The Marketplace report balances our perspective on the idea of a social market with that from Trent Stamp, President of Charity Navigator. He makes two points, both worthy of response:
1. “There is a fundamental difference between charities and Wall Street. We can’t just measure the bottom line when it comes to charities.”
True, but while it is obvious there are many fundamental differences between charities and Wall Street, it’s less obvious that both sides are building bridges between them, changing the very language of this very discussion. It’s hard to keep up with the latest cooperative buzzwords, but we’re already good friends with Corporate Social Responsibility, Social Return on Investment, Venture Philanthropy and Social Entrepreneurship. Even the sacred bottom line itself is not safe, as the double bottom line accounting model reports on corporations’ social as well as economic impacts.
For the record, we don’t want to turn charities into Wall Street. What we want to do is connect the charities and donors who think some ‘Wall Street’ ideas could have valuable application in the non-profit sector. One favourite example is just for non-profits to set clear goals for success, and to track their progress towards meeting them. Internally, this provides valuable information for program managers. Externally, this provides the input to socialmarkets, where outcomes data is converted into social capital for the consideration of donor ‘investors’.
2. “We have to measure whether they’re doing the work with passion, with purpose, whether they’re honoring people, whether they’re keeping up with the public trust.”
We not only agree with such talk, we think we’re a great example of walking it - arguably an even better example than Mr. Trent’s own organization. Superficially, his org and ours have much in common: we both use quantitative measurements to evaluate nonprofits. But the devil is in the details, in this case the specific data involved in the evaluation: socialmarkets believes in evaluating charities based on what they do rather than what they spend.
socialmarkets is riding the wave of several new trends, including an increase in charitable donations, and an increase in the need for advice to the donors behind them. There are many other sites surfing these waves with us (including those like Charity Navigator) that use the information in IRS Form 990 as their advisory database. We see the appeal of this approach, since every U.S. tax-exempt entity must file this form, and the data within it is publicly available. This makes this database highly efficient to compile, if somewhat less optimal to execute.
We just don’t see mining data from 990’s into a good metric of nonprofit effectiveness. Sure it’s helpful to know that Soup Kitchen A has twice the expense ratio of Soup Kitchen B, but if it also serves ten times as many meals, isn’t it by far the more “efficient”? Isn’t it then okay to pay for the better benefits, more expensive software, and/or free cupcakes that are behind this impressive performance? We think so, and we think there are lots of donors and charities who agree.
This is where socialmarkets comes in - not making 990s irrelevant, but putting them in perspective. We know you can’t evaluate a charity’s success in their stated mission without digging deeper. You need more direct contact, at the very least asking charities to share their goals and the record of their experience in meeting them. In our experience, evidence of the “passion”, “purpose” and “honour” Mr. Trent is looking for is just one of the fringe benefits this deeper connection affords. We encourage him and the others sharing his corner of the charity evaluation space to see for themselves.
