High-Performance vs. High-Impact Nonprofits

Recently I was part of a conversation about how to define a high-performance nonprofit. One issue that came up was whether we were talking about “high-performance” or “high-impact”. Now bear with me: this isn’t semantics; it is critically important.

A high-performance nonprofit is a very well run organization. It has outstanding leadership, clear goals, an ethic of monitoring its activity to be sure its programs are effective, and it is financially healthy.

A high-impact nonprofit is one whose efforts have been proven to cause sustainable, positive change.

Impact can be seen only in retrospect. Often many years later. Performance can be directly observed.

I think high-impact nonprofits are the holy grail of philanthropy. But like any holy grail, it is something to journey towards, not something you demand now.

Guess what, nonprofits need funding during their entire lifespan as they head towards high-impact status. The ones that get there are not the ones that have the best programs; they are the ones that are the highest performing organizations. High-performing organizations are robust and flexible enough to dump programs that don’t work and adopt those approaches that work best. Weak organizations that happen to have a great program are not able to deliver the program with fidelity, are not able to scale the program, and are not able to adapt to changing conditions.

As a field, philanthropy needs to focus on identifying and funding high performance nonprofits. This was my point during my debate with Paul Brest earlier this year. This is my point when I reject overhead expense ratios as a relevant evaluation metric. This is my point when I argue that nonprofits should pay their employees better. This is my point when I call for “philanthropic equity” funding. This is my point when I argue that the Social Innovation Fund may encourage foundations to supply growth capital.

Currently, the field of philanthropy rejects performance in favor of evidence of impact. Philanthropy likes to talk about great programs, but forgets that only high performance organizations are in position to deliver great programs consistently.

It is time for us to reject the idea that great programs run themselves.

Sean Stannard-Stockton is a principal and director of Tactical Philanthropy at Ensemble Capital Management. Ensemble Capital provides families both traditional investment management and philanthropic planning. He is the author of the blog Tactical Philanthropy and writes the column Tactical Philanthropy for the Chronicle of Philanthropy.

Read more stories by Sean Stannard-Stockton.