By Andy Carroll, Exponent Philanthropy
The nonprofit sector now encompasses 1.5 million organizations, from universities to hospitals to environmental groups. Human service organizations alone account for nearly one-third of public charities.
With so much choice, donors tend to consider two questions as they decide where to invest philanthropic dollars: the donor’s philanthropic goals and the nonprofit’s effectiveness, which is the degree to which a potential grantee delivers results over time.
But what makes an effective nonprofit?
To a significant extent, a nonprofit’s effectiveness depends on your goals as a donor. For you, effectiveness will mean delivering results on issues you deem important. That being said, organizations with the following elements are likely to deliver results and have impact.
Qualities and Characteristics Common to Effective Nonprofits
Clear mission and purpose. The most fundamental quality of an effective nonprofit is clarity about its mission—both what it seeks to accomplish and why this purpose is important. The nonprofit should communicate its mission clearly to all its stakeholders—board, staff, donors, volunteers, partners, and the general public—so that everyone understands its goals and works toward a common purpose. All the nonprofit’s programs and operations should be aligned to advance its mission.
Ability to perform key functions. Effective nonprofits are able to perform essential functions necessary to fulfill their missions. The authors of How Effective Nonprofits Work cite six essential functions:
- Communicate vision and mission
- Engage and seek stakeholders’ input in designing programs, including people who use its services, and serve its target community appropriately
- Achieve results and track impact against a few key measures, at least through basic means
- Manage an active and informed governance structure
- Secure resources appropriate to its needs
- Plan for the future
A seventh function is key to effectiveness: the nonprofit should be a learning organization.
Strong practices, procedures, and policies. Effective nonprofits also follow good practices in three functional areas: finance, governance, and organizational and program development. (Thanks to How Effective Nonprofits Work for this framework.)
Good people. Above all, nonprofits depend on one key resource to fulfill their missions: qualified, skilled, and talented board members, staff, and volunteers. Since people are key to performance, look for nonprofits that invest in their human resources. Recognize that measures of nonprofit efficiency—the ratio of program expenses to total expenses, for example—might only tell one small part of a much bigger story.
Ability to mobilize others. The ability to mobilize and engage volunteers, other nonprofits, businesses, and government agencies is an essential skill for nonprofits seeking to address the root causes of problems and bring about long-term change.
Recognizing Your Opportunities as a Donor
As a donor, you have not only the power to identify effective nonprofits but also to build and strengthen the ones most aligned with your goals. In other words, excellent nonprofits are often made, not found.
Through conversations with your favorite grantee organizations, whether about financials, training for board and staff, systems and policies, fundraising capacity, equipment, or other issues, you’ll discover what they need to move forward. Can you make the types of grants they need most? Would you consider general operating support, which can free many organizations to focus on their services? Would you consider grants to help train board, staff, and volunteers or to build systems or technology capacity? Can you offer support beyond grants, such as advice on fundraising, communications expertise, or connections to other funders?
Above all, your commitment to finding effective nonprofits and lending the support they need will pay off in greater results and greater satisfaction as a donor.
Download the complete tear sheet “What Makes an Effective Nonprofit?” (members only)
Related resources
Forces for Good: The Six Practices of High-Impact Nonprofits (Jossey-Bass, 2008)
Due Diligence Done Well (Grantmakers for Effective Organizations, 2010)
Nonprofit Lifecycles: Stage-Based Wisdom for Nonprofit Capacity (Stagewise Enterprises, Inc., 2001)
Senior Program Director Andy Carroll writes resources, designs workshops, and facilitates seminars for funders. Andy also dedicates a significant portion of his time to managing our Leadership Initiative that defines, validates, nurtures, and celebrates the many ways philanthropists lead. Andy has 25 years of experience in nonprofit organizations, and he enjoys talking with funders about their questions, interests, passions, and plans for making a difference. Follow Andy on Twitter @andycarrollexpo.
