The cost of driving blind

Kevin Starr

The guest editor of the last issue of Alliance, Michael Lerner (‘Light and shadow in organized philanthropy’), has this to say about American philanthropy: ‘… if the institutions of philanthropy in the US were suddenly wiped out … American society might actually be worse off.’

Might be worse off? Can it be that the best we can say about US philanthropy is that it might be better than nothing? I hope not,  but the truth is that we can only guess because philanthropists – even more than NGOs – have never been accountable for impact. The last issue of Alliance worries about the perceived arrogance of programme officers, the psychological well-being of funders, and neo-colonial attitudes towards indigenous peoples; everything, in fact, but the most important worry of all: are we creating lasting impact commensurate with expenditure?

Lerner tells us that ‘dysfunctional systems-change philanthropy represents an egregious waste of resources’, but leaves it at that. It’s as if he had the beast in his sights, but lowered his gun and walked away.

Let’s look down the barrel again: philanthropy that fails to create lasting impact looms over all the other shadows in the field – in fact it creates most of them. Not only is it a waste of resources, but it sends the wrong signals to recipients, ensuring that inefficiencies and waste will go on for ever.

Imagine what would happen if investors in the financial markets were immune to the effects of bad investments. Capital would flow indiscriminately to good and bad companies alike, and incompetent fund managers would go unchallenged and undetected. The business sector would accumulate a growing burden of deadwood, and transactions would increasingly take place on the basis of personal dynamics rather than profit and loss statements.

This is analogous to what actually happens in philanthropy yet, incredibly, there is still debate over whether we should be rigorously and consistently measuring impact. For the social investor, impact is the equivalent of profit – to ask whether we should measure it is like asking whether we should drive with our eyes open. Any organization that doesn’t measure impact is driving blind, and any donor who doesn’t ensure measurement has helped to create the ensuing wreckage.

Any organization with a clear mission and theory of change can come up with valid and useful impact indicators. Those that can’t probably need to go back to the drawing board to clarify what it is that they are trying to do.

Finding the right indicators isn’t always easy. However, we often give up too quickly or we simply pick the wrong ones. A project that distributes mosquito nets must make sure that malaria rates drop, not just count nets distributed. Microfinance institutions need to measure wealth created instead of simply tallying new borrowers and loans repaid. The key is a clear understanding of what you’ve set out to accomplish. Tracking impact is challenging and does add cost (which donors should be happy to cover), but that cost is insignificant compared to the cost of driving blind.

Measurement of, and accountability for, impact provides the only sure route out of the shadows. Real transparency depends on knowing whether each of the actors made a real difference, all the way down the food chain.

Imagine if we were all accountable for impact: status would accrue to foundations best at creating change with their resources. Ineffective programme officers could be weeded out, and those remaining would have a humbler, healthier relationship to the grantees whose results they depend on. Resources would go to the organizations most effective at change, eliminating much of the posturing and bickering that plagues the non-profit world. In sum, the sector might finally function like a healthy, efficient market.

Chet Tchozewski (‘Intuition, trust, and a great river of money’) is right that the process of resource allocation is maddeningly inefficient and often adds little value, but his prescription – handing it over to a clique of ‘experienced and creative programme officers’ to distribute according to intuition – is wrong. We don’t need a river of money directed by the intuition and opinions of a few powerful figures. We’ve already had that, and the result was something that might – and only might – be better than nothing. What we need is a river of money guided by high-quality data to flow efficiently and transparently to those who’ve demonstrated the ability to create lasting impact. The solution is not to abandon measurement, but to do it better.

Trust, without a real basis for it, does a disservice to all involved. One man’s sage intuition is another’s foolish hunch, and the only way to know the difference is to measure it. The ultimate form of transparency is accountability for impact. If we want to shine light into philanthropy’s shadows, we must ensure that we measure impact and hold ourselves, not just our grantees, accountable for it.

Kevin Starr
Managing Director, The Mulago Foundation
Director, The Rainer Arnhold Fellows Program

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