How do you choose the charities you support?

In mid-November, Forbes released its annual report of America's 200 Largest Charities.

We can't help you pick your causes,” the article demurs. “But, we can suggest a few pointers about how to evaluate charities in a very Forbesian way--by their financial efficiency.

The article – subsequently trumpeted generously by a range of other news sources – went on to explain how to carefully consider “Charitable Commitment” (percent of total expenses dedicated to programs), “Fundraising Efficiency” (percentage of donor revenue remaining after fundraising expense) and “Donor Dependency” (an organization’s reliance on fundraising dollars).

Interestingly enough, just a few days later the New York Times ran an article about Charity Navigator’s efforts “to offer a wider, more nuanced array of information”“in an effort to wean donors off a reliance on administrative-cost ratios and other financial metrics that have traditionally been used to assess charities.”

This article explains how important it is for nonprofits to invest in people and technology that will keep the organization strong and help it better accomplish its purpose.

Author/fundraiser Dan Pallotta is even more strident about the shortcomings of the current systems for evaluating nonprofits’ success, as he often states in his Harvard Business Review blog.

“Those organizations should take no pride in telling donors or anyone else how low their fundraising costs are. Quite the opposite. I want to support the organization that's going for scale, not the one that's stuck where it is. Why would I support a cancer organization promoting its low fundraising investment while cancer remains uncured? We have the whole reward system backwards.”

What is good stewardship? At what point does penny-wise become pound-foolish? Or a visionary mission turn into a quixotic quest?

Obviously, there’s no one-size-fits-all answer. I do think that every successful organization – profit or nonprofit – needs to be pushed (from both inside and out) to be more ... more ambitious … more resourceful ... more responsive … more effective … more efficient ... more responsible.

Here’s wishing you more managers – and supporters – up to that challenge!