In The Affluent Society, John Kenneth Galbraith wrote that "It is a far, far better thing to have a firm anchor in nonsense than to put out on the troubled seas of thought."

Last week an important player in the charity-evaluation business announced that it is pulling up anchor and heading out to sea. Charity Navigator, one of the nation's three principle watchdog agencies, issued a joint press release with Guidestar and oversight upstarts Philanthropedia, GiveWell, and GreatNonprofits, stating that "overhead ratios and executive salaries are useless for evaluating a nonprofit's impact."

"Useless." Wow.

The big news here is that Charity Navigator is in the mix, because it has been a fixture of the establishment. The organization's CEO, Ken Berger, stated in the release, "We believe that too many donors are paying too much attention to measures like overhead." Next year, Charity Navigator will begin focusing instead on measuring a nonprofit's effectiveness.

I salute Ken Berger for this act of exemplary leadership. It cannot be easy for him. Overhead ratios are easy and inexpensive to measure. That made them seductive — no, irresistible — to evaluators operating without multi-million dollar budgets. And not a one of them has anything close to that. The ratios have been the flagship offering of the watchdog agencies for years — including Charity Navigator — which in 2007 had a budget of around $1 million. It takes tremendous courage to put the thing that has sustained you second to the things that can sustain real change in the world. As Sean Stannard-Stockton, founder of the Tactical Philanthropy blog and the new Tactical Philanthropy Advisors, wrote last week, it's like McDonald's saying goodbye to the hamburger.

Coincidentally, the Better Business Bureau Wise Giving Alliance, one of the other watchdogs, made an announcement last week, too. Because of the recession's severe impact on charities, it will "allow organizations more leeway in meeting its standards for how much they spend on fund-raising and program activities," according to the Chronicle of Philanthropy. Whether it offers leeway or not, the agency is standing in the way of progress so long as continues to withhold seals of approval on the basis of program ratios.

Charity Navigator is not only being courageous, it's being smart. Evaluators that remain obstinate about program ratios are fast becoming dinosaurs. In the press release, Charity Navigator shares the stage with some really exciting, entrepreneurial, forward-thinking players that represent the future. In doing so, the affiliation demonstrates the kind of savvy Johnny Cash had when he teamed up with U2. None of the new evaluators is perfect, but all of them reject the admin:program ratio, and in that sense, each one is brilliant. Together, they represent a tide the old icons will not be able to turn back. Which is why they should join them.

The big questions on the horizon are about agency and scale. A $1 million budget is no match for the $307 billion America gave to charity in 2008, or for the 700,000-plus active charities in America. Considering the resources it will take to perform objective assessments of that number of organizations, keep them up to date, make them accessible to everyone, and make the donating public aware that they exist, a million dollars is vapor in the bucket.

The question is not so much what measure will replace the admin:program ratio — we're making excellent progress on that front (and pretty much everyone who's thinking about this realizes there must be more than one measure, and that they'll have to be far more thoughtful and far less simple). The question is how we will apply them consistently to hundreds of thousands of organizations and make them accessible to every American in user-friendly form. It is of no use to develop wonderful new measures if we don't have the resources to apply them or the agencies to distribute the data.

But those are questions for next week. Today is a day to celebrate. As Galbraith also wrote, "There is a disquiet in the central tradition." Hallelujah. In distancing itself from these dangerous ratios, Charity Navigator trues its compass and sets a course for earning its evocative name.

In the latest issue of Business Week, Stephen Baker's article "Beware Social Media Snake Oil" makes a provocative argument. He claims that all the hype around social networks, wikis, and blogs for business neglects the potential risks and time wasted. While I think he is overstating the argument, he is bringing up a vital question all managers and employees need to ask: What's the business value of using social media? In my view, there has to be a crystal clear business impact for using these tools.

Consider collaboration inside companies (which differs from using these tools for marketing and PR). The promise of social media, or "enterprise 2.0" as it is often called, is that employees can become much better at finding information and working together if they use blogs, wikis, social networking, document sharing, Facebook pages, and the like. But are these new activities valuable for a company? Well, that depends. The first obvious issue is that you can spend an awful lot of time on this, and that's time not spent doing other things, such as finishing your job for the day. So it's only valuable if the result (e.g., finding good information) justifies the effort (all the hours put into social media). That's focusing on outputs, not inputs.

Some people miss this point: They think of adoption success in a company as the number of wikis, blogs, tweets, and Facebook pages that people have created and used. In other words, they measure success as the activity level. But that's the same as saying, "in our company, we have lots of meetings so we must be doing something right." As enterprise 2.0 expert Oliver Marks told me, "random Twitter and online dialog can be an even more disastrous use of time than endless unfocused meetings." More is not necessarily better.

There is a bigger problem, however. Social media tools are only useful for some problems. Managers need to ask, do social media tools solve my key challenges? Consider again collaboration inside companies. Why are people in your company not collaborating better? There are potentially many different reasons for this. As I show in my book Collaboration, some barriers to collaboration are motivational — people are unwilling to share information and look for help, perhaps because they see colleagues as rivals or only care about their own performance. Social media tools are just not going to be good at fixing these motivational problems. You need other solutions for this, such as changing the incentive system so that people are rewarded for helping others.

If you blindly focus on investing in social network tools, wikis, and blogs in your company, without solving these motivational problems first, you have just committed a great managerial sin. You have applied the wrong solution to your problems. You have prescribed cough medicine for a broken leg.

We need to be precise and honest about where these new social media tools have great impact, and where they don't. Then they will be seen as great tools, and we won't hear the snake oil label anymore.

Morten T. Hansen is the author ofCollaboration: How Leaders Avoid the Traps, Create Unity, and Reap Big Results (Harvard Business Press, 2009). He is a professor at the University of California, Berkeley, and at INSEAD.

A good run-down of the basics of commercial lending from Becky McCray at Small Biz Survival.

Do your investors send you a holiday card? Scott Austin looks at one firm's whimsy at WSJ's VC Dispatch.

Mashable's Adam Ostrow offers advice on picking smart phones for small business owners.

Google and Twitter court local businesses, Liz Gannes writes at GigaOm.

CQ's Anna Palmer looks at the National Federation of Independent Business's approach to health reform lobbying.

If you're still trying to figure out ways in which you can use social media to help your business, perhaps you would do well to consider that marketing through social media is not necessarily that different than marketing in general. Rebecca Kelley the Director of Social Media at 10e20 recently discussed why it's not that different in an interview with WebProNews.

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It's long been possible to prove a business's popularity by putting stuff in its window; newspaper reviews and/or a lot of customer's written comments could do the trick.  Google's offering a higher-tech approach, however, with the release of bar code decals and a "Favorite Places on Google" program.

Google started by sending stickers to 100,000 local businesses.  Business owners are supposed to put the stickers in their front windows, and then consumers can scan them with their smartphones and see reviews or access coupons.

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