Following up on Thursday’s Alliance for Effective Social Investing meeting, Sean at Tactical Philanthropy writes:

A high performance nonprofit is a very well run organization. It has outstanding leadership, clear goals, an ethic of monitoring performance and making adjustments as needed, and it is financially healthy.

A high impact nonprofit is one whose efforts have been proven to cause sustainable, positive change.

Impact can be seen only in retrospect. Often many years later. Performance can be directly observed.

I think high impact nonprofits are the holy grail of philanthropy. But like any holy grail, it is something to journey towards, not something you demand now.

Sean goes on to argue that funders should put more focus on “high-performing,” as opposed to “high-impact,” nonprofits. At GiveWell, we focus on “high-impact” nonprofits, in that we look for evidence of past impact and not just future promise. Our response to Sean:

1. Assessing “high-performance” is much harder than assessing “high-impact.” This isn’t to say that either is easy. But we feel it’s very doable for charities to take the “form” of a “high-performance” nonprofit – collecting large amounts of data, executing activities competently, and describing those activities in a compelling and money-raising way – without actually being on a path toward impact (which requires that the data be the right data and that the activities be the right activities for the goal).

We see many charities with impressive-looking evaluation systems; far fewer with actual past outcomes to show. If anything, this makes us suspect that other funders are looking for the form and appearance of good evaluation, without holding charities accountable for actual results.

2. Because of this, funding “high-performance nonprofits” is not something that casual donors (as opposed to subject matter experts) are well positioned to do. This point parallels our argument that casual donors aren’t well positioned to fund the unproven and innovative. Like funding a small and unproven charity, funding a “high-performance” but not “high-impact” charity means trying to do something that hasn’t been done before, and introduces a greater need for understanding the full context of a program.

3. “High-impact” nonprofits might be rare – but that doesn’t make them overfunded. We believe that our top-rated charities can productively use more funds than they’re currently getting. As long as that’s the case, why should a casual donor give to a charity without past impact rather than a charity with past impact?