April 29, 2009
Creating a Jewish GDP
Think of the American Jewish community as a business — a more than $10 billion annual business. If our organizations and leaders made programming decisions based on that notion, perhaps they would be building a stronger, larger and more effective Jewish community.
With that thought in mind, Mark Pearlman, an experienced business strategist (CBS Inc., Fox TV) and MIT graduate, spent weeks researching how much money Jewish organizations take in and spend each year, analyzing what categories get the most attention, and which the least. In effect, he sought to create a Jewish GDP, the equivalent of Gross Domestic Product studies that measure all of the services and goods produced by a country over a specific period, usually a year, to judge the growth rate.
“I wanted to compile a ‘McKinsey style’ top-level analysis of the Jewish nonprofit community, and understand where the resources are directed,” explained Pearlman, whose JInsider.com Web site aggregates Jewish news and feature stories and specializes in video interviews with a range of Jewish thinkers, celebrities and artists.
Pearlman used publicly available filings, primarily via the Web sites GuideStar and Charity Navigator, from more than 400 Jewish nonprofit organizations, and focused on all financial data. The revenue data for each organization was then “compiled and categorized according to systematic service groupings” like education, communal life, etc.
The results, he readily admits, are incomplete, in large part because religious organizations are exempt from filing tax reports available to the public. But what he has found makes for some fascinating study and discussion points in our community — for instance, that the Jewish GDP is $9.7 billion, with most funds going to social welfare (25 percent), followed by education (20 percent).
Twelve percent of services provided go for communal life, with 3 percent for advocacy, 1 percent for the arts, and less than 1 percent for Arab-Israel relations.
More than 25 percent of all funds come through the Jewish federation system, and 33 percent of all revenue is concentrated among the top 10 nonprofits, including UJA-Federation of New York, the Jewish Agency for Israel, Hadassah, American Jewish Joint Distribution Committee, Yeshiva University, FEGS Health and Human Service System and the Jewish Geriatric Center.
Perhaps most surprising is that no Jewish organization has undertaken this kind of data gathering, which could create a clear and standardized annual snapshot of how many — and how — Jewish nonprofit dollars are generated in this country.
Pearlman said he undertook the study on his own because of his concern for the lack of a systematic approach to collecting financial data in the community. He has no particular cause to promote or axe to grind, but wondered “how can we effectively plan for the future without a clear understanding of our base year starting point?”
He said his intent is to have the information he collected “reviewed and discussed in the community for its findings and implications.”
Pearlman said he was impressed to learn that “Jews are committed to tikkun olam [repairing the world], by making social welfare the most significant service area.” And he noted that the overall figure for the GDP well exceeds $10 billion because his research did not include groups like Chabad-Lubavitch, believed to be in the range of a $1 billion-a-year enterprise, or the Orthodox Union, whose kashrut division is said to generate hundreds of millions for the organization.
“Religious organizations are totally under-represented in my study since they aren’t required to publicly post their IRS reports,” Pearlman said. He added that he requested information from the various religious groups and all were either unwilling or unable to disclose financial data.
Several professionals in Jewish communal life credited Pearlman for taking the initiative to bring more information and transparency to light.
After reviewing Pearlman’s findings, Shalom Elcott, president of the Jewish Federation of Orange County, Calif., concluded that “while the total numbers are impressive,” in terms of funds raised in the Jewish community, “each category has hundreds of organizations doing similar things. In this economy,” he said, “there is no way we can maintain that kind of duplication.”
Having worked inside and outside the federation world for many years professionally, Elcott said the system is impressive but needs to change.
“Our mistake is that we’ve focused almost exclusively on the high-end gift, but we need to do more to re-engage those we lost, and the grass roots. We all talk about outreach but few of us in the federation or nonprofit world invest enough in reaching others,” he said, pointing out that his federation engages only 15 percent of the Jews in Orange County.
“A company unable to reach 85 percent” of its constituency is severely challenged, Elcott added, yet too many federations today are “cutting back in areas that strive to reach those people,” like their marketing and communications departments.
Jeffrey Solomon, president of the Andrea and Charles Bronfman Philanthropies, called the GDP data a “good first step” because “the better educated the community becomes, the more informed people will be about philanthropy and about making good judgments.” He said he hoped that organizations not required to divulge their financial information would be more inclined to do so in the spirit of openness.
For Solomon, the next step for Pearlman would be to “get the information out and start a debate among people” about how best to raise and spend charitable funds. “We should all start with the same set of facts because until now we end up arguing about ‘your facts’ and ‘my facts.’”
Pearlman says he would like to see the community create a standardized, more complete and transparent database, including “financials, best practices and strategy/mission information.” He suggests creating a seal of approval for complying organizations as an incentive for disclosure. And he would like the Jewish community to emulate the United Nation’s Millennium Goals, encouraging organizations to concentrate on addressing a few major challenges.
The UN’s top goals are ending poverty and hunger, and achieving universal primary education.
“What goals would the Jewish community choose?” Pearlman asks.
It’s a good question, and one that should not be left unanswered.
Gary Rosenblatt is the editor and publisher of The Jewish Week.