF THE SAME INPUTS

Taking the Mystery out of Ratings Understanding the Charity Navigator Methodology

Objective rating for fiscal management, operational excellence and good governance

7 financial metrics, 6 inputs from 990

Measures financial efficiency and capacity

20 A & T metrics, 6 inputs from website, 14 from 990

Measures good governance through policy and disclosure

A SIMPLE, DONOR-CENTRIC ANALYSIS THAT INDIVIDUALS LIKE

Taking the Mystery out of Ratings BBB Wise Giving Alliance National Charity Seal

Developed the Charity Seal Program to foster public confidence and assist donor decisions

20 Standards include:

Governance and Oversight

Impact – Measuring Effectiveness

Finances

Fundraising and Public Education Materials

BBB PROVIDES A NATIONALLY RECOGNIZED VALIDATION LOGO

Taking the Mystery out of Ratings Validate your impact outside of your own website

GuideStar Exchange • Provides on-line profile of

information you manage

• 3 simple categories, Bronze, Silver and Gold

• Database links to 60+ websites, applications and programs which support nonprofits

GreatNonprofits • Provides on-line reviews

of organizations

• Share impact from testimonials

• Database links to dozens of other nonprofit supporters

• Powers GuideStar Exchange Gold results

TELL YOUR STORY THROUGH EXTERNAL VALIDATORS

Taking the Mystery out of Ratings Positive validation – why ratings matter

Establish Confidence and build donor trust

Donors use financial data from online sources

Individuals use your info even if you don’t know it

Financial advisors direct clients to ratings sites

External validation to support your claims

Primary Sources:

REMEMBER, DATA + VALIDATION BUILDS TRUST

Creating New Donor Conversations

Don’t Assume Trust

"What does this trust exercise teach us? Never take your donors' support for granted."

Source: Chronicle of Philanthropy, May 1, 2008

New Fundraising Normal

Donor Conversations

High Performance

Social Sector

Excellence Results

New Fundraising Normal: Start by Sharing Your Story and Dream

• What is your organization aiming to accomplish? • What are your strategies for making this happen?

Strategic Vision and Plan

• What are your organization’s capabilities for doing this? (internal and external)

Culture of High Performance

• How will your organization know if you are making progress? • What have and haven’t you accomplished so far?

Culture of Learning and Performance

Source: Guidestar Charting Impact and Leap of Reason

New Fundraising Normal: Then Explain Operational Costs

Capacity

• What does it cost to do your work well and reach the desired impact you want?

• Is it a question of “Low pay,” “Make Do,” or “Do Without?”

Outcomes

• What happens if you don’t have the adequate funds you need to run your programs?

OPERATIONAL COSTS BECOME FOCUSED ON

INVESTMENT IN CAPACITY

Conclusion

Validators Can Guide Nonprofit Excellence

Donors Nonprofits

Social Sector Excellence

Stronger Nonprofit Sector

Financial Investment

Questions and Thank You

Barbara O’Reilly, CFRE

Principal

Windmill Hill Consulting

www.whillconsulting.com

@BOReillyWHC

Richard Neustedter

Partner

Nonprofit Financial Specialists

www.npfinancialspecialists.com

richardneustedter@hotmail.com

https://bloomerang.co/resources

•Nonprofit  Wrap-­‐Up  •Bloomerang  TV  •Bloomies

•Daily  blog  post  •Weekly  webinars  •Downloadables

Our  next  free  webinar  »

Face-to-Face Fundraising: Best Practices & New Initiatives

Wednesday, April 20th - 12:00pm Eastern

Daryl Upsall, FInstF

https://bloomerang.co/resources/webinars