There’s an "elephant in the philanthropic room," says Jacob Harold, president of GuideStar, "which is simply that some nonprofits are better than others. Some are able to squeeze more good out of the dollars that they spend."
As the largest online resource for data about nonprofits, used by some 7 million people each year, GuideStar is dedicated to helping donors, charity leaders, and other "stakeholders of social change" make smart decisions about how to get the most out of their money, their time, and their passion for a cause.
In this segment from the Business of Giving, Mr. Harold talks about what people are looking for when they come to GuideStar’s website and how the organization is going beyond Form 990s to paint a more detailed picture of nonprofit operations. He also discusses his own activist background, the importance of funding nonprofit infrastructure, and the dangers of "short-termism" in assessing charities and pursuing social change.
Listen to the full interview below and/or scroll down to read a transcript provided by the Business of Giving.
Denver: It is a bit ironic that at a time when we have more information and data than at any other time in human history, our ability to predict the future and to make sound decisions has never been less. And one reason for that may be because not enough people are thinking about how to make this data accessible, meaningful, and truly useful. That is why the nonprofit sector is so fortunate to have someone like Jacob Harold, the President and CEO of GuideStar…who just happens to be with us now. Good evening, Jacob, and welcome to The Business of Giving.
Jacob: I’m thrilled to be here, Denver.
Denver: Some listeners may never have heard of GuideStar. For those who have, they may be thinking: “Oh, Yeah, Yeah. The 990 tax form people.” So, let’s start by having you tell us what GuideStar is, and what you do.
Jacob: You bet! GuideStar is the largest platform of information about data for nonprofits. And let’s just start by saying: Why do we even care about having data about nonprofits? And for me, it’s to address what I call “the elephant in the philanthropic room,” which is simply that some nonprofits are better than others. Some are able to squeeze more good out of the dollars that they spend. It’s not necessarily that those that are not as effective are bad people, but they haven’t figured out the most effective way to do good in the world.
So the challenge that donors face and that nonprofit executives face…and researchers and government officials… is trying to find excellence in the field, to learn from it… to make sure it gets the resources it needs. And so GuideStar’s mission is to help in that process: to provide the kind of information so that the “stakeholders of social change”–the people who have a stake in the work of the nonprofit sector–are able to make good decisions with their time, and with their money, and with their attention, with their passion. So, we provide data. And historically that’s mostly been, as you said, from the IRS Form 990, the tax form that most nonprofits are required to file. But we realize that that’s a very powerful foundation of data, but none of us would tell our own story through our 1040. And we need to supplement that with other kinds of information to tell a richer story about nonprofits. And so that’s what we’re really trying to do at GuideStar right now. And we’re having some success; we have about 7 million people each year who use GuideStar.
Denver: That’s right. And you really get into the inner workings of all this data and how the whole philanthropic system works. Where did that come from? What kind of background did you have that instilled this into your DNA?
Jacob: In some ways, it came from the dining room table at the house I grew up in. Both of my parents worked for small community-based nonprofits. My mom worked at an AIDS hospice. My dad worked for Catholic Social Services, providing services to the poorest of the poor in our community. And so over the dining room table, I would hear about the struggles faced by those people who are devoting their lives to try and make the world better. And these were my parents!
And I began to understand that the institutions they worked in… matter, and the struggles to find funding had consequences for our community. So, after college, in a way I tried to stay in the family business, and I stayed in the nonprofit sector. But we all have to rebel in one way or another. So, I rebelled against my parents’ local focus and decided to work on national issues, and I worked on environmental issues. And I had a chance to work for a whole set of different environmental organizations: Green Corps, Greenpeace, Rainforest Action Network. And I got to know dozens of others. And it became very clear to me in my early 20s that some of these organizations were simply far more effective. And it led me to a question: “Well, okay, how are we going to tackle a great challenge like climate change if we’re not sending money to where it can be most effective?” That led me to really start to wonder: “Well, how do we build a marketplace for philanthropy that will help us achieve a better world?” And that eventually led me to business school, and then to my current role.
Denver: Interesting. You mentioned a moment ago that you have 7 million visitors a year. Who principally makes up that audience? And what is the #1 thing that they’re looking for?
Jacob: When GuideStar was first founded, we assumed that the #1 audience would be individual donors, and they are a critical audience. But it turns out that our single biggest audience are nonprofit executives that are trying to find a partner organization or benchmark themselves against another. I will say that the first thing that usually brings people to GuideStar is salary data about nonprofit executives. I call that the “gateway drug,” because people come looking for: What does the CFO of this nonprofit get paid? What does the Head of Programs get paid…
Denver: It’s negotiating time for them…
Jacob: That’s right! They may be a donor, but very often they’re actually applying for a job at this organization. And quickly though, they realize there’s a lot of other information here that can answer a lot of other questions. And that leads to much more nuanced analysis.
Denver: It was at the beginning of this year that you gave your nearly 2.5 million nonprofit profiles a facelift of sorts. Actually, it was more like a total makeover. What did you do with them?
Jacob: So as I said before, historically, our primary source of data has been these tax forms. We all know from filling out our taxes that tax forms– can feel kind of boring. I think that initially when GuideStar was founded, we just quickly put up the data, and it sort of reflected the structure of a tax form. But that’s not telling the whole story of a nonprofit, and so we needed to change the visuals of the site, the user experience, the graphic design to reflect more of what I call a “multi-dimensional view of nonprofits.” Looking at them from many different viewpoints! We wanted to say the financial data is incredibly important; it provides a baseline, but it’s not the whole story. So our redesign was really about saying: “Well, there’s the financial data here, but there’s also operational data…and data about people, programs, goals, strategies, photographs and video. We needed to figure out how to display that visually in a way that gave people the whole picture of nonprofits, and not just a partial picture.
Denver: And that’s where the 21st century is. I know that Mark Zuckerberg on his conference call, was talking about the fact that they think Facebook is going to be almost all video in the next couple of years. So many in the nonprofit sector are there with that dense data– that nobody really looks at anymore, so it’s a great move. Now, nonprofits are asked to complete profiles for GuideStar about their programs and operations, and depending on the level of detail that they’ve put into these profiles, they get recognized at either the Bronze, Silver or Gold level… At least until this past May, when you introduced the Platinum level– which I must say you were almost overly excited about! What kind of information will the Platinum level require? And why do you think this information is going to be so meaningful?
Jacob: So as I said, the baseline data we have comes from the Form 990, but we invite nonprofits to come and share additional data to tell a richer story about their work. And about 115,000 nonprofits have added at least some additional data, and about 40,000 of them have reached one of the levels that you mentioned. Bronze is up-to-date operational data; Silver indicates fresher and more deep financial data; Gold provides answers to questions like: What’s your goal? What’s your strategy? Describe your programs (in a deep way). And then Platinum is what we call “quantitative programmatic data.” These are metrics…numbers that describe your progress towards your goal.
It could be for a job training program– what is called in nonprofit jargon an “output”– How many people went through your program? Or it could be an “outcome”–How many people went through your program, and got a job, and kept it for year? The challenge is that the nonprofit sector is so diverse that there’s no single metric that we can use to describe a homeless shelter, an art museum, and an environmental advocacy group. We have to reflect the diversity of the sector.
At the Platinum level, we’ve invited nonprofits to come in and choose metrics that are appropriate to them. But if possible– where multiple nonprofits are measuring the same thing–we’ve identified that, so nonprofits can more directly compare themselves to each other. And we think this is transformational because it’s the first time that at the field level, we have data that’s really about social change. Not just about the organization itself, but about the impact they’re having in the world… that reflects the diversity of the field, but also reflects the ways the field has a sense of commonality and shared purpose. That said, it’s going to take us years to evolve the Platinum level to a point where it’s truly comprehensive. But we’re very excited about it, and we’ve had about 1,000 nonprofits so far that have shared about 4,000 metrics and we are looking to have that number climb over the next few years.
Denver: That’s great! Well, it really allows them to benchmark themselves against a similar type of organization… and maybe even see what some of those organizations are looking at that they hadn’t thought about… and saying we need to do that as well! Earlier this summer, we had Perla Ni; the CEO of GreatNonprofits on the program. And they, of course, collect reviews from those who’ve been helped by nonprofit organizations– the beneficiaries, as well as others…donors and volunteers. And we got into a discussion of their relationship with GuideStar–how you worked together to bring numbers and stories together in a way that will really help donors make more intelligent decisions. You’re a big believer in collaboration and in partnerships… What others have you been working on to serve the public in a better fashion?
Jacob: When we think about building an information system for the trillion-dollar nonprofit sector, it’s very clear that we can’t do it alone. We have to work with other organizations. GreatNonprofits is a terrific example –where we are able to provide a channel for the GreatNonprofits’ reviews to be shared with many, many more people. And then, it helps to enrich our profiles as well. So, there are lots of other partners for us. They come both on the data collection side– where we get data, but also on the data distribution side.
There are about 209 partner organizations that are showing our data on their website or in their software– including Amazon.com. Intuit and Google have apps that use our data. The National Donor-Advised Funds, the philanthropic giving vehicle of Fidelity Vanguard, and Schwab all use GuideStar’s data. And so those sorts of partnerships…
Denver: That’s your wholesale partnership there, right?
Jacob: That’s right! Yeah, it really is wholesale. So there’s the retail on the website, and then the wholesale through these partners. And that way, it doesn’t have to be what you would call a “pull strategy”: “Hey, come over to my website” if we have push strategy…pushing the data out to where people already are.
And then there are so many other critical partnerships for us–organizations like BoardSource that are experts in how nonprofit boards of directors work. They’ve helped to inform how we ask questions about nonprofit governance. The same with an organization called D5 that works on issues of diversity, equity and inclusion in the nonprofit sector. We got their advice on how we should most appropriately ask questions about nonprofit staff and board demographics. Our partners at the Foundation Center have the best data on foundation grants, which is a great complement to our work. So we know we can’t do it alone but the partnerships have to be substantive. And optimally, they need to be automatic too, so the data is flowing back and forth automatically.
Denver: Yes. Exactly. You all do certain things better than others, and if you can join together, it best serves the public. You encourage these nonprofits to be transparent about their operations or finances,… and coming from the school where you want to practice what you preach, you do that by holding a quarterly impact call. Where did this idea come from, Jacob? And what happens on the call?
Jacob: This was an idea that I think initially came from our former CFO James Lum. We’ve been batting around the question: How do we do a better job proactively sharing with our stakeholders what GuideStar is trying to do.. so that no one’s surprised, so they have an understanding of our strategy… how they might fit into that, and how it may help them. And we thought about what public companies do. They have a quarterly earnings call where they share with investors…
Denver: Ah, so that’s it.
Jacob: Basically yes. It was inspired by that, but different in a couple of ways. One is that we’re not just talking about GuideStar’s financial results– which are really just a means to an end, although we do share that. We were talking about our programmatic results: What’s happened? How many new nonprofits have come and shared data with GuideStar, for example? How many people are getting data from GuideStar, or have gotten it in the last quarter? And then, what are we trying to do next? What are we struggling with? What mistakes have we made? What have we learned? I will say the one thing that we’ve been cautious about is: On Wall Street–and here we are in the studio right down near Wall Street–there is the danger, I think, of “short-termism” of thinking everything happens on a quarterly basis. If you’re trying to build a great company, it takes years or decades, and the same is true for social change. So one thing with the impact calls is we want to make sure that we’re being proactively transparent, but that we’re still thinking in the long term.
Denver: Yeah, and that’s really important. I think the long term can be lost when everybody wants results and outcomes and begins to design programs that are going to give them the kind of returns and outcomes that will get them funded again. And that’s one of the dangers we have to stay away from.
We’ve been talking about all these different organizations and parties trying to come together to coordinate this information in an intelligent fashion here in the United States… but the nonprofit world is increasingly global. You have been working on something called the “Bridge Project” to begin to address this. What is the Bridge Project, and what is its purpose?
Jacob: Sure. So the Bridge Project is an attempt to create a unique ID number for every nonprofit in the world…essentially, a Social Security Number or a VIN number. And that’s really important because if different organizations like GuideStar want to share information about a nonprofit that’s in Cameroon, we have to know we’re talking about the same organization. Having a unique ID helps us do that. It’s a very simple thing, but it’s actually quite profound in our ability to collaborate across an organization like GuideStar… and we mentioned the Foundation Center earlier… which is one of the other partners in the Bridge Project. The other two are Global Giving and TechSoup Global. So, we now have more than 3 million nonprofits in this database that have these unique IDs, and we’re searching for partners to help plug in to that system so that we can expand it over time. Because, yes, we live in a global world!
Now one challenge is that the concept of nonprofit shows up almost everywhere in the world, but it’s always a little bit different. My favorite example is in China; they have something called a GONGO–a government-organized non-governmental organization… which reflects the structure of Chinese Society.
Some of them do very important work. But as we think about trying to build a global system to understand philanthropy and the nonprofit world, we have to have something that captures commonality through these numbers, but also reflects that diversity. So that’s going to be our ongoing challenge looking forward.
Denver: It would be a huge step if that could be done. As a nonprofit, you’ve got to go out there and get funding… what are your sources of revenue?
Jacob: GuideStar is a hybrid organization. We are a 501(c)(3) charitable nonprofit, but we do have a business model that allows us to cover the majority of our costs through earned revenue. And so our budget is about $12 million; about $10 million of it comes from earned revenue, and $2 million of it comes from foundations, on average. And we’ve been very lucky to have support from significant foundations like the Gates Foundation, Hewlett Foundation, Kellogg Foundation, Barr, Packard and others. And they like that we’re able to cover most of our costs through earned revenue. But I also like that it’s not 100%. I like the foundations holding us accountable to our mission, so we don’t just turn into a data company. We remember that we are a nonprofit that has a social mission. And the foundations constantly remind us of that and force us to make decisions so that GuideStar is maximizing the good for the field.
Now that $10 million of earned income also creates really good incentives because it forces us to be useful for our users. And they’re only going to pay us if it’s helpful. Now, 99% of our users use GuideStar 100% for free. But there’s 1% who are accountants or foundation program officers or lawyers or bankers or consultants who need additional tools and the ability to download customized databases, etc. And they pay us for access to premium subscriptions. And then some of our wholesale partners pay us as well, for access to bulk data. But it’s always a tricky balance and it forces us to be as thoughtful as we can be about ensuring that we meet the mission, but also that we pay our bills.
Denver: Let me pick up on your point about the funding that you receive from foundations. Back in May, you and your buddy, Phil Buchanan, the President of the Center for Effective Philanthropy… who was a guest on the show back in the Spring. You led a group of 21 like-minded colleagues who all signed a letter to foundation executives urging them to invest more of their resources in nonprofit infrastructure. What exactly is nonprofit infrastructure? And what was the specific request you made to these foundations?
Jacob: So, infrastructure is the stuff that helps make a system work. So when you think about society, things like roads or rail or sewers…
Denver: Things we don’t pay any attention to in this country.
Jacob: Exactly. Until they start to go wrong. That’s one definition I’ve heard is that infrastructure is the stuff you don’t realize you need until it goes wrong. And you think about the business world. The business world has an infrastructure: the New York Stock Exchange, Harvard Business Review, investment banks, etc. Now we’ve seen how sometimes that infrastructure doesn’t live up to what we as a society need it to be. We saw that in the financial crisis.
The nonprofit sector has an infrastructure too: it’s the training programs at universities that help prepare people to be nonprofit executives. It’s the magazines and newspapers and radio shows that help to get the word out about what’s happening in the field, what the key questions are, that help people wrestle with the challenges that we face. It’s organizations like The Center for Effective Philanthropy that help foundations learn from their constituents and get better… or like GuideStar. And these institutions are critical for the healthy performance of the nonprofit community. But they’re all a little bit underfunded because people don’t like to invest in this sort of infrastructure. So the 21 of us that you mentioned, initially convened by Phil Buchanan and myself, we asked foundations to devote at least 1% of their grant’s budget to nonprofit infrastructure. That would be a significant leap if they actually did that…
Denver: Sure would.
Jacob: …but…the vast majority needs to go to the work on education, or healthcare, or in environment, or the arts, or whatever issue a foundation is engaged in. But we need that sliver of money to make sure that the underlying systems are there and are healthy.
Denver: Have you been happy with the response?
Jacob: So, it’s been really interesting. I’ve been very happy with the ad hoc response…anecdotal response. Foundation leaders contacting us and saying…”Oh, this is great! Really like it; we’re sharing it with folks. We’re talking to our board about it.” But it’s too early to know whether it actually has any real impact.
Denver: I know what you’re talking about. Everybody recognizes its importance; everybody wants it done, but everybody wants somebody else to fund it.
Jacob: That’s right.
Denver: Because they don’t want to fund something that other people are going to benefit from, and they’re hoping some other guy will pick it up. So I think your idea of across the board… and 1%… is the right idea, but as you say we’ll see where it goes.
Of all the topics we have discussed, Jacob, on this show, more than any other has probably been debunking the overhead myth–that misguided notion that you can tell the effectiveness of a nonprofit organization by how much of your donor dollar goes to program, and how little of it goes to administration and fundraising. As a matter of fact, we had Caroline Fiennes on the show–she’s from Giving Evidence based over in the UK. She cited some data that showed the most highly-rated organizations on Give Well, were, in fact, the ones that had the highest overhead.
You have been a real leader in this from the outset. But let me put myself into a donor’s shoes for a moment, if I can. This overhead number is a really, really nice number. It’s simple; it’s clean; it does what you mentioned a few moments ago. It allows me to compare that homeless shelter to an art institution, and maybe.. most importantly, it makes me feel responsible.
Denver: I get the point that you’re making. The question I have here: Is there another number– or some other indicator– that is nearly as clean or simple, that I could use to make an intelligent giving decision? Does such an indicator exist?
Jacob: No, it doesn’t! And the reason it doesn’t exist is that the nonprofit sector is simply too diverse. Just like in the business world, no smart investor is going to only use one single metric to compare the investment into a new startup company– a restaurant versus GE stock. They’re just too different from each other! Now, that said, that doesn’t mean we shouldn’t look at data. We need to give up on the idea that there is a single number. I do think that there’s a single “word,” and I will offer the single word which is “clarity.” Is the nonprofit clear about its goals? How is it going to get there? How does it knows if it’s making progress? And I think that’s where having good data can really help. Does a nonprofit have a good metric that they’ve chosen– on GuideStar Platinum, or wherever– that shows how they believe they should be judged in the unique context of their work? And does that make sense to you as a donor? Are they clear about why they think the things that they are going to do are actually going to lead to lasting results?
Denver: Is there any effort to try to compare “like” organizations to one another? When you talk about the private sector, you can’t compare them all. But if you look at let’s say, retail stores, it’s always sales per square foot. Are people thinking of doing those kinds of verticals for homeless shelters, for education, for medical philanthropies? Or, is that not being thought about?
Jacob: Absolutely! And I think that could be incredibly valuable to say… “Look, for homeless shelters, there are seven metrics that are really quite relevant. You should look at these, and that will allow you to make smart decisions among homeless shelters.” Or for art museums… or for international development groups. And we believe that the Platinum level in GuideStar is going to help us gather that data and organize it in a structured way, so that we can look at one subset of organizations at a time.
Now that said, I will just add some nuance here perhaps to complicate things. Think about two different homeless shelters that are both measuring average number of nights stayed at that homeless shelter. But one homeless shelter focuses on the chronically homeless– people who may have drug addiction problems or mental illness. And another one focuses on the newly homeless–people who just missed a rent check. The second one may want to minimize the average numbers of nights in the homeless shelter. They want to get them back into permanent housing as soon as possible. Whereas, the first one that’s dealing with the chronically homeless, may actually want to maximize it. So we need to be thoughtful about that unique context. But even just raising that question… having that data… forces us to be more thoughtful about the work we’re doing, and how to do it better.
Denver: It brings up other questions as well… to use your example. There may be a homeless shelter that’s not doing that well, but it’s the only one serving a single community. And if you have do away with that, well, those people are just going to be left high and dry.
You’re a data guy. Is there any set of data out there that has not been released, but could be released, that would have a profound, positive impact on decision making and problem solving in the social sector?
Jacob: You won’t be surprised that what I dream of is data from individual nonprofits, sharing what they measure to track their own performance– basically the data we’re collecting on Platinum. The challenge, of course, is that it is not one data set. It’s fragmented across the entire nonprofit sector.
So another answer I’ll give is: government funding of nonprofits. Now, individual levels of government– the federal government, or a given state or municipality, may share data about which nonprofits they’re funding and why. But that is also very fragmented. Government funding of nonprofits accounts for– depending on how you count it– at least $400 Billion a year, and some really good work. But we don’t have that in aggregate to understand how government is outsourcing some of its functions to the nonprofit sector. And it’s not working! And I think often the answer is: Yes!; sometimes the answer is: No! But, how could we get government to share that data at all different levels… in an open format… that will allow us to learn from these investments that we’re making as citizens? I think, all told, they’re very good investments, but let’s find the data to show that!
Denver: Very interesting. Let me get you out on this: We’re in the middle of a Presidential election. Thankfully we’re going to pretend to turn the page here and move on to the next one in 2020. I don’t think we can look really intelligently much more beyond the next four years. What will GuideStar look like? What will the world of nonprofit data look like for our listeners? When I sit down with my computer, or whatever I’m going to be using four years from now, and search for information about nonprofits: what information do you hope, and what information do you anticipate that we will be able to get?
Jacob: I’ll start by saying, I think you’re not the only one who’s ready to turn the page on this election. But I do think that four years from now, we will have enough of this programmatic data–the measurements of actual progress made by nonprofits… against their goals. And we will have it organized, as you suggested, within the subset–homeless shelters over here, and art museums over there. That’s going to allow us to think about nonprofits in their unique context in a much more powerful way. And I would also say that we’re going to start to have much more global data. It’s not going to be perfect. It’s going to take more than four years to get to a truly global database of all the work done to make the world better; That’s going to take decades. But four years from now, we’ll begin to have linkages with a handful of countries that already have significant efforts. For example, there is a GuideStar in India, that is a separate organization that’s a partner of ours. There’s data on maybe 10,000 of the largest nonprofits…
Denver: It’s a start.
Jacob: And we talk to them regularly to figure out how could we bring our databases together. So I hope that four years from now, we’ll have some really good examples of sharing data across national borders, and that we’re going to begin to have the programmatic data that actually shows how nonprofits are doing towards achieving their mission.
Denver: That would be great! If people want to get more information about GuideStar, where do they go?
Jacob: So, guidestar.org, and lots of information there: 2.8 billion pieces of data, videos, photos, and lots of fun to explore how all these organizations are trying to make the world better.
Denver: Well, Jacob Harold, the President and CEO of GuideStar. I want to thank you for being on the show this evening. You are not only a great champion for GuideStar, but for the free flow of meaningful information across the entire ecosystem of the nonprofit and philanthropic worlds. It was a real pleasure to have you on the show.
Jacob: Thanks a lot, Denver.