What Informs Donation Decisions?

Give is hoping to create a social exchange. Ultimately, it would stop evaluating NGOs using specific criteria to determine whether they should be listed on the Give site and would function more as typical stock exchange – listing if the group meets certain minimum criteria and leaving ratings to others.

One of the hopes in creating an online market place is that with greater information available through the internet, donors will use this information to educate their charitable decisions so that they do not rely on proxies for outcomes.

What I mean is that they don’t look at some statistic like number of schools built but question how the schools operate, whether they are they right type of schools, whether the children are getting an education that allows them to get future jobs, or higher education, or whatever the end result sought.Unfortunately, what seems to be happening is that internet is just reinforcing the practices of non-online donating. People still rely on images of starving children, etc. and that sways donating decisions.

If that is the case, then I wonder how useful a reporting framework will be? The key it seems to me is not convincing NGOs of why working through a process that clearly articulates outcomes sought and what needs to be done to get there is right, but instead convincing donors that they need to do more and need to take more responsibility. They need to demand more information and they need to really think about what they want to accomplish. While this might work when holding the hands of certain individuals or companies, I don’t know how this works without holding their hands and acting as some sort of “charitable” wealth advisor.

What would be useful is some sort of survey about what donors want from their donations. Do they want to actually have a certain impact, regardless of publicity or “graphic” measures, or do they want to engage in a process that sees slow but (hopefully) definite social change. I don’t mean for this to be full of judgment (which it definitely reads as) but I don’t know. I would be interested in any good donor surveys that people could recommend. I’ll post a summary of the ones I have and any I get soon.

Acknowledging Failure

One of the key things that we hope that this Initiative can accomplish is to “de-penalize” failures. Currently, if an organization fails to reach a stated goal and brings that to either the donors’ or the social marketplace’s attention, it is penalized for doing so. The problem is most significant when looking at donor decisions. Donors may question the failure – often without waiting or looking for explanation – and decrease or shy away from future support. It is also likely that there will be a greater emphasis on failures as opposed to successes.

Although questioning failures is healthy and necessary, the unfair stigma attached to them often results in NGOs neglecting to mention or even discuss its failures. A simple glance through NGO annual reports will confirm this. It is our hope that through this reporting framework that at least some of this stigma can be removed and NGOs can be encouraged to more openly discuss failures.

The first step in changing this behavior is getting NGOs to correctly identify their theories of change. If they successfully identify their theories of change – not just as a mission statement, but rather, as a statement of desired outcomes and how they directly plan to achieve these outcomes – then they can more easily identify the perquisite conditions that will achieve these outcomes. The key is to identify those prerequisite conditions that if completed or achieved would logically lead to the desired outcome. If this is done, then the prerequisites could serve as a “goals” or “to do” list for the NGOs. More importantly, the prerequisites could also serve as performance indicators. One would be able to see how well the organization was doing by seeing how many of its prerequisite conditions it was satisfying. And unlike, say knowing how many school lunches an organization provided, a donor or stakeholder or anyone else interested in the NGO could see how the NGO was doing in the larger picture – how many lunches it provided, along with whether they were healthy, whether they were helping kids be more engaged in school, etc.

A failure of one of the prerequisites, then could be judged in terms of its impact on the desired outcome and the how well the other prerequisites were being met. We would hope that NGOs would be more likely to identify these failures and explain their impact. And correspondingly, donors would see any failure with the proper perspective.

This isn’t likely something that will happen all at once, and probably not at all in the beginning, but it is essential to a proper dialogue between the donor and the NGO and any reporting framework that doesn’t address this issue would have a significant hole.

My guess is that it will take a lot of explaining to both donors and NGOs as to why such reporting is essential and why without it neither is likely at to be able to fairly measure or communicate success. I’m just not sure how we do this yet (other than explain that it is needed and hope everyone agrees).

First Steps: Selecting and Soliciting NGOs

Once in Mumbai we started be selecting specific children’s related charities that we hoped to work with. We carefully chose this set from those that were already listed on Give’s site because: (1) we could be assured that they had already met and were continuing to meet Give’s demanding criteria; and (2) they would be open to working with us. It was even more important because given the one-year time frame, and the six-month period in which we hoped to have a pilot group ready to take to donors. With such a tight time frame for the pilot group, we really benefited from Give already having many of the documents we needed to review for our diligence and could build on Give’s relationship to ensure an easier time completing any additional diligence.

Once we identified potential pilot partner NGOs, we drafted an explanatory email and a document explaining the goals of the reporting and learning framework to go with the prospectus. With this package of documents, we began to solicit partners for the Initiative. (Attached is the sample template we used to solicit NGOs through email and the document summarizing the goals of the framework.)

We were surprised by the overwhelming interest as a great number – to date (a week after sending the initial emails) approximately 60% of NGOs expressed great interest in the Initiative (and even one that heard about it through another NGO). What is even more exciting is that we demanded that the boards of the NGOs that wished to participate discuss the Initiative, approve participation, and be willing to participate. All of the participant NGOs had done so and many were ready for their entire boards to participate in the workshops.

Another pleasant surprise was that the NGOs really seemed to understand that the real carrot in this process was not the money they could hopefully see, but the more dynamic and engaged relationship that they could have with their beneficiaries and donors. Whether this is true or just some clever chicanery, we’ll have to see. But it would surprise me if it wasn't true.

On the other hand there does seem to be a lot of attention to “revenue generation” and concern with financial accountability. One of the interesting things about NGOs operating in India is that they – like everything else in India – are greatly influenced by India’s new found prosperity. Many of the leaders of these NGOs have or had significant experience in the corporate sector in areas like banking, finance, accounting, and consulting. As a result they are very well versed in the corporate dialogue and are tuned into the movement to implement market ideas into the charitable world. In addition to financial accountability there is also a lot of discussion about “adding value”. (I’m still not sure whether all of this market discussion is entirely well-suited for the NGOs. There seems to be some conflict with “adding value” and doing charitable work. Especially with young organizations, the “value adding” constraints may inhibit innovative work. Also for all the discussion on accountability, I’m not sure how much extends beyond financial accountability into accountability in terms of effectively reaching outcomes or effectiveness as seen through other stakeholders’ and beneficiaries’ eyes.)

Nevertheless, I think it is probably this experience that explains why so many understand transparency and why they should be accountable and responsible to their beneficiaries. (Of course, our pilot group is comprised of Give listed organizations – and therefore – already have to be transparent with information. But there seems to be a deeper understanding of why that could be helpful.)

There also seems to be an increasing recognition that accountability means more than financial accountability. What we are not sure of yet is how deep this understanding is. Groups like Give and CRY recognize the need for accountability to be more than financial and for it to capture effectiveness, and CRY is leading an initiative to try to educate and train auditors as to how to evaluate NGOs and how that is unique from corporate auditing. I know that CRY and Give had previously discussed other plans to make such a program national, but I don’t believe that it has taken off yet. Hopefully, we can contribute to that movement through our work with the CMI.

Starting the CMI

The Charitable Measurement Initiative is a collaboration of people and organizations that are deeply committed to the belief that social change organizations can mobilize significant new and better investment if they are able to implement a measurement reporting framework that credibly communicates their real impact to donors. The Initiative is directed by GiveIndia (www.giveindia.org) and calls on the resources of pilot program partners Keystone Accountability, (www.keystoneaccountability.org), Global Giving (www.globalgiving.com), and New Philanthropy Capital (www.philanthropycapital.org), as well as many other organizations committed to social welfare.

Both Alex and I started on this process when we decided that we wanted to combine our previous experiences in humanitarian and charitable work with our current work as corporate lawyers. We were hoping to find a group in India that was looking to incorporate capital market/securities like concepts in reporting and analysis to create more valuable and transparent information.

Thankfully, we were put in touch with GiveIndia, they discussed the idea of running a pilot program implementing the Keystone framework developed by Keystone Accountability to see if we could help organizations more clearly articulate the outcomes they wanted and better communicate their actual results to donors. This was exactly what we were hoping to do and gladly agreed to donate a year of time to making this work.

While we were in London, Give put us in touch with Keystone Accountability and New Philanthropy Capital. After many meetings throughout the spring and summer, we arrived at our joint creation – the Charitable Measurement Initiative – and a plan as to how we would seek to help NGOs in India become more transparent, responsive, and efficient, as well as helping donors become more engaged and involved. Our initial prospectus, summarizing our thoughts, the reasons for the NGOs we selected, guesses at a time frame, and general plans is attached.

Dedication

Although we have decided to not use the names of specific people other than ourselves in this blog, we wanted to thank the many individuals at Give, Keystone, NPC, and CRY who have given us advice, support, and the opportunity to work with them on this exciting project. Clichés aside, we are deeply humbled by their commitment and are honored to learn from them.