The insulting refrains are all too familiar to those who work in the nonprofit world: Nonprofits are ineffective. They waste money on CEO salaries. They have good intentions, but they don’t make much of a difference. The for-profit world is so much more efficient.
Where do these frequently repeated claims come from? Certainly not the data.
Over the past six years, first at the nonprofit evaluators ImpactMatters and then at Charity Navigator, I worked with a team that analyzed the effectiveness — in terms of results and cost — of more than 1,000 direct-service nonprofits engaged in areas such as school improvement, community health, work-force development, and hunger.
I’ve come away with a clear conclusion: Most nonprofits are actually highly successful — and cost-effective — at improving the lives of those they serve. At least that’s what the data show.
Consider these examples of some of the most effective nonprofits we studied, each of which was analyzed for their success at getting results and how much they spent to achieve them:
- Eden Reforestation Projects offsets one year of personal carbon emissions for about $7 by planting trees. We found it cost approximately 10 cents to plant one tree and that about 70 trees were needed to capture one American’s carbon footprint.
- Sankara Nethralaya Om Trust prevents blindness for $70 a person by performing cataract surgeries.
- Living Goods saves the life of a child for $5,200 through its network of community health workers who go door-to-door in underserved countries such as Uganda to treat sick children and pregnant mothers.
- Nourish Pierce County, which collects and distributes food in the Tacoma, Wash., area, feeds one person in need for 40 cents.
While these nonprofits are at the top end, they aren’t extreme outliers. In the area of blindness prevention, for instance, we analyzed six nonprofits that specialize in cataract surgery. Sankara Nethralaya Om Trust was the most effective, but two others — Benevolent Missions International and Vision Outreach International — were close behind, each spending under $100 to prevent someone from going blind. Two more organizations spent less than $300 to avert a case of blindness. The least effective was Servants for Sight, which spent about $850 to prevent one person from going blind.
But can we really say a nonprofit that stops a person from becoming blind for roughly the cost of a new iPhone is ineffective? We didn’t think so. We applied a fairly harsh benchmark, based on what’s known as the Disability Adjusted Life Year Averted — the World Health Organization’s metric for determining the number of years of healthy life made possible by a particular intervention. Based on that standard and the areas where Servants of Sight works — we analyzed its program in the Dominican Republic — we concluded it should be considered highly cost-effective if it averted a case of blindness for about $57,000. It accomplished that goal for less than a 50th of that amount.
86 Percent Got Top Marks
In fact, the vast majority of nonprofits we analyzed — 86 percent of 1,064 — earned our designation of either cost-effective or highly cost-effective. More than half (57 percent) earned our top designation of highly cost-effective.
What could be driving this? It’s possible we selected more effective nonprofits for analysis, but in many areas, such as food, emergency shelters, and scholarships, we analyzed a large and diverse number of organizations. Of the 312 food-distribution nonprofits we analyzed, 293 were cost-effective.
It could be that our criteria were too generous. But that seems unlikely since our ratings were typically based on objective criteria using local data. Those 293 food nonprofits spent $2.01 on average to provide a meal compared with an average cost of $3.15 in those same communities to purchase a meal.
A more reasonable critique could be that our analysis focused on nonprofits that took approaches that made it easy to make a difference. While there may be some truth to that, several efforts, such as community health worker programs, are anything but simple to run effectively. But if true, so what? Our analyses covered roughly $15 billion in spending, a large chunk of the social-service portion of the nonprofit world. Plenty of lives can be improved in simple ways. Complexity is not an inherent virtue.
Some may find other reasons to criticize the quality of our work. The estimates produced by this type of cost-effectiveness analysis are never perfectly precise. The goal, however, is not to come up with a precise figure but to understand if a nonprofit is in a high or low performance zone. For instance, we estimated that Living Goods saves the life of one child for $5,200. Our estimate could be off — it could be more costly. But we’ve also seen nonprofits spend millions of dollars to save a life. This analysis shows us that, regardless of the precise number, if the goal is to save a child’s life, Living Goods is an extremely good bet.
That leaves the simplest explanation: Most nonprofits are genuinely, verifiably, and impressively improving the outcomes of those they serve.
Small Share of Groups Rank Low
There is, of course, always room for nonprofits to improve, in terms of both allocating and spending resources. And it is worth noting that those nonprofits at the top range do seem genuinely more effective than those in the middle. But that is not because those in the middle are ineffective. They are just less effective than the best performers. Ineffective nonprofits are rare, making up about 15 percent of nonprofits, according to our data.
Most people who work for nonprofits won’t be surprised by any of this. They have seen their effectiveness firsthand. But now they have the data to back them up.
The myth of the ineffective nonprofit is just that — a myth. Assessed against objective criteria, most nonprofits are doing an excellent job of improving the lives of those they serve.
