Institutional funders could perform a great service if they would analyze their giving records going back twenty or thirty years. Which agencies survived, and which died, and why? For any one type of nonprofit–arts group, social service agency, advocacy group–take ten extant groups of roughly equal size, and compare them to ten defunct groups of roughly equal size and vintage, asking:
- What proportion of earned income, of grant income, of individual giving turned out to be the golden mean?
- What financial or client/audience figures should have rung alarm bells?
- When should the Board have known it was throwing good money after bad?
These aren’t simple questions, but they should be answerable, and the foundations–with their years and years of grant applications containing financial records and their ability to do (or pay for) sophisticated statistical assessments–can be the ones to answer them. Ascertain these algorithms, and then share them with your grantees so they don’t have to keep reinventing the management/fundraising wheel.
Early in her consulting career, the Nonprofiteer actually proposed to a funder a research project answering this description. One of Chicago’s most honored theaters had gone very suddenly belly-up, demonstrating with blinding clarity that artistic excellence alone wouldn’t sustain a theater–business acumen was required. Yet the likelihood of a theater’s having such business acumen was almost inversely proportional to its artistic quality: the better the artists, the more focused on art; the more focused on art, the less likely to be able to read a balance sheet, or notice that the light bill hasn’t been paid.
Certainly, some theaters lucked out by finding or growing business talent equal to their theatrical gifts, but why should the survival of fine art be a matter of luck? Experience shows there are better and worse ways of managing a theater; why couldn’t the funders ascertain what those were, and make that experience–in the form of financial guidelines–available to all theaters, so they could avoid obvious business mistakes and stand or fall on the quality of their productions alone?
Perhaps not surprisingly, the funder’s response to the idea that it open its files to the Nonprofiteer for a research project–and pay her for the privilege–was, "We create our own research ideas. We don’t get them from consultants." Fair enough: but Not Invented Here isn’t really a good enough reason not to do something that might make charities more efficient and effective at relatively little cost.
No one has access to the same kind of detailed financial histories as the funders; no one has the expertise they have to see what works and what doesn’t. How ’bout it?