Giving poorly can be worse than not giving at all

 

Paul Penley

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Paul Penley

Paul Penley

What if your donation to fight human trafficking paid the salary of a human trafficker? What if your donation to support widowed law enforcement families went to a felon’s bank account? What if your child sponsorship monthly donation and letters never helped the girl in the picture? What if you gave money to loan to a struggling entrepreneur in Africa that was actually embezzled by loan officers? In the last year, I have seen each one of these nightmares come true.

Giving is not ‘plain and simple’

I’ve sat with foundation principals and everyday donors who argue that good intentions are enough. You identify an opportunity that resonates with your heart and take action. I wish it was that plain and simple. I wish the only homework required to give well was finding a cause you believe in. But that’s just not the truth.

As a non-profit performance analyst, I’ve identified a litany of performance and organizational health indicators. I’ve crafted program success indicators for specific sectors and geographies. ‘Best practices’ in governance, financial management and accountability have risen to the top. This experience has given me first-hand knowledge of both the best models and the worst-case scenarios.

In each of the nightmarish examples given above, my team and I were able to identify warning signs in our due diligence process. We put the strengths and weaknesses of each organization (purposefully not named here) on the table for foundation boards and philanthropists to review. Sometimes the warnings signs caused the foundation to walk away. Other times the philanthropist stuck with the group because of a charismatic leader or a captivating marketing campaign around the vision. That giving was worse than not giving at all.

Avoiding ‘avoidable mistakes’

Why do I remind you of how giving poorly can be worse than not giving at all? Because we can do better. In the words of Joel Fleishman and Tom Tierney, we can ‘avoid “avoidable mistakes”’. Non-profit analysts and foundation program officers have learned a lot during the last century of active American philanthropy. We know what green flags and red flags look like in non-profit organizations.

‘Skimping on due diligence will almost certainly come back to haunt you,’ say Fleishman and Tierney in Give Smart. I wholeheartedly agree. The four examples above are recent proof from the last year. Giving comes from the heart, but it must go through the head. There are too many written and human resources, too many online databases and giving associations, to excuse uninformed giving that funds ‘avoidable mistakes’.

Giving well is better than giving all

A recent editorial piece from Jan Masaoka at Blue Avocado questioned the growing size of the ‘Philanthropic-Consultant Industrial Complex’. Her concern is that consultants and foundation program officers are proliferating, rather than directors of on-the-ground service providers. Their proliferation is a sign of dollars being directed away from non-profit general funds. Her concern raises the question: does the difficulty of giving well to high-performing charities justify re-directing money to non-profit evaluators and capacity builders? Or is all that money better spent on donations to groups that don’t receive such personnel-intensive due diligence?

In my opinion, spending 5% of your annual charitable contributions on getting the other 95% right is a smart and necessary move. Giving all your money to an under-performing organization is not better than giving 95% to the cream of the crop. Giving effectively is better than giving more. Unfortunately, most givers don’t understand this reality because so few carefully track the impact of what they gave. The dark secret of philanthropy is: many of us don’t want to know what happens after we give, for fear it doesn’t meet our hopes and dreams.

Resources for giving well

We can overcome the tendency to make donations blindly. The resources exist to do valuable homework before you give. Foundations can swap grantee experiences by getting involved in the Association of Small Foundations, the Council on Foundations, Grantmakers For Effective Organizations or the Philanthropy Roundtable. Individual givers can find reviews of a number of charities on platforms like GiveWell and GreatNonprofits. Or you can put in a request to get the 120 most critical data points on any organization’s health and performance at Intelligent Philanthropy.

We can give better. We can give from our hearts and through our heads. We can tap in to the proliferating resources that exist to give intelligently. We can avoid the ‘avoidable mistakes’ and fund the cream of the crop. It’s worth the extra effort both for you and the beneficiaries of your next gift.

Paul Penley is director of research at the philanthropic advisory firm Excellence in Giving and creator of IntelligentPhilanthropy.com

Tagged in: Accountability Best practice Charity analysis Due diligence Impact measurement


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