In the wake of the Overhead Myth campaign which urged donors to recognize that charity financial ratios should not be used as the sole basis for making contribution decisions, some have encouraged charity watchdogs (and I hate that label) to formulate a universal measure of effectiveness that focuses on a charity’s results or impact. I have several concerns about this recommendation.

Due to the wide diversity of charity missions ranging from curing diseases to promoting religious beliefs and from helping the needy to saving the environment, it is unlikely that any single metric will be able to capture the effectiveness of all charity activities in a fair and objective manner.

Even if such a metric was proposed, it would be vulnerable to exploitation by some charities that will manipulate the impact metric just as some organizations manipulate financial reporting to show larger than actual program expenditures. For example, if the metric was based on accomplishing goals, a charity could set theirs knowing they are easy to accomplish. Also, focusing on an impact metric could discourage risk taking to solve problems out of fear that a promising but untested activity might not achieve its objective.

In my view, the most a charity monitoring group could do is to recommend potential content for an effectiveness assessment and verify if a charity produced a corresponding results report. But that verification would not measure a charity’s impact, it will just be identifying the process the organization used to gather its information and report its results.

Finally, while BBB WGA supports the idea of making charity impact reports publicly available ( see the 2011 Wise Giving Guide cover story on Charting Impact project), I anticipate many will focus on the positive results just as a typical charity annual report does today. This is one of the main reasons that BBB Charity Standards 6 and 7 focus on producing such reports for the charity’s board of directors so there will be greater openness about both positive and negative results as well as recommended course corrections.

H. Art Taylor, President & CEO
BBB Wise Giving Alliance