Chairman’s Corner: February 2006

Effectiveness: An Elusive and Difficult Concept

by Mario Morino, Co-founder of VPP

Over the last 20+ years there has been growing concern and intensifying dialogue about performance, results, and accountability of nonprofit service providers, government programs, and even philanthropy itself. Yet amid this growing concern, the concept of “effectiveness” has been elusive and difficult for practitioners to grasp, focus on, and make meaningful progress toward. More troubling, it is often “missing in action.” I’ve been in far too many settings where the challenge to donors is to raise the level of giving, with hardly a reference to using what’s been given more effectively. Equally common, the push for scaling and replication all too often focuses on numbers (e.g., lives touched) instead of effectiveness and impact (how the lives of those touched have been meaningfully improved). Even the “capacity building” efforts of late are not necessarily explicitly focused on effectiveness and, as such, are evolutions of aspects of technical assistance, focusing more on efficiencies than effectiveness.

Despite its numerous interpretations, for the purposes of this discussion, effectiveness is defined as how well—read “effectively”—an organization is doing what it sets out to do (mission) and achieving the change desired (outcomes and impact) for those served.

Why is effectiveness both elusive and difficult? It’s elusive because there’s confusion about what effectiveness means, and the meaning is often obfuscated by peripheral dialogue. Often, people confuse effective with efficient. There is also confusion created by specific applications of the term, for example, organizational effectiveness or program effectiveness. Stereotypical comparisons such as nonprofit vs. for-profit, mission-driven vs. financially-driven; use of best practices, or the notion of nonprofits being “run like businesses” serve to take the dialogue even further off track. The irony of these discussions is that they are simply not “effective;” they are debates over words, semantics rather than issues. And even when it’s understood, effectiveness is difficult because it requires clear focus, a commonly shared understanding of what success really looks like, and great execution.

When I think of effectiveness, I immediately recall a phrase once shared by management guru Peter Drucker: It is more important to do the right thing, than to do things right. Drucker’s “Law of Effectiveness” (my term), is a remarkably clear and insightful adage that goes straight to the heart of effectiveness.

Aren’t we all seeking to achieve meaningful and lasting change for those we serve, and to do it well? Isn’t it at this level that we should apply the test of effectiveness? And, doesn’t that start by questioning if what we do—our organization’s mission—is relevant? One of the nonprofit efforts we launched in the mid-1990s was sunset in 2000 because our mission was fulfilled and, thus, our ”reason for being” was no longer relevant. The important take-away is that this organization objectively looked at itself and determined that, based on its accomplishments (combined with other changes in the region), the mission was achieved and the organization had served its purpose. Instead of coming to grips with the organization’s irrelevance, we could have taken an alternate course and invested significant time, energy, and resources to re-invent the organization. Making the decision to sunset the organization freed resources for application to more relevant issues.

This same question of relevance could and should be asked from time-to-time about each of the programs and services an organization provides. Consider the growing challenge for nonprofits that have historically served low-income neighborhoods when real estate prices soar, the neighborhoods go upscale, and the demographics and needs of those in the neighborhood change. Is the nonprofit serving that demographic still relevant to and meeting an important need in that neighborhood? Coming to grips with irrelevance can be one of the most difficult challenges facing certain organizations operating in areas where rising real estate prices are causing gentrification. Should a nonprofit whose mission is to deliver services to low-income families continue to operate in a neighborhood that is becoming more populated by middle class and wealthier families? Should it sunset its programs? Or should it find ways to reorganize to apply its knowledge and services to other areas in the region?

But effectiveness and Drucker’s “Law of Effectiveness” can be explored at a deeper level. Most of us can justify the relevance and importance of our missions and programs. But, how do we know we are actually accomplishing what we claim for those we serve? How do we know that our desired outcomes for those served are, in fact, being achieved and with the impact we claim? This is one of the most difficult effectiveness questions, because answering requires great objectivity by an organization’s leadership (staff and board), management rigor at all levels of the organization, and an investment of time and money to instill an outcomes orientation and build the systems that measure how well desired outcomes are achieved. At the macro level, doesn’t this broader and deeper definition go right to the heart of today’s debate about the future of our children and how effective our collective efforts are in preparing them to be adults in a radically different 21st century? Aren’t these the kinds of questions we should be asking?

Therefore, I’m suggesting that effectiveness implies three things. First, being effective requires that we do our very best to ensure continued mission relevance and importance. Second, that we ensure our programs fulfill our mission by achieving the outcomes we claim and that doing so leads to the sought-for impact. And, third, that we continually learn, adjust, and improve what we do and how we do it as the environment changes.

When we look at effectiveness through this lens, all the rhetoric of “for-profit vs. nonprofit,” “mission-driven,” or “running like a business,” is not relevant. What matters is that leaders of foundations, nonprofits, and government create a culture that embraces effectiveness as a staple of how they function. And they look to all venues—business, nonprofit, government, research, academia, and especially those they serve—for ways and inspiration on how to be more effective. If it means that a nonprofit leader borrows from the practices of private industry to be more effective, that makes sense. If it means foundation heads can make their work more effective by learning from or emulating “investment” practices of private enterprise or borrowing from other philanthropic approaches, that makes sense, too. Leaders should be able to make these cross-sector connections without getting caught up in the morass of terms and phrases that do more to polarize than help; as a collective force, we become more issues-based and effective. In sum, it is less about what paradigm, best practice, or management ideology we turn to (e.g., more business-like) and more about putting effectiveness at the forefront of the discussion, thinking differently about the notion of effectiveness, and then remaining open to the ways an organization can do better.

As simple as it sounds, putting Drucker’s “Rule of Effectiveness” into daily practice is difficult. Focusing on the right things may bring tension. To illustrate, a mission-driven founder/leader would embrace the idea that he or she may not be the right person to take the foundation or nonprofit to the next level. In fact, this person may even be the one to drive that change. At a different level, a mission-driven organization seeks an objective assessment of how its programs and services are working and how they can be improved even if the results go against the grain of fundamental assumptions. The challenge of being effective is that organizations must fight calcification of their organizations, be open to changing their way of doing business, and be highly resilient to changes and the opportunity. They must be ready, able and willing to adapt to the change and turbulence affecting social services, the broader nonprofit field, and philanthropy.

Effectiveness is the real challenge and the real opportunity facing the nonprofit and philanthropic worlds. It is a goal to be cultivated and strived for, a way of working that permeates all aspects. For a nonprofit serving children, effectiveness encompasses everything from how well a child is served and how caring those services are, all the way to the mundane task of effectively managing the back office to ensure that the “trains run on time.” And the challenge of continuously striving to be more effective is as important, and applies as equally, to foundations, philanthropists, and yes, venture philanthropy investors.

In practical terms, what can organizations do to better address their effectiveness? Boards and management of organizations should regularly:

• Assess two basic premises:
  – Does the mission have continued relevance and importance—and are there external factors that could change this in the future?
  – Are programs and services relevant, of continuing value, and achieving desired outcomes?
• Validate the theory and application of the organization’s programs and services to:
  – Clearly understand and confirm how they lead to achieving the desired outcomes;
  – Identify gaps that may exist in the programs and services and need to be addressed.
• Establish accountability throughout the organization—from the board to the staff—for how well, how effectively, desired outcomes for those served are achieved. Implement systems to regularly assess how well the desired outcomes are being achieved, incorporating this information as the basis for cultivating a performance-driven culture that guides all aspects of the organization’s management. And, make an assessment of the leadership and whether it has the skills and experience needed to sustain the current organization and meet the changing needs for the years ahead, considering their:
  –  Drive for thinking in different ways about how to be effective;
  – Willingness to hold themselves accountable for the organization’s performance and better governance;
  – Ability to incorporate management rigor in planning, decision-making, and execution; and
  – Desire and ability to foster an organization-wide focus on outcomes.
• Invest in management, board, staff, systems, and processes to build and sustain a well-run organization necessary to deliver high-quality programs and services.

The areas that can most influence an organization’s effectiveness include:
– Clarifying mission and goals
– Building strong senior management
– Ensuring an effective board—well-informed, engaged, and working with, but independent of, the head of the organization
– Ensuring the organization is adequately capitalized and financed
– Striving for high financial integrity
– Improving the quality, delivery, and scalability of programs and services
– Establishing a performance management system to report on outcome achievement and organizational and program effectiveness.

Effectiveness of organizations—funders and service providers alike—is becoming increasingly more important, and pressure will continue to escalate as organizations are asked to do more with limited resources.

Effectiveness is not a destination, but a journey that allows us to continually learn, adapt, and improve—all with the purpose of ensuring our relevance and that our organization is doing well what it claims to do for those we serve.

So I hope all of us, VPP included, spend less time on rhetoric and instead focus on the best ways—regardless of origin—to be more effective in fulfilling mission and increasing the outcomes for those our organizations serve. And, when you think about your future, don’t forget the “Drucker on your shoulder,” chanting his effectiveness mantra for our benefit: It’s more important to be doing the right thing, than to be doing things right.”