Reaching Critical Mass: Philanthropy's Next Wave

Donors want evidence of effectiveness; more bang for their buck

Jan 20, 2010
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Submitted by: Paula Schwed

A new wave of philanthropy that aims to drive more funding to the most effective nonprofits that have the power to bring enduring social impact has been gaining more and more attention from policymakers and thought leaders. Business Week notes these efforts have begun to reach "critical mass" with far-reaching repercussions for nonprofits everywhere.

Influential "Tactical Philanthropy" columnist Sean Stannard-Stockton says: "People want to know that their money is actually making a difference." 

Some new signs of this paradigm shift - the IRS overhaul of Form 990 that nonprofits must file to require new information on governance questions, and the Obama administration investing $50 million this year on bringing innovative nonprofit programs to scale.

These new efforts to change the way nonprofits are evaluated to offer more useful guidance to donors who want true impact presents a huge and welcome opportunity to organizations like WINGS, which has a proven track record for effective results that can be measured.

Social Return on Investment

On January 21st, 2010 Adam Pomerantz says:

In the business world, investors look for high rates of return on their investments (ROI), but it’s not as clear in the philanthropic sector.  It’s very difficult to objectively take a dollar donated to WINGS and measure how much it’s worth in one, two or three years from now.  With that said, one equivalent gaining popularity is the concept of social return on investment (SROI), where donors and organizations attempt to measure the social and financial value created by nonprofits.  This isn’t as cut and dry as analyzing a publicly traded company’s SEC filings, but WINGS has been trying to quantify the economic impact of our program through the use of improved graduation rates of WINGS kids.  Using studies on the financial impact of a high school diploma, we’re able to see the effect on individual earnings and social benefits based on the increases in graduation rates of WINGS kids vs. non-WINGS kids.  Over time, I expect these numbers will become strong and will continue to show that an investment in WINGS provides strong dividends.

As SROI becomes more codified, donors will be able to make more choices based on impact.