In the Money

Posted by Joan Ulmer on October 24th, 2014 in Thoughts & Commentary

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A phrase from an article in Forbes recently caught my eye: “It has become trendy to liken effective philanthropy to Moneyball, ….”  Really?  We moved from strategic philanthropy right into Moneyball philanthropy?  (They are, without a doubt, closely intertwined.)

For those of you who are unaware, Moneyball is the player selection strategy introduced by the Oakland Athletics (As) and made famous in the 2011 movie of the same name.  The As jettisoned the long-standing baseball practice of selecting players based on assessments by the experienced eyes and brains of scouts, managers, coaches, etc.,  in order to build a winning team and switched instead to selecting players based on statistics—specifically on-base and slugging percentages.  See any parallels?

All those funders who switched to being strategic philanthropists and started pushing just the statistics—jettisoned the reliance on the eyes and brains of experience.  Don’t get me wrong:  I am a firm believer in the importance of being able to demonstrate programmatic impact.  After all, if we can’t do that, why should we exist?  And I am equally against investing in a person, such as an executive director or founder, because “s/he does good work,” without the data to prove the existence of the good work.  But as the Forbes article argues, there are far more variables in the world of nonprofits than there are in the world of baseball, and stats alone cannot and will not ever tell the full story in the laboratory that is the messy world of nonprofits.

Speaking of Moneyball and messy worlds, in case you missed it, this Tuesday, the “big three”—Charity Navigator, Guidestar and BBB Wise Giving Alliance—came out with their follow-up to last year’s letter to donors urging them forget about the overhead ratio.

As you may recall, for years, these big three had hammered home to anyone who would listen a kind of Moneyball approach to assessing the “goodness” of a nonprofit.  Their Moneyball system was to judge a nonprofit on how it used its money and lambasted any nonprofit that spent “too much” on overhead.  They weren’t looking at the context in which that money was spent, nor were they calling on experienced eyes and ears to look at expenditures in the framework of what the organization was doing, where it was in its lifecycle, etc.  Rather, they had an arbitrary statistical point that if crossed by any nonprofit—regardless of its particulars—that nonprofit was automatically deemed not “investment-worthy.”  But, as noted above, this Moneyball approach doesn’t work in the world of nonprofits and the big three finally recognized this.  (It only took years and years of criticism and persuasion.)  So, the big three wrote the “Overhead Myth” letter. And a year later, they have a corresponding letter for nonprofits, telling them what they should do to combat the overhead myth.

It starts out by saying that they, the authors, are asking for our, the nonprofits, help in ending the overhead myth.  Seriously?  Most nonprofits have been trying to combat that myth for decades.  They weren’t, and aren’t, the ones who perpetrated it in the first place; the big three, and others like them—other watchdogs, like attorneys general, funders, and all the others like them who have never worked in a nonprofit (or worked there so long ago they’ve forgotten what that reality is)—are the ones responsible.  But, now that they have seen the light (through, I must point out, their own schooling by loud voices of nonprofit leaders) and they want us to help educate funders.  And, as if this, too, were a novel idea that they have come up with, they want us to demonstrate ethical practice and share data about [our] performance” and “manage towards results and understand [our] true costs.”  And they even give helpful tools for all those nonprofits out there.

OMG! Seriously?  Where have they been?  We at The Nonprofit Center and every other management support/capacity building organization that I know of have been pushing all of that since our inceptions, which, for us is 33 years ago.  We have been consistently crusading against the fallacy you promulgated.  Do not patronize us, please, particularly it is you who have put us behind the eight ball (and yes, behind your silly Moneyball that financial ratios can tell the whole story about the goodness of a nonprofit).  

“Baseball isn’t just numbers, it’s not science. If it was then anybody could do what we’re doing, but they can’t because they don’t know what we know. They don’t have our experience and they don’t have our intuition.”

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