A Means to Assess Social Investment Risk – and a Plea on Behalf of the People who Need Nonprofit Organizations to Deliver the Value they Promise

Abstract

Summary

This article focuses on the hundred thousand registered nonprofit human service agencies that, annually, have combined budgets totaling $141,215 million. Is society getting the social value such enormous resources should yield? In human terms, are those people who depend on nonprofits to improve their lives and prospects getting the help they need and the results they deserve?

I repeat the observation I made in a previous article in this journal that while nonprofits work incredibly hard, with passion and dedication, and often in extremely difficult circumstances to solve society’s most intractable problems, there is virtually no credible evidence that most nonprofit organizations actually produce any social value. And I address the counter-arguments adduced by those who have criticized this assertion. On the question of my commitment to the nonprofit sector and its organizations, I state unequivocally that ultimately my first loyalty is to the people whom nonprofits serve: the individuals and families who are poor, hungry, sick, disabled, structurally marginalized, and desperate to improve their lives and prospects but who face enormous obstacles in doing so.

Because it seems likely that for the most part nonprofits will not reform themselves without a major push from funders, I argue that the sector needs enlightened social investing, by which I mean the channeling of resources to nonprofits with the measurable objective of supporting the betterment of intolerable social conditions, the melioration of suffering, and the improved well-being of those whose lives and prospects promise little comfort, health, security, safety, or adequate resources. How can a social investor know which nonprofit agencies are likely to be delivering high social value? This article closes with a discussion of a social investment risk assessment tool that my colleagues and I have developed to help nonprofit funders make well-informed choices in selecting nonprofits to support.