The Inneffecient Restriction

March 21, 2012 • Blog, Development • by
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Restricted giving should be outlawed. I know, BOLD, right? But come on, since when do we think the professionals don’t know how to allocate resources? If you can’t even trust an organization to do that, should you really be giving them money? Restricted giving is essentially a selfish act, saying that you the donor knows more about the proper allocation of resources than those running the organization.

If you are unfamiliar with the concept, restricted giving is when the donor specifies how their donation should be spent. For example they might specify that it go towards a certain program or cost. We would never do this in the for-profit world, why must non-profits deal with this? Could you imagine telling a company that you would buy their product as long as the income was allocated to production but not to marketing because you felt that was wasteful.

What are your thoughts? Do you hate restricted giving as much as me? If not, why not?

Buy Outcomes

February 6, 2012 • Blog, Development • by
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Buy outcomes. We do it all the time. When you invest your money in a company, the outcome you most generally want is for that company to succeed and make you money. If you lose money on an investment you are upset because it was not the outcome you thought you were purchasing when you invested.

With philanthropy that construct should remain, the outcome should be different. When you give to charity, do you think about the outcomes you are buying? Do you compare between different organizations to see who will give you the most outcome per dollar donated or who is achieving the most impact? I’m not talking about anecdotes and stories, I’m talking about asking who is actually solving the problems they set out to address?

Last week I saw the “Buy Outcomes” banner raised in the most surprising place, Christianity Today. They had a great article in the February issue (unfortunately not online) entitled The Best Ways to Fight Poverty - Really. It was written by Bruce Wydick, a professor at the University of San Francisco and visiting professor at UC-Berkeley. In the article, Wydick contacts a range of economists and has them compare various poverty interventions based upon their impact, success, and expense. It’s a remarkably cogent article aimed at a general audience.

It’s good to see that churches, a large source of philanthropy, are beginning to turn their eyes towards impact.

But we can all learn this lesson. Don’t just give your money away, buy outcomes.

The (Ugly) Math of 50-50 Fundraisers

January 16, 2012 • Development, Economics • by
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One of the readers of the Freakonomics blog asked a question about 50/50 fundraisers. If you are unfamiliar, these are fundraisers where you buy raffle tickets and the organization keeps 50% of the money raised and gives away the other 50% to the winner of the raffle. Freakonomics reader Melissa Belvadi writes:

This strikes me as an incredibly bad deal, but a bit complicated to explain why, as it contains 2 components:

  1. As a gamble: poor expected value. I am not sure how to calculate this, but from my experience in Las Vegas where slot machines boast being set to 97% return ratios, a gamle where 50% goes to the “house” seems unlikely to be a good EV.
  2. As a charitable donation: poor “program ratio” - at most, 50% of my donation will go to the “program” (charitable cause) - this is considered a very poor ratio in the philanthropic world where typically 60% is the bare minimum acceptable - the BBB requires 65%

I completely agree with the above analysis. I think that 50-50 raffles are not great gambling or philanthropic decisions but they are obviously popular for a reason. To understand why I wonder if it helps to think about it from the perspective of the purchaser.

A person who purchases a lotto or traditional raffle ticket certainly hopes to win, but I don’t think there is any expectation that they will win. People might not be great with statistics but they understand that the odds are stacked against them. So win they think about their future they face two scenarios: the rare chance they win and become wealthy; the likely scenario though is that they will lose and be out their money.

In a 50-50 raffle the two outcomes are changed. There is still the rare chance that they will win but now if they lose they’ve still done something good with that money so it softens the blow some.

Does your organization do a 50-50 raffle? Do you participate in them? Tell me why or why not.

WaterForward: An Experiment in Social Giving

October 31, 2011 • Blog, Development, nonprofit, Philanthropy & Giving, video • by
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It’s long been known that, for some, the motivation to give to a cause is that others will know about it. That’s why everything from buildings to hallways to benches are named after donors and its why we tweet and Facebook our favorite causes. The innovative water provider charity:water is bringing this tradition into the 21st century with WaterForward.

The idea is simple. Someone pays $10 to get you into the WaterForward book which can be viewed online and will be printed after every million members. You get a message that you’ve been placed in the book and you are asked to pay it forward by buying a spot for your friends for $10. They will then be invited to do the same. The only way to get into the book is for someone to buy your spot (though initially there are some other ways to get invited).

I think it is a tremendous way to raise awareness and money at the same time while literally making your fans your development team. This is something that charity:water has always excelled at.

After a quick perusal of the book its hard to tell how well it is catching on but often times these social movements need to reach a tipping point and when they do they’re unstoppable.

To learn more about WaterForward read this article from FastCompany and watch the video below.

 

 

How WaterForward works. from charity: water on Vimeo.

Activities vs Outcomes

July 19, 2011 • Blog, Development, Philanthropy & Giving • by
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Activities are the things we do. Outcomes are the things we produce. Outcomes are more necessary than activities and today’s donors don’t want to just fund activities, they want to purchase outcomes.

An activity is handing out food at a food pantry. An outcome is helping people move from food dependence to food independence.

An activity is running an after-school basketball league. An outcome is increasing the odds a student ends up in college.

Activities make up the day to day life of social entrepreneurs and nonprofit leaders. Outcomes are why they started the organization to begin with. Read More…

Why Limiting Charitable Deductions Might Actually Help Charities

July 11, 2011 • Blog, Development, nonprofit • by
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The Philantopic blog had a great post today about the Obama administration proposal on limiting itemized deductions on charitable giving. It quoted a survey by the Association of Fundraising Proposals that found that development officers expect to see at least a slight drop in giving if the proposal goes into effect.

As a University of Chicago trained economist, this make sense. As it becomes more expensive to give, people will do less of it.

But is it a wholly awful scenario? Read More…