Bloggers continue to debate in our virtual world whether it's appropriate for nonprofits to be held to “business standards” in terms of demonstrated program impact and management effectivess (see this recent Agitator post).

However, nonprofit executives operating in the real world must recognize that the debate is already over!

Consider this remark, in a Forbes interview, by philanthropist Mario Morino, whose Venture Philanthropy Partners was set up specifically to assist small to mid-sized charities working with children to improve their managerial capacities … so as to grow in scale and effectiveness:

“Bottom line, if we could help sway the needle from loyalty-based giving to merit-based giving — and [as a result] there was more effective allocation of public funding — that would be a huge accomplishment.”

Put this attitude in the context of Forbes' estimate, termed conservative, that “activist philanthropists” will put in the neighborhood of $2.6 trillion into philanthropy over the twenty years that began ten years ago … roughly 35% of the giving in that period.

That's quite a lot of weight behind “merit giving,” coming from a breed of “activist philanthropists” who made their money at a fairly young age in pursuits like high tech and finance that reward speed, competitive edge and survival of the fittest … and who apply this mental conditioning to their nonprofit interests.

[Even, we'd argue, the Boomers who are becoming your “rank-and-file” direct mail and online givers share the “show me” predisposition as one of their characteristic generational genes.]

Increasingly, nonprofit execs have no choice in the matter. You must perform in an environment of business plans, milestones, performance and impact assessments, management training and so forth … certainly if you expect to fund your budgets through major gifts.

The evaluation tools of for-profit enterprise might often be ill-suited to charitable pursuits, and the mere notion of being scrutinized in a “competitive” framework might be offensive to some, but the “merit givers” are increasingly calling the shots in the philanthropy biz.

Perhaps the good news in all this is that as merit giving takes ascendancy, two consequences that nonprofit managers can welcome will occur. First, funding support will indeed increase for nonprofit capacity building and infrastructure. And second, metrics will become far more sophisticated and meaningful than simplistic nonsense like percent of funds devoted to “overhead.”

We predict another — somewhat counter-intuitive — consequence as well.

Merit givers will tend to focus on and reward people as opposed to programs. In an environment where programmatic performance measures will indeed be ever more crucial, nevertheless, the new philanthropists will still, in the first instance, bet on individual stars … individuals they regard as like them (in drive, passion, “can do” attitude, charisma, results orientation, salesmanship), only operating in nobler public service roles and causes.

Fairly or not, “quietly effective” will not be a plaudit in the merit giving world! Boards and recruiters of nonprofit execs, take note.

So let us bloggers debate over the fairess and suitability of demanding business-like accountability. But if your day job is actually managing a nonprofit, whine about it at your own risk!

Roger & Tom

P.S. Thanks to Philanthropy Today for the pointer.