But how? There are three key areas
that can create a domino effect of
improving charitable giving.
1.HONESTY There must be greater honesty about charitable
giving. Although the media often reports on fraud and
waste in the charitable world, such instances are not
the most problematic lack of honesty. The larger issue
is more common and very subtle. For example, today’s
dominant paradigm of giving is that donors give to
the causes they care about and have personal ties to—
the university they attended, the illness that touched
their lives, or the nonprofits promoting the type of art
or music they enjoy. This type of giving itself is not
dishonest, but the fact that so few people acknowledge
that giving based on the personal preferences of the
donor dramatically reduces the impact of the donations.
While these are “good” causes, this type of giving is very
different from trying to make the biggest dent in the
causes that are most effective at helping others.
Is philanthropy about helping those in need or
pursuing the personal passions of the donor? If it is
the former, then shouldn’t a central tenet be to try to
provide the most help possible? In this case, such donor-driven strategies should be widely regarded as failed
Being honest is not just about not lying, but also
requires a certain level of frankness. Not every good
cause is equally good, and not every donor is equally
deserving of praise. As long as the philanthropic
community views those who donate millions to their
favorite opera houses to be as generous as those who
help the poorest people in the world, there is a lack of
honesty. We should reserve the highest public praise
for donors with the most altruistic motives and better
understand our own reasons for giving. This type of
honesty would lead donors to be less whimsical and
more thoughtful about their giving choices.
a good measure of performance—just because a charity
only spends 10% on fundraising and overhead costs
doesn’t mean the programs funded by the remaining
90% are effective. Even among the charity rating agencies
that have advanced beyond pure financial measures of
performance, most give their top ratings to hundreds of
extremely different charities, effectively watering down
the value of their ratings and expressing little conviction
about what really works best. These rating agencies can
be counterproductive to their own missions, as they give
donors a false sense of confidence when providing high
ratings for charities that may not be very effective.
There are only a small number of charity evaluators
that present their views of the best of the best charities;
the most notable are GiveWell and Giving What We
Can. More of these evaluators, as well as a higher profile
for the existing ones, would go a long way to make
charitable giving more effective. Such charity evaluators
will develop and thrive as donors express more interest
2.EVALUATIONS There must be better ways for donors to evaluate
nonprofits. Although there are several charity rating
agencies, their weaknesses are often so glaring as to make
them virtually useless. Most focus almost exclusively on
financial metrics such as the percentage of donations
going to fundraising and overhead costs. This is far from
3.RESPONSIBILITY Donors must take more responsibility for the
impact of their giving. According to a study by Hope
Consulting, only 35% of donors do any research before
giving, and only 9% do more than two hours of research.
Instead of giving with all “heart” and no “head,” a better
balance is needed. Donors must think about not just
what causes tug at their hearts, but also what are the
greatest problems and where are charities most likely to
make an impact. The irony is that as donors make their
giving decisions based less on emotional appeals and
more on evidence about what works best, the increased
conviction they have in their giving will ultimately
provide even greater emotional satisfaction.
A reinvented, better world of philanthropy will not
happen overnight. But it can happen gradually, as one
donor at a time takes responsibility for their own giving.
Eric Friedman is an individual donor who has spent several years trying to understand how to maximize the impact of his giving, including traveling to Africa to see his giving in action. He is also an actuary. He graduated from Stanford University with majors in mathematics
and economics. He lives in Oak Park, Illinois.
Reinventing Philanthropy: A Framework for More Effective Giving will be available for purchase in September 2013 from www.amazon.
com, www.barnesandnoble.com and through all major booksellers http://www.reinventingphilanthropy.com