Tag Archives: Money

Thinking Velocity Vs. Efficiency

Image representing GlobalGiving as depicted in...
Image via CrunchBase

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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