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THE PHINEO METHOD The PHINEO method: Analysis with compassion and understanding The PHINEO analysis is an independent quality assessment process for nonprofit activities. We evaluate the potential effectiveness of nonprofit organizations and their projects. Our analysis consists of a four-stage process that is open to nonprofit organizations of all sorts and sizes. Following the analysis, we publish our comprehensive evaluation of the organization’s approaches, opportunities, challenges and funding needs as a distinctive profile. The PHINEO analysis relies on six organization-related and three project-related criteria, based on a process that had proved effective in the United Kingdom. We worked with experts from academia and the field to adapt the model to the structures of the German social sector. Participation is free of charge for the nonprofit organizations. To provide context for the PHINEO analyses, we also prepare sector reports that present the status of research and examples of good practice for nonprofit engagement in various fields.
The PHINEO analysis: Nine criteria Nine criteria underpin our evaluation of a nonprofit’s organizational capacity and the impact of its activities. We measure the project’s potential impact by three criteria: goals and target group, concept and approach, and evidence of results. We analyze goals in terms of how they address a specific social challenge and meet the needs of the target group. The concept and approach should suit the goals, the target groups and the social challenge. Evidence of results enables us to assess the nonprofit project’s learning culture and its impact. We measure the nonprofit’s organizational capacity by six criteria: vision and strategy, leadership and human resource management, supervisory board, finances and controlling, financing and fundraising, and public relations. Under vision and strategy, we award points if the organization bases its medium-term strategy on a clear long-term vision and presents operational plans for at least one year. Under leadership and HRM, an organization earns points if its management and decision-making structures are clearly articulated and it follows the dual-control principle. Another sign of an effective organization is its implementation of appropriate control mechanisms through internal or external supervisory bodies. Under finances, the key is transparency: The sources and use of funds should be traceable and whenever possible audited externally by a tax consultant or certified accountant. Financing and fundraising has to do with the organization’s long-term stability. Here, we award points if the organization addresses various financing possibilities, is selective when choosing fundraising measures and regularly checks their outcomes. Public relations work that describes the or1|4
ganization, its vision and its projects transparently and credibly to the public and to potential investors earns particularly high marks in the PHINEO analysis.
Four stages to the PHINEO project profile PHINEO prepares a profile for projects that have successfully completed four stages of analysis. At each stage, points are awarded for each criterion on a defined scale that ranges from minimal to excellent. In the first stage, the nonprofit organizations complete an online questionnaire covering key benchmark data. Applicants also provide specific information regarding the project and its activities. In the second stage, the organizations send informational materials to PHINEO that give our analysts a comprehensive look at the organization and its activities. These include such things as evaluation reports, program descriptions, bylaws and annual reports. In the third stage, the PHINEO analysts visit the organizations on site and gain a personal impression. They are accompanied here by an expert from the field of the relevant sector. In the fourth step, all organizations and projects that have been found particularly effective during the three previous stages are submitted to a committee that makes recommendations about which organizations to profile. The recommendation committee consists of academic experts from the relevant field, experts on the nonprofit sector in general, and individuals who understand the needs of social investors.
Weighted criteria for impact, and the standard of suitability The PHINEO analysis aims to provide a comprehensive profile that focuses on a project’s potential impact. Therefore, the three criteria for impact of activities are routinely given more weight in the analysis results than the six criteria for organizational capacity. This reflects the fact that social investors are most interested in the impact of nonprofit projects. In order to advance effective projects, they would also support improving the organization’s structures. An organization that earns high marks for organizational capacity but low marks for the impact of its activities would not be included in the PHINEO portfolio. The suitability of an organization’s activities and structures plays a decisive role in the PHINEO analysis. For example, an established organization is more likely than a startup to need solid governance structures anchored in bylaws. In applying the PHINEO criteria, we attach importance to considering the special features of the organization and the project. 2|4
Sector reports as the starting point The sector reports provide context for the PHINEO analysis. They describe the status of research and examples of good practice for nonprofit engagement in various fields. This context analysis sets the frame within which we can properly evaluate nonprofit work in specific fields. After all, the conditions for nonprofit work in the field of dementia, for example, will differ from those in environmental education. Researched and written by outside experts commissioned by PHINEO, the sector reports describe the causes and characteristics of a social problem and identify effective approaches to resolving it.
Development of the PHINEO analysis Experts developed the PHINEO analytical method under the auspices of the Bertelsmann Stiftung in its Orientation for Social Investors pilot project in Germany. The Center for Social Investment at the University of Heidelberg (CSI) prepared a report on various processes for measuring impact in the nonprofit sector. Based on its findings, the decision was made to adapt for Germany the model effectively used by the British organization New Philanthropy Capital. The Bertelsmann Stiftung received substantial support in that endeavor from the Decision Institute, the Central German Institute for Social Issues (DZI) and Univation – Institute for Evaluation. The Decision Institute made valuable contributions to developing the analysis, weighting the criteria and reducing the complexity of information. Univation was particularly involved in developing the questionnaire, designing the survey process and developing informational material. The DZI contributed significantly to formulating the organization-related criteria.
PHINEO: Analysts with compassion and understanding PHINEO analysts bring knowledge and expertise from a wide variety of disciplines, including social sciences, the humanities, law and economics. They also have professional experience in the nonprofit sector and often personal experience as well. Along with this background, the analysts bring to their work an attitude of positive expectations; that is, they start with the assumption that the nonprofit organization and its projects are effective. To avoid a subjective bias in its results, PHINEO has incorporated a system of checks and balances in the analysis process. At least two analysts independently rate each organization (dual control). If their results differ significantly, the team of analysts meets to discuss the case and arrive at a decision. At the end of the process, the external recommendation committee reviews the evaluations and makes the final decision about the profile. PHINEO employees routinely receive further professional training in specific fields, such as evaluation methods, so that they can continue to refine their methods and processes.
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New options for donors and nonprofit organizations With this innovative approach, PHINEO has created an important resource for donors who want to maximize the impact of their support. At the same time, PHINEO has broadened the scope of available information about the nonprofit sector. For nonprofit organizations, the PHINEO analysis provides more than an opportunity to demonstrate the impact of their activities. It also offers a way to reflect on that impact and improve those activities. The PHINEO project profiles the “end products” of our analyses thus serve a variety of purposes. They constitute recommendations for the projects we highlight; they give social investors a growing number of effective organizations to choose from; they provide a more detailed view of an organization’s strengths and potential; and they offer nonprofit organizations a high-quality document for their own fundraising.
……………………………………… PHINEO provides guidance for social investors on various fields of philanthropic action and specific projects that promote effective engagement in the nonprofit sector. As a not-for-profit corporation, PHINEO is supported by a broad alliance of government, business and civil society organizations. Shareholders include the Bertelsmann Stiftung, the Deutsche Börse Group, KPMG and Stiftung Mercator. PHINEO’s mission is to strengthen the nonprofit sector and civil society. PHINEO conducts a multistage analysis of nonprofit projects and recommends those with strong potential to make a lasting impact. With reports on selected issues, handbooks for donors and recipients, and individualized consulting for social investors, PHINEO offers a platform for orientation. PHINEO – Platform for Social Investors: www.phineo.org
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