September 08, 2013

Donors Should Give Based on Need, Not on Personal Interests or Whims

Kevin Lamarque/Reuters

The causes that most attract rich donors don't always offer the greatest impact.

Nearly a decade ago, I decided to give a substantial portion of my income to charity. It wasn’t much compared with what many large foundations give, but it was a lot for me. I didn’t have much experience with charitable giving but thought it would be worth my time to learn how to do it well.

My goal was simple: to do the most good with my donation. Any cause or charity was on the table. I discussed how to pursue this goal with many people, including those with professional expertise in charitable giving and those without, and I read everything I could find on giving. But I was amazed at how few people could provide adequate responses to my most basic questions: How should I choose causes and charities to support, and how could I maximize the impact of my giving?

What the experts advised went against my instincts about how best to make a difference.

Nearly everyone told me to direct my giving based on my interests and passions—for example, by identifying a disease that has affected my life, a geographic region I wanted to support, or a school or program that had helped me. They told me that it was impossible to compare causes as different as education, health, poverty, and the environment.

But they missed the point. Every donor compares very different causes. Some people do that based on their own interests, but I wanted to do it based on what would help others the most.

To be sure, answering my questions involved a lot of judgment because no cause is objectively the best or most important. But I wasn’t going to throw in the towel and not try to make comparisons.

Though many insiders in philanthropy were not comfortable with some of my perspectives, almost all agreed with the premise that philanthropy has a lot of room to improve.

Fundraisers know that the causes that get the most donations are not necessarily the ones that make the greatest impact. Nonprofit staff members know that tremendous resources—in both time and money—are diverted from their programs to engage and solicit donors. Longtime observers of the philanthropic world know that the personal whims of donors determine where dollars flow, regardless of need or impact. Some believe this is unchangeable in a system that relies on people to give their money willingly, but this is narrow thinking. Too many people give for the right reasons, that we should not expect mediocrity forever.

So it’s time to reinvent philanthropy to do better. We must:

Encourage greater honesty about philanthropy. Too few people speak candidly about key issues in philanthropy. An example is the notion that it is impossible to compare the amount of “good” done by different philanthropic causes, which underlies the idea that donors should focus on their personal interests (rather than a logical analysis) to select the causes to focus on.

But not every good cause is equally good. I believe that helping those in extreme poverty is much better than giving to a well-endowed art museum. The donor who gives to the art museum is probably doing more good than the person who gives nothing. But not by much. And this position is not unreasonable, unfair, or inappropriately judgmental.

Maybe you disagree. That’s OK. Let’s talk about it openly and honestly. Don’t say we can’t make comparisons: Donors make choices every day. Of course, it is difficult to compare diverse causes, and individual judgments will surely vary. A dozen thoughtful philanthropists, all trying to maximize their impact on global welfare, may produce a dozen approaches. Having a much more honest public discourse can improve the way these donors make decisions.

Offer donors better ways to evaluate nonprofits. It is extremely hard for donors to assess how good a charity is. Most charities typically tell donors a few anecdotes about people they have helped and some relatively useless statistics—maybe counting how many people they have served, without meaningful information on how much those people benefited. Some charities measure their impact exclusively for the purpose of soliciting donors; it is often obvious that those measures are extremely biased (another issue with honesty).

Even with better information, evaluating and comparing charities would be an exceptionally difficult task. Plenty of charity-rating organizations already claim to help with this, but most have tremendous weaknesses. For a long time, they focused almost exclusively on financial measures. That is obviously flawed; just because an organization spends only 10 percent of its budget on fundraising and overhead doesn’t mean that the programs supported by the other 90 percent are effective.

Some charity watchdogs now base their ratings on other measures of performance, and a new crop of alternative rating groups is popping up. Though the new methods are often incremental improvements, most suffer from the same problem: giving top rankings to 100 or more charities. By promoting so many nonprofits in such diverse areas, they have watered down the value of their ratings by expressing little conviction about what really works best.

Only a small number of charity evaluators provide bona fide views on the few nonprofits most worthy of donations. Examples of charity evaluators with these types of high-conviction views include GiveWell, Giving What We Can, and Innovations for Poverty Action’s Proven Impact Initiative. More should be created that will do the same.

Encourage donors to be more open to feedback. Though most donors have good intentions, they share the blame for the failures of philanthropy. But rarely do they receive critical feedback: The nonprofits they donate to are reluctant to bite the hand that feeds them, and those they don’t give to, have no reason to interact with them.

For example, it is common for donors to make restricted gifts for big new endeavors while charities’ most critical needs often remain unmet. The nonprofits they support want to thank them and slap them silly at the same time. (We all know which of these urges rules the day.)

People who work at nonprofits and foundations have an extreme fear of being judgmental. The implied rules are that almost anyone who is trying to do “good” is beyond criticism. The resulting code of silence suffocates constructive discourse, harming nonprofits, donors, and the world they are trying to serve.

Donors must recognize that they need feedback to improve their own performance. As the controllers of the purse-strings, they must be more cognizant of the power of asymmetry. They will not get feedback unless they make it very clear that they are open—extremely open—to receiving it.

The world’s problems are too serious to continue accepting underperformance by donors and beneficiaries. Some people think putting so much emphasis on impact would make giving cold and emotionless.

From my experience, I can confidently disagree. The strongest, most authentically satisfying feelings I’ve had about giving are when I’ve had the most conviction that my giving was designed to do the most good for others.


Eric Friedman is the author of Reinventing Philanthropy: A Framework for More Effective Giving.