In my work, I’ve found that foundations and major donors can gain useful insights by analyzing three fairly simple types of information.
Warren Buffett notices a feature of philanthropy that makes it more difficult than running a business. With philanthropy, he says, “you can keep doing something that doesn’t make any sense and there’s no playback from the market”. So how do you know if you are giving well?
First, invite that “playback from the market” by soliciting views from the organizations that you support.
One example I’m aware of involved a wealthy donor who made a substantial grant to a charity. When I talked to that charity, it turned out that they couldn’t plan properly because they didn’t know when the grant installments were coming. This was astonishing — there was a schedule — but somehow this hadn’t been communicated to the charity.
Another example here is the practice of “restricted donations”.
Many donors only want to fund the glamorous stuff, and attach conditions to their donations. But if those donors listened to the organizations that they fund, they’d hear that this creates a costly administrative nightmare for the charity. I’ve heard of a donor who specifically funds toilet paper in London museums and galleries on the simple grounds that it is what they said they really need.
The second analysis looks at how many of your grants succeed, and what affects that success. Do large grants work better than small ones? Do long grants work better than short ones? Every donor makes decisions about size, duration, and so on, and data can reveal which decisions are best in particular circumstances.
The third analysis looks at the transaction costs created by your processes — both for you and (more crucially) the organizations you choose to help.
Read the full article about three ways to tell if you’re giving effectively by Caroline Fiennes at Giving Evidence.
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