Tag Archives: Charitable organization

Thinking Velocity Vs. Efficiency

Image representing GlobalGiving as depicted in...
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Global Giving is a deservedly widely-hailed institution, highlighted by such luminaries as the Clinton Foundation and Bill Easterly. Its model is relatively simple. Philanthropists-to-be browse the website, and look for a (prescreened) cause they want to donate to; the causes are posted with amounts needed, where and what the money will be spent on, and a reassurance that you’ll get regular updates. And a couple guarantees – notably, that your money will be “on-the-ground” in 60 days. Now, we might expect that getting spent quickly is a good idea; after all there is a fear that the money will be retained by those getting it for personal gain, or that it’ll be whittled away on bureaucratic red tape. And some pressure must surely be put on organizations to avoid waste, undue delay or excessive red tape.

However the constant pressure to get money out the door, let alone  an absolute requirement, can lead to dangerous incentives as Good Intentions are Not Enough illustrates:

I worked for a large international charity after a major disaster. As part of the senior management team I attended monthly meetings to discuss our “burn rate”. The burn rate referred to how quickly we spent… our money. There was no similar meeting on the quality or impact of our aid….[We wanted to] ensure that all money was spent by the five year anniversary of the disaster. My organization knew that if there were any unspent donations at that time they would get a lot of negative publicity. If the public heard that they hadn’t spent all of the money donated for that disaster they would be less willing to donate to the next disaster. Spending money quickly was paramount. Unfortunately this caused a lot of problems in the field for our partner organization…Our staff was caught in the middle between the very real needs of the partner organization and the demands of HQ. A large part of the funding decisions were based on the ability of the project to burn through money rather than on the quality of the program or what type of assistance was needed the most.

I suggest you read the whole thing: the real problem of the constant push to get money out the door irrespective of quality, need, efficacy etcetera is demonstrated in the details. The incentive to burn money is also amply demonstrated by a conversation one of Good Intention’s are Not Enough’s commentators had with their organization: “[I said] ‘But if that’s the best way of doing it, why don’t we do that everywhere?’ ‘Because it takes too long and it doesn’t cost enough.’” We usually think of corporations as doing things quick, dirty and cheap. Well it seems that charities often are incentivized to do things quick, dirty and expensive.

So while I think Easterly is right to hail GlobalGiving for its concentration on solving small problems in doses, rather than on the next panacea, I think we should recognize that velocity should not take precedence over efficacy.

Again, I think that GlobalGiving does do a wonderful job and that its model is something to consider very strongly over the usual scaled international aid. We should just think very seriously about what we push aid to do.

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Charity Navigator 2.0

Charity Navigator, a site we’ve mentioned before as part of a repertoire of resources to seek out good charities always was somewhat limited in what it could offer because it concentrated on an important, but ultimately secondary element, the finances. But they’re now promising to tackle the larger and more difficult tasks of assessing “accountability/transparency and effectiveness/results.” They’re calling this new iteration Charity Navigator 2.0  The excellent Give Well currently works on the second goal, results and efficiency, but on a relatively small scale. And it’s still an open question what criteria Charity Navigator can use to judge effectiveness. Something utilitarian, like a dollars spent per life saved? And how can you have a system which judges Arts and Culture on the same scale as International Aid?

These are important questions for Charity Navigator to deal with, but this is heartening news all the same. Charity Navigator 2.0 will likely be a powerful tool by finally putting the focus on the outputs rather than the inputs.

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Non-Profit Restaurants: Exciting Innovation or CEO Ego-trip?

Slices of French Bread
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Via Charity Navigator, a USA Today story:

Imagine walking into a Panera Bread and picking out anything you wanted to eat or drink — then, at the end of the line, instead of handing your money to a cashier, you faced a donation box…. A sign at the entrance says: “Take what you need, leave your fair share.” Customers who can’t pay are asked to donate their time. The cafe opened Sunday and will operate seven days a week from 7 a.m. to 4 p.m.

Basically, the you pay what you want and the proceeds go to charity. Charity Navigator and some quoted experts in the story seem excited by this notion. But this seems like a major breakdown of specialization. Why should a restaurant try to be a soup kitchen and nonprofit? Does it really have the relevant expertise to organize people donating time and money, not to mention actually making back the money it takes to rent, staff and supply the store? An increase of “20% on opening day [of being a non-profit] vs. the previous Sunday [when it was still a for-profit]” is not such a shockingly high jump in revenue. Of course, I do wish them well.  Just take this with a grain of salt…

And what would be the preferred scheme? Less exciting, but more realistic: specialize! Sell tons of French food in a normal restaurant and then, if you want, give the profits to charity. If preferred, have a selection of charities to donate to. Frankly, I suspect that former Panera Bread’s former CEO is eager to swoop down on from on-business-success-high and sprinkle the shower of brilliant innovation onto the nonprofit world. But somehow a soup-kitchen/pay-what-you-want/charity/French chain cafe combo seems less than realistic.

Also: Freakonomics collects a gaggle of pay-what-you-want schemes.

Another also: USA Today has a blog about weird non-profit schemes

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How to Evaluate a Fundraising Project

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Charitable fundraising is a simple concept: collect cash for a specific cause or organization. The money is then used to pay for something that is severely needed, such as medical aid and scholarships for underprivileged students, or to simply keep an organization operational.

There are two basic questions to ask when evaluating a fundraising endeavor:

  1. What are the funds used for?
  2. How is the money raised?

For the first question, we encounter a number of dilemmas. There are a wide range of opinions around what causes are most important, what the world’s pressing needs are, and why you should care about everything from overfishing in Japan to the lack of educational resources for teachers in your local schools.

Forget what others are rallying you to care about. When deciding if funds are going to the right place, it really depends on what you are passionate about.

Once you have focused on a specific cause, the evaluation can begin. There are a whole host of Non-Governmental Organizations (NGOs), government programs, and other large fundraising efforts that have been raising and spending enormous amounts of money for the past few decades.

Bill Easterly, in his incredible book, The White Man’s Burden, provides chapters of analysis of the World Bank, the International Monetary Fund, and other large global efforts to combat global poverty. One thing that he constantly stresses is the lack of practical results from such large efforts. One case he cites as an example are malaria nets. Intended to protect children while they sleep, many nets are currently being used for fishing because the distribution is improperly managed.

What does this mean for you? Its important to note that even very large organizations do not always do things well. Executives working in New York don’t know how to meet the needs of a rural farmer in Ghana. Check that the organization you work with can prove that their efforts are making an impact. If they can’t show you what the funds are accomplishing, then why donate to them in the first place?

Unfortunately, most organizations are not able to show how their funds will directly serve their stated cause. One major exception to this rule is Charity Water. They are committed to transparency,  provide data on all projects, utilize Google Maps to show where there projects are happening, and even put their financial reports on their website for anyone to look over! There are many organizations that can learn a lot from Charity Water.

For evaluating the methods of raising money, there are a number of great online resources that evaluate large organizations. Charity Navigator is the leader in the field.

To answer our second question, we start to get a bit more technical. There are tons of metrics that are used in the business world that can be applied here, so let’s go over two basics:

  1. Expenses vs. Income: In the business world, this is what is called profit. If you spend more than you make, you aren’t doing a very good job. Especially for charitable causes, where a large percentage of your income comes in through donations (which are 100% pure profit), it shouldn’t be too difficult to be “profitable.”
  2. Fundraising Costs as % of Total Expenses: If you are evaluating an organization that fundraisers and provides direct aid, this is an invaluable metric. A good range can vary widely depending on the type of cause, fundraising models, and size of the charity. However, when fundraising costs seem to be a large chunk, such as with these non-profits on charity Navigator’s Top Ten Inefficient Fundraisers, something is seriously wrong.


Remember, there are tons of ways to go about this. These are just a few things you can quickly do to make sure that your efforts are having maximum effect. Also, if you cannot find an organization for your cause that meets the criteria mentioned above, then maybe you should think about starting your own. Just a thought.

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