Thursday, March 22, 2012

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Principal, db 3rd Sector Consultancy www.donorconfidenceindex.com

he Not-for-Profit (NFP) Sector’s contribution to social and economic development is poorly understood: in Ontario and elsewhere. The sector is widely viewed as a drain on productive resources, not as a producer of productive re-

sources. Media coverage of the sector is disproportionately skewed towards cases of fraud and deceit. All this negative attention leads to heavy scrutiny around how NFP organizations raise and spend money, while the prodigious benefits produced with that money draw little notice. With “big money” considerations in one corner, a “good cause” rebuttal can‟t always hold its own. Actually, the “good cause” defence enhances the perception of a sector outside the „real‟ economy of employment and prosperity. Our sector‟s chosen self-image doesn‟t help. Emotive appeals might make for effective fundraising tools, but they do little to counteract the image of a „soft‟ sector that saps scarce resources from more productive applications, albeit for heartwarming reasons. If you‟re reading this, you probably know that the NFP sector is more than safety net for the most vulnerable: it is a vital driver of economic growth and development. Social impact is our primary concern, but in the process of enacting social change, our sector creates goods and services with hard economic value. We spend money in the real economy. We hire people in the real economy who spend their wages in the real economy. We provide critical goods and services we create exceptional value and wealth for the people who use them – not to mention the people who pay for them. We don‟t sap wealth from productive parts of the economy: we are a productive part of the economy. We create prosperity, and the conditions in which prosperity can be shared and enjoyed. Problem is, we don‟t tell this story very well. Now, more than ever, we need to be clear about our full value. The stakes are high. In the wake of the Drummond Report, politicians will face increasing pressure to rationalize investment decisions according to economic cost-benefit criteria. Individual donors are also steering their philanthropic investments by value-for-money calculations. In this highpressure environment, our sector competitively disadvantaged relative to the private sector, where people generally understand that money spent correlates to goods produced, and therefore to value created. Funds spent in our sector also translate to goods produced and services rendered, and ultimately to value created, but if we can‟t tell that story ourselves, who will tell it for us? What do we have to show for the money we spend? Quite frankly: not much. If we were given $1 million to grow tomatoes and had to report our progress to investors, the testimonials of a few happy customers would not pass muster. Neither would glossy photos of the pizza and pasta we enabled. Just showing that we spent the $1 million would likewise fail to impress. We need to know how many tomatoes we‟re producing, proverbially speaking, and we need to demonstrate why our tomatoes are an invaluable and integral axel of the societies and economies in which they are grown and enjoyed. It sounds basic because it is basic: we can talk about what we cost or we can talk about what we produce with that money. It‟s a pretty simple choice, if you ask me. OTF can play a leadership role in helping the NFP sector demonstrate the full productive impacts of its work. The first step is to help organizations demonstrate the greater impact money they spend. OTF could easily develop the ability to calculate how the sector‟s purchases benefit other sectors in the economy. OTF could give other funders access to this information and encourage them to contribute to it. We could share information to grow our knowledge and reduce the time it takes for grantees to apply for grants. Image that: less work, more knowledge and better results for all. Of course, the goods we produce are far more valuable than the cost of production. A subsidized meal may cost $2 but its true value is much higher. It is much more persuasive, and much more accurate, to say that we created $10 of consumer value with just $2 than it is to say that we spent $2 on urgently needed meals. Sadly, we can‟t make these kinds of valuations until we know more about what we‟re producing. OTF can and should lead a broader shift towards outcomes-based granting and reporting. We need to know who‟s making what difference: as funders looking to enable positive change and as organizations trying to ensure that activities generate their intended effects. Slapping a value on these impacts is easy, but it can‟t be done until we know the full extent of the impacts themselves. We make an impact. We create value, prosperity and opportunity. Let‟s tell the whole story.

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