Evaluating a Nonprofit? Ask Some Common For-Profit Questions

These tried-and-true business practices could influence your charitable giving decisions.

People are motivated to give for a variety of reasons, ranging from a sense of duty to belief in a specific cause. While the reasons may vary, it’s probably safe to say that everyone wants their money to have the greatest possible impact, perhaps with a side of tax mitigation. Turns out, that could require a little vetting on your part.

It may seem obvious, but you’ll want to double-check that your preferred charities are qualified organizations so your donations will be tax-deductible – and take the time to research their credibility using sources like CharityWatch, GiveWell, BBB Wise Giving Alliance, Charity Navigator and GuideStar, as well as independent audits. And before you decide where you want your dollars to go – and why – you may first want to take these points into consideration.

Are costs balanced with scale of impact?

In his TED Talk, “The Way We Think about Charity is Dead Wrong,” AIDSRide founder Dan Pallotta argues that nonprofits have many of the same goals as for-profit businesses, but they’re held to a different set of standards. He’d like to see charities measure their success based on how they scale – not how low they keep their overhead.

Is top talent compensated appropriately?

For-profit businesses get high marks for recruiting top talent, yet nonprofits are often criticized when salaries are deemed too high. But if charities are expected to bring in more money to do what they do best, it may be counterintuitive to keep salaries low. Take a closer look at executive compensation in the charity of your choice, as well as how other workers in the organization are being paid. Is the organization in a position to attract the brightest minds?

Are the right tools and technology in place?

If forced to stay lean in the interest of keeping overhead low, the charity may not have the necessary tools and technology to succeed. Quality technology is a must for communicating, analyzing data, raising funds and supporting daily operations – just as it is in the for-profit sector.

Is there a thoughtful marketing strategy?

Like many people, you may not like to see your donations spent on advertising. But maybe you’d change your mind if you knew the advertising could bring in more money to help fulfill the charity’s mission. Social impact organizations need to build awareness and explain their purpose in order to generate support, which can require a robust marketing effort.

Are they innovative?

Nonprofits are hesitant to take risks because they’re expected to focus on generating an immediate return on investment. But where there’s no risk, there’s little or no innovation – and that can hinder an organization’s ability to grow and solve big problems.

It’s hard to make an impact and change the world with middling salaries, poor technology and a small or nonexistent marketing budget. Yet that’s what nonprofits are asked to do over and over again. Before you give, take a closer look at how your money is being spent – and think about what it takes to really make a difference.

Sources: 501c.com; ted.com; nonprofitpro.com; fastcompany.com; araize.com; themodernnonprofit.com; Charity Navigator’s 2016 Charity CEO Compensation Study