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Myths, Misconceptions, and Mistakes: The Wounded Warrior Project

The Wounded Warrior Project, a major nonprofit serving veterans, has found itself in the public eye. A recent article in the New York Times offered a wide-ranging analysis of the organization’s practices. That article was followed up by others in major media outlets.

These articles included sometimes scathing critiques of WWP’s operational decisions. Some of the critiques of WWP do appear legitimate. For example, I would argue that WWP made a mistake spending as much as it did at a major staff retreat. 

But other criticisms of the Wounded Warrior Project are rooted in myths and misconceptions about nonprofit work. They fail to understand the reality of running a complex organization doing complex work in a complex world. These myths and misconceptions hurt other nonprofits, too. So, in an attempt to provide context, I would like to offer four comments on the WWP story: 

1. A Continued Focus on the Wrong Number(s)

Much of the critique of WWP has, tragically, been focused on overhead ratios. We at GuideStar have said it before and we will say it again: impact is what matters. It is a myth that overhead ratios tell you anything about the quality of a nonprofit’s work. Organizations have to invest in themselves and their fundraising to achieve that impact. 

Language matters here. Even the venerable Washington Post used the misleading phrasing that a certain percentage of “Wounded Warrior Project’s money goes toward its mission.” For every nonprofit, 100% of the money should go toward the mission. That does not mean that 100% goes to program expenses—every organization must also invest in administrative and fundraising costs. When responsibly used, administrative and fundraising costs are absolutely central to an organization’s work to achieve its mission. 

2. Exponential Growth Is Hard

The Wounded Warrior Project grew very, very quickly—from $41 million in 2010 to $342 million in 2014. (See a chart from the WWP page on GuideStar, below.) Fast growth is difficult to manage. Just ask any successful technology start-up in Silicon Valley. Different-sized organizations need different systems, decision-making structures, governance processes, and different cultures. It takes work (even staff retreats) to manage that kind of growth. In general, growth is good: more resources for an organization to advance its mission. But growth also increases uncertainty, multiplies choices, and accelerates change. 

Financial analysis of Wounded Warrior Project from its GuideStar Nonprofit Profile.  Note the rapid increase in revenue (in blue) and costs (in gray). More than 1,300 people viewed this page on January 27, 2016, the day of the New York Times article on WWP.

Financial analysis of Wounded Warrior Project from its GuideStar Nonprofit Profile.  Note the rapid increase in revenue (in blue) and costs (in gray). More than 1,300 people viewed this page on January 27, 2016, the day of the New York Times article on WWP. 

3. Some Perspective on Compensation

There have been critiques of the salaries paid to WWP’s executives. Good people can disagree about the right level to pay nonprofit executives. It is a privilege to work at a nonprofit. The bar should be high for justifying nonprofit compensation. But let us remember that senior executives at a for-profit company with $342 million in revenue would most likely be paid far more than those at WWP (according to one analysis, three times as much).

Do we want less capable executives running nonprofit organizations? Don’t our veterans deserve to have experienced professionals running veteran-serving nonprofits? Nonprofit compensation requires attention and accountability. There are cases of fraud or unethical behavior. But it is no small task to run an organization with a third of a billion dollars in revenue and 500 employees. Nonprofit leaders have difficult jobs. Let’s hold them accountable, yes. But let’s also treat them like professionals.      

4. Transparency Matters

In the end, nonprofits exist to achieve results for the people, communities, and ecosystems they serve. Sharing that data is a prerequisite for having meaningful conversations about nonprofit performance. On the Form 990 it files with the IRS, WWP only shared modest data about its programmatic results. As my colleague Chuck McLean argues, they should add more. But, to WWP’s credit, they added additional quantitative programmatic data to their GuideStar Nonprofit Profile and their own website (although we did note that their profile on GuideStar was focused on WWP’s work in the San Diego area). We need this kind of transparency if we are to shift to the conversation that matters, a conversation about results. 

So let us not, as one letter to the editor in the Times lamented, constrain “nonprofits to a special class of organization that isn’t allowed to market itself, pay competitive salaries or grow quickly.” The work of social change is hard. Some people do it well, some do it poorly. A few scoundrels darken the work for all of us. 

But in the main, the nonprofit sector is made up of serious people tackling serious problems. So let’s hold nonprofit organizations accountable for results, not just ratios.

jacob-harold-100x140.jpgJacob Harold serves as the chief executive at GuideStar, the world’s largest source of information about nonprofits.  Prior to GuideStar he worked at the Hewlett Foundation, the Bridgespan Group, the Packard Foundation, Rainforest Action Network, Greenpeace, and Green Corps.  Jacob earned an AB from Duke and an MBA from Stanford.

Topics: Impact Senior Executive Issues