The Critical Voice Just Got Even Smarter

by Nathaniel Whittemore · 2009-12-01 18:28:00 UTC
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Hot on the heels of yesterday's post about the importance of GiveWell and the critical voice in the social sector, a consortium of major nonprofit review groups today issued a press release called "The Worst (And Best) Way to Pick A Charity This Year." The press release officially calls overhead ratios and executive salaries as a "red herring" in determining how effective an organization is.

The overhead ratio is one of the most persistent measures of supposed quality in charities. The premise is basically that the less money is spent on staff salaries, the more can go "directly to the problem." Of course the fallacy here is that overhead ratio is a measure of inputs - not outputs, and what really matters is whether a nonprofit can deliver on its mission and improve lives.

The thing that makes this press release particularly significant is the role of Charity Navigator - for a long time the leading advocate of the overhead ratio style metrics. Last year, they hired a new CEO in Ken Berger who promised to lead the charge to a better measurement system for a better nonprofit sector.

Sean at Tactical Philanthropy provides particularly good context, and in the process leads the "standing ovation" for the shift. One important piece that almost gets buried in his post is that this press release not only indicates a new direction for the big guys, but indicates their embracing of GiveWell, GreatNonprofits and Philanropedia as important parts of the nonprofit review ecosystem.

All in all, it's exciting to see the critical voice get even smarter.

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(Photo: Red Herring by Tim Parkinson)

Nathaniel Whittemore is the founder of Assetmap. Previously he was the founding director of the Northwestern University Center for Global Engagement.
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