Jacob Harold’s State of the Sector: The GuideStar Chief Talks Election

OK, let’s jump right in: Your thoughts on the Clinton and Trump foundations? You wrote a really great piece for GuideStar’s blog comparing the two, but can you condense that for our readers, and is there anything you left out?

Seeing some of the conversation in the media, to me, reflected a lot of common misconceptions and misunderstandings about the role nonprofits play in our society. And so we did a piece of analysis to kind of take advantage of all this attention and hope we could provide some education, and to show, for example, some of the differences between the two institutions. The Trump Foundation is actually a private foundation, whereas the Clinton Foundation is a 501(c)(3) public charity. That difference—that the Clinton Foundation is running its own programs while the Trump Foundations is a vehicle for making grants—has been lost, unfortunately, in a lot of the discussion about the two institutions. The size difference is quite striking, as well. At least in terms of assets, the Clinton Foundation is about 400 times larger than the Trump Foundation.

And then, if you listen to the media, there’s what we call the “perceived” styles of the two candidates—one being very structured and the other being more improvisational. I think that’s reflected in the strategies of the two institutions. The Clinton Foundation has a clear set of goals, strategies and metrics, and the Trump Foundation appears to be a bit more ad hoc in its behavior. And there’s nothing wrong with that. There are many donors who are very, very generous who also have an improvisational style. The Trump Foundation’s approach wouldn’t fit the definition of strategic philanthropy, but there’s nothing inherently wrong with scattering unrelated grants out into the world.

We were pleased the Clinton Foundation achieved a Platinum transparency seal on GuideStar, and provided a set of quantitative metrics around their programs that we think are substantive and can help people make their own judgments about the efficacy of the organization. That’s one example of how transparency helps us have conversations that are grounded in facts, and allows us to focus on what ultimately matters, which is whether these institutions are creating good for the world in proportion to their scale—and doing so in a way that matches the behavior we would hope to see in our social-change institutions.

It seems like the nonprofit sector has been under more media scrutiny than usual, with some high-profile stories on last year's presidential candidates’ foundations, the Wounded Warrior Project investigation, etc. What do you think of all this coverage? Is the media paying more attention than usual? Is it doing a good job? And what impact, good or bad, do you think all this coverage will have on the sector moving forward?

It’s a great question, and it’s one we think about a lot here. We’re on the phone with media outlets almost every day, sometimes just trying to correct misconceptions. I think we’ve seen some media misconceptions play out, as I just said, in the Clinton and Trump foundations. I think we saw that, as well, in the debate around Wounded Warrior Project. That’s not to say Wounded Warrior Project was entirely innocent, but recent analysis has shown that some of the criticisms it was under in the media were distorted and maybe even, at times, unfounded. Others were legitimate, I think.

And it gets to this: There are very few reporters who are on the nonprofit beat, who have the time to develop expertise in the nuances of the nonprofit sector. It tends to be a reporter from another beat—from business or from politics or from a community beat—trying to understand nonprofits but simply not having enough time. So that’s a tragedy, and it’s a reflection of how the media business has changed in the last many years. I would say, in general, that I feel like the reporters I’ve been talking to are getting smarter on questions about, for example, nonprofit overhead, about understanding the importance of clear goals, strategies and metrics to track your progress against your mission. I think we’re seeing some slight progress, but there’s no doubt in my mind, and perhaps through no fault of the media—just because of how the media business is changing—we’re not getting the kind of quality the sector deserves. And I hope that as the field gets more and more transparent, cleaner and more standardized in terms of how it shares information, we can aspire to some better journalism about nonprofits and philanthropy.

This goes hand in hand with the above question, but with the uptick in big-time news stories on nonprofit organizations, it also seems like the charity watchdogs have been more involved than ever. What do you think of their role in shaping news coverage, and by extension, public perception of the sector? How would you assess the job these watchdogs have been doing?

We don’t consider GuideStar to be a ratings site, per se. But we often get lumped in, I think understandably, with other organizations that do formal ratings, like CharityWatch or Charity Navigator. I think the American public and the media do want to engage in substantive discussions about the quality and relative quality of different nonprofits, and questions of ethics and governance. So there’s going to be a demand for judgments made by ratings sites.

The challenge, of course, is that the data we have about nonprofits—the only kind of standardized data across the sector—is financial, which has led to a set of myths about what really matters with nonprofits. As we like to say, sometimes it feels like we’re the drunk guy looking for his keys under the lamppost because that’s where the light is. We’ve got light around overhead ratios, so we decide as a field that somehow that’s a reflection of the quality of the work done by nonprofit organizations, when we all know that it isn’t. I think, in that way, some of the ratings agencies have been counterproductive, by reinforcing that myth. And that’s had real, negative impact on the field.

But I also get—and honor—the desire to strive for excellence. Our challenge, as a field, is to collect information that’s meaningful and actually gets to whether or not an organization is achieving its mission effectively, and offer that as an alternative. We, as the nonprofit sector infrastructure, all have to raise our game, and the nonprofits have to be willing to share more information if we want to get to a conversation that’s more meaningful.

Image via GuideStar

One of the big criticisms of the charity ratings sites is that they don’t rate based on impact. Charity Navigator, in particular, has said it eventually wants to move to impact-based ratings, but what do you think the challenges are—for the ratings sites and for the nonprofit sector—in moving toward a system like that? Is it even possible?

There’s not a good answer as to whether or not it’s possible. I think we have to try, as a field. But we have to do so reflecting and understanding the complexity of social change and the diversity of the nonprofit sector. I do believe it is essentially impossible to have, for example, a star ratings system or an alphabetical ratings system that allows you to meaningfully compare Harvard University to a homeless shelter. They’re simply too different from each other. I think that may be a fool’s errand.

That said, within individual categories—among environmental advocacy groups, or among homeless shelters, or art museums, or domestic violence shelters—I think you can coherently talk about quality. But to do that, we need better data. That data, in my mind, comes from both inside of the organization—its own articulation of its goals and strategies and metrics—and outside of the organization. What do the organization’s constituents think? What do experts in the field think? There are experiments out there bringing all this information together. It’s going to take a long time, and it’s going to be expensive, so we’re going to have to make compromises as a field. That’s why GuideStar has chosen, for our toe in the water, to be just around transparency. Our transparency seals—which some people would call a ratings system, though we wouldn’t—are an indication of transparency. We think that’s a proxy for the quality of an organization. And an organization that is willing to share information about its goals, strategies, metrics, operations and governance practices is more likely to be effective. And then, importantly, a donor, journalist or researcher has more information to make his or her own judgments.

I think we’re moving in a direction where we’re going to have better and more substantive conversations about the quality of organizations. But we’re never going to get to a world where we have a single ratings system that allows us to compare across the entire nonprofit sector in a perfect way.

Last year, GuideStar released the 2016 edition of its Nonprofit Compensation Report, clocking in at 4,297 pages. Based on the report, it seems like the nonprofit sector is a bit ahead of the for-profit sector when it comes to the gender pay gap, but it’s definitely still evident. Do you think the nonprofit sector is improving in regard to the gap? Is it doing enough, and what can it do better?

It is true that we in the nonprofit sector are ahead of other parts of society here. Historically, the nonprofit sector has had a different gender balance, and you can offer all sorts of cultural or economic explanations for that. Let’s just note that that’s a fact—we have a different history that we’re coming from in the field.

But we’ve got a long way to go. And there are a number of basic practices that play out across questions of gender equality, and also around race and class, which gets to questions about our hiring practices.
For example, the practice of having salaries be in line with someone’s previous compensation—it simply locks in patterns of inequality. Similarly, the practice of not sharing approximate salary ranges in job postings makes the process more opaque and creates a disadvantage for those who are not already advantaged.

So, I think there are concrete things we can do in the field to get better about how we hire and how we promote, to help address this gap. There’s a lot of history here, as I said, and it’s not going to go away immediately. I think we’re heading in the right direction, and I think we can be proud of the progress we’ve made. But we also have to recognize we still have a long way to go.

What are your thoughts on the state of the nonprofit sector, in general? Where do you see it going from here?

The nonprofit sector is growing. It’s big already, and getting bigger. It’s becoming more sophisticated—there are more and more billion-dollar nonprofits that are doing extraordinary work around the world. And we’re still seeing lots of entrepreneurial activity in the sector. So, the state of the nonprofit sector is strong.

That said, I think we’re on the cusp of an identity crisis, as we realize that solving any big social problem is not the job of any one sector, but requires a role for government, a role for business, a role for the nonprofit community. We’ve seen a lot of blurring of lines. We see impact investing, social enterprise, different kinds of private partnerships, social impact bonds—all of which I think are very promising. But it does challenge us in the nonprofit community to articulate our unique value and also to be willing to speak the languages of other sectors.

There’s been great progress there, but I think we’re still struggling in some ways to say what it really means to be a nonprofit in the 21st century. How does that relate to an era of declining budgets for social services, an era of new kinds of innovation around government financing, an era of corporate social responsibility? It’s an exciting time, but I think we are going to have some work to do as a field to really tell our own story in a new way.

You guys have been busy at GuideStar over the past year or two—new website, launch of GuideStar Platinum, etc. Can you talk a bit about some of the cool things you’ve done, why you’ve made the changes you made and your plans for the future?

Fundamentally, it comes down to two sides of a supply chain. One is collecting data. The other is distributing that data. On the collection side, we realized that the Form 990 is an absolute goldmine of data, but we can’t stop there. No American citizen would tell their story as a human being just through his or her 1040, nor should nonprofits tell their stories just through their 990s. We’ve really been investing in inviting nonprofits to share more information.

Platinum is a big part of that. We’ve already collected well over 4,000 metrics for nonprofits, many of which are comparable. That creates the opportunity for benchmarking over time. It’s been a mixture of metrics nonprofits have provided and some we have suggested. And we’re just really excited, because we think if we can get that right, we can begin to tell a quantitative story about nonprofit impact, but in a way that reflects the diversity of the field. We’ve been doing a lot to try and show that nonprofits are more than just a tax form.

On the distribution side, there are two things we’ve really been thinking a lot about. One is graphic design and data visualization. Now that we have 2.8 billion pieces of data, there’s a lot there, and we have to figure out how to display that in a way people can actually absorb. A lot of that comes down to data visualization, smart graphic design and user interface. I think we’ve made real progress there, but there’s a lot more still to do.

The second—something I think a lot of people in the nonprofit sector don’t realize—is that there are more than 200 other platforms using GuideStar’s data. The donor-advised funds of Fidelity, Vanguard and Schwab. Apps made by Intuit. Amazon Smile. Dozens of community foundations. They’re building their own tools based on GuideStar data. That offers the potential that, if we can get the data collection side right, nonprofits will essentially just have to keep their GuideStar profile up-to-date and know that information is automatically flowing out through hundreds of other websites, software tools and platforms. A great example we just launched in the past year or so is GuideStar for Grants, where GuideStar data automatically populates the grants management software used by foundations, just removing a lot of waste from the system.

We think, with time, we can create a flow of information that is rich and multidimensional but also is efficient and isn’t wasteful. We’re excited about that, but it’s a big, complex process to get all those pieces in the right order. We’re very pleased with our progress over the last few years, and we know it’s going to take a few more years. But we’re not alone in this. The more that nonprofits share data with us, the richer that flow is, and the better they’re able to tell their own stories. And the more other platforms tap into GuideStar’s database, the more we can have a unified and coherent system for the field that might actually really work—and might help us, as a community, tell our story more effectively.