Tuesday, November 13, 2007

Beyond Donor-Nonprofit Matching and on to Nonprofit Evaluation

GiveWell is now up and running--or at least in preview mode--the latest, and certainly one of the most complex, in charity evaluation websites. Whereas Charity Navigator evaluates nonprofits strictly according to the financial information reported in IRS 990 forms, which the folks at GiveWell find to be misleading and therefore an incomplete measure of a nonprofit's effectiveness, GiveWell instead acts as a nonprofit granting agency and uses the application process to collect detailed information about organizations.

We review program activities, technical reports, and most importantly, results. How many lives has a charity changed, how has it changed them, and what's the evidence that they can do it again?

The result is that GiveWell certainly is not the most comprehensive of sites in terms of numbers or types of nonprofits (only four agencies are recommended under the Employment Assistance section), however, each of the few nonprofits listed have been hand-vetted with detailed information about why they are considered to be the most effective nonprofits of their kind.

I like this approach because it ensures that nonprofits are treated as individual organizations, requiring a complete analysis, rather than measuring them against one universal metric. I agree with the folks at GiveWell that it is not necessarily desirable to have the vast majority of donations go towards programming--without a solid infrastructure, any nonprofit will fail.

So far GiveWell only has reviews and recommendations compiled for charities that raise incomes (with a focus on NYC), however, upcoming will also be reviews and subsequent recommendations for charities that save lives, improve education, fight global poverty and provide child care.

But GiveWell isn't the only site of its kind, using a different system of metrics than just the 990 to evaluate charities. The Better Business Bureau Wise Giving Alliance reports on how well charities conform to the BBB charity standards.

The JustGive Guide "contains over 1,000 charities in 19 categories who meet certain criteria." These criteria include having "received funding from the top 100 foundations," "have reasonable fundraising and administrative costs" and are "recommended by experts."

The American Institute of Philanthropy also grades charities according to the following criteria: High grades go to charities that put
75% or more towards program cost while generally spending $25 or less to raise $100. These groups also receive an 'open book' credit from AIP for willingly sending the financial documents we request.

[Note: the AIP does not appear to list or grade museums.]

Newdea is coming at the issue of nonprofit evaluation from a slightly different angle, focusing on the assumption that the common bond between nonprofits and their funders is the notion of impact.
Through Newdea, the entire philanthropy community can connect, demonstrate, validate and measure the impact of their efforts. For the first time, everyone involved can actively participate in ensuring the same goals. Donors aren’t just writing checks anymore – they have a genuine interest in their investment and in using their influence positively. Charitable organizations no longer have to waste time and resources on operational redundancies, inadequacies and external pressures. Program staff can spend more time on the most impactful work and less time on administrative distractions. And those in need receive more of the help they need and can lead improved lives.

It's a little difficult for me to parse how exactly Newdea goes about doing this, but from what I can see, unlike the other sites where outside forces are evaluating nonprofits, this platform allows nonprofits to submit their own evidence of impact and have direct control over the information being put forth about them.

What is particularly interesting to me, though, about all of these sites is the idea that simply matching donors with potential recipient charities is not enough, that it is crucial to ensure that donations will be put to the best possible use in order to create the greatest good. In theory, I like this idea quite a bit, but I suspect that in practice, there will still be some kinks to be worked out in distilling the perfect way to truly gauge the effectiveness and worthiness of a nonprofit.

My guess is that evaluation sites such as these might not have much use or impact for those donors who already know where they want to give their money--but are using a third-party site simply for the ease of online giving--with the utility in these sites being primarily for those donors who are interested in particular issues but are still looking for a specific agency to fund.

But I could be wrong. Long-time supporters of particular organizations may use at least the larger of these evaluation databases to see how their favorite charities stack up--and from there, they may decide to search for new ones with similar missions but higher ratings.

In that case, I hope that donors will recognize that there is no standardization or one single, proven metric for charity evaluation and that they bear that in mind when they look up their favorite organizations. If you have had a good relationship with a particular organization and are satisfied with what it is achieving, does it matter how one website rates it?


Miko said...

Recent developments within GiveWell are disheartening. It's co-founder and CEO was discovered promoting the organization under fraudulent identity. Subsequent looks into the business model and the group's philanthropic method are not encouraging.


Allyson Lazar said...

Hi, Miko:

Thanks for this. Yes, I was aware of the recent "lapse of judgment" on the part of GiveWell co-founder Holden Karnofsky, and while this certainly does raise questions about how GiveWell is run and their long-term strategies, I don't feel that this actually negates the idea behind GiveWell. I personally am not wed to any one particular charity evaluation service, rather, as a researcher and trends analyst I am just happy to see that there are groups out there exploring different methods for nonprofit evaluation. Evaluation and metrics have been a very hot topic in the nonprofit world this past year and yet somehow there are still very few groups that are looking beyond the IRS 990 Form as their criteria and in that respect, I still appreciate what GiveWell is trying to do. What also gives me hope for the future of GiveWell is that, lapse in judgment or no, there are some strong and serious members of the philanthropic community on the GiveWell board and I feel confident that they will address this error in a satisfactory manner. In the meantime, I am eager to see the rise of other organizations that, like GiveWell, seek to evaluate nonprofits in a thorough and comprehensive manner.