06 Mar. 2014 | Comments (0)
Some skiers are better than others. Some singers are better than others. The same goes for teachers, nurses or even firefighters. So it seems reasonable to suppose that some companies are better at philanthropy than others. But how do you tell?
Skiers can easily see if they beat their opponents, and surgeons see if patients live or die, but success in philanthropy is less evident. Whereas businesses may get feedback on performance against the “internal goals” of their giving (take reputation and staff engagement, for example), they don’t on the “external goals,” such as finding great organizations or improving literacy. Businesses can’t rely on the nonprofits they support to tell them, because those nonprofits don’t dare bite the hand that feeds them. Steve Jobs cited the difficulty of knowing if you’re giving well or badly as the reason he didn’t give much at all. Fortunately, it is possible to assess those external goals—and not terribly hard. I discuss various tools that may help almost any donor to understand their performance in a white paper released by Giving Evidence recently. The tools may seem rather obvious, but they have proven useful to individuals, companies, and foundations who give to nonprofits. They are:
- Monitor the “success rate” (or the proportion of your grants that do well, do alright, and fail): Although clearly the definition of success varies between grants, presumably each one is made with some purpose. This tool simply asks how many succeed in their own terms. It’s unashamedly a basic measure, but it’s hard to argue that a company is giving well if barely any of its grants succeed. We’re not saying that every grant should succeed: many funders sensibly support experimental or exploratory work. However, like venture capitalists, donors should expect some failures but also have some system in place for noticing which grants do fail and for enabling learning from the patterns. The Shell Foundation (attached to the energy company) used this measure to triple its success, from a 20 percent success rate to eventually 60 percent. After a few year of low success rates, Shell Foundation changed its model: whereas it had been making many, small grants on a reactive basis, it started now to make fewer grants, each larger in scale and became more engaged with each of them. The success rate picked up. Shell Foundation intensified the change, which increased the success rate further.
- Track whether “the patient is getting better” (e.g., whether biodiversity is increasing around the lake, or whether malaria is becoming less prevalent): This of course indicates nothing about why anything is changing or the donating company’s contribution. Nonetheless, it’s imperative to know if the problem is worsening—in which case, we might re-double our efforts or invite other funders in—or if it’s gone away. Often, data from public or commercial sources shows progress on a funder’s goals.
- Measure the costs created for charities (and others) by the funder’s application and reporting processes: These costs can be huge. As a charity CEO, I had some grants for which the donor’s processes consumed 90 percent of the money. It can be even worse: a physicist at Colombia University, for example, calculates that some grants leave his lab worse off, and we’ve heard stories of application processes which cost twice the amount eventually given. Grantees may make great progress despite a meddlesome funder. The avoidable costs from application and reporting processes in the United Kingdom alone are estimated at about £400 million (~$667 million) every single year. BBC Children in Need, a large U.K. grant-maker attached to the broadcaster, has examined its process and found ways to make savings. Other large donors can too.
- Hear what your grantees think: When I ran a charity, I often saw ways that corporate (and other) donors could be more helpful, but I never told them because the stakes were too high—we couldn’t risk offending people whose financial support we may need in future, and the same goes for other charities. So the learning is lost. Yet, listening to grantees and beneficiaries has brought great benefits in medicine and social services—and to many philanthropic donors.
- Clarify what you’re learning, and tell others: Funders do publish information about the impact of their donations, but it’s mainly about their successes. According to epidemiologist Dr Ben Goldacre, in medicine “publication bias”, in which positive stories are disproportionately likely to be shared, means that “the true effects of loads of prescribed medicines are essentially unknown.” We are currently working with a corporate foundation to clarify and publish the “whole truth” about how an innovative program fared, and I look forward to sharing the findings with Giving Thoughts readers in the near future. Tales of failure and challenges, however inglorious, teach us a great deal.
Perhaps “measuring impact” is too hard and too off-putting, and we should all instead talk about “understanding performance.” The tools in this white paper help with that.