Philanthropic Analysis Paralysis

Face it, many of us “wonks” (which I lovingly use) in the philanthropic sector have become enamored with being able to measure things. We also like to complain a lot when we can’t measure something.

Lately, all of the talk has been on the various ways to measure an organizational outcome. Under Ken Berger’s leadership, Charity Navigator has set a new course and begun studying ways to incorporate measurement of outcomes into their charity rating system. I applaud Ken and Charity Navigator and believe that for too long, we have not been focusing donor attention on the entire picture. It is inherently good to ask the question, “How effective have you been at actually achieving the thing we’ve been giving you money for?”. To be able to create mechanisms that address that question could potentially have a huge impact and be a game changing moment for the nonprofit sector.

In my work as an investment adviser, I choose investments to put money into. For the most part, I frankly don’t care how much a company spent on advertising expenses or other overhead costs, I care about their earnings. I care about their dividend. I care whether the company is growing or contracting. I care how much market share they have relative to their competitors. These and other things tell me how healthy a company is. While it is useful to compare the overhead of Home Depot to Lowes, it is pointless in my opinion to compare it to Johnson & Johnson if you are interested in the metrics of the home improvement business. They do completely different things. Measuring the right things is something that we’ve done a poor job at and it seems like good people are committed to making real improvements to how we track effectiveness. This is long overdue. Have we missed something along the way though?

When I first started becoming interested in philanthropy as part of my business, I wanted to help charities tell the planned giving story. When I went to become a Certified Financial Planner™ Professional, I saw the tax wizardry of Charitable Remainder Trusts and was amazed when I saw that one could potentially leave more money to heirs through the use of these and other kinds of charitable vehicles. I thought, “Wow, why doesn’t everyone know about this?” I felt that many more people would give to charity if they knew what kind of tax benefit they could get and that if heirs actually wound up receiving more in the process, well that would certainly be a win for everyone but the government. Over time, I learned that while many people do give for tax reasons, more give because they are inspired to do so for one reason or another. They give from their heart. They give to give something back or to make a difference.

While the measurement issue is a critical one, let’s not lose sight of the fact that we also need to be focused on showing people the way into philanthropy. We need to be creating opportunities to make new philanthropists by showing the world that we all make a difference and have the ability to do so. I discovered philanthropy. A business coach asked me to write my own eulogy. After a few minutes of sitting there, staring at him, and thinking about the question, I answered. I said, “I guess I would want people to say I made a difference…” The rest is history.

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5 Comments

Filed under ESTATE PLANNING, FINANCIAL PLANNING, FOUNDATIONS, NON-PROFIT & CHARITY, SOCIAL ENTREPRENEURSHIP

5 responses to “Philanthropic Analysis Paralysis

  1. Thanks for the kind words my friend. I agree with you as well that we need to focus on getting more people to see the value in their lives in becoming social investors (donors with their eyes wide open).

    Ken

  2. Michael Johnston

    “…the way into philanthropy…”

    “…showing the world that we all make a difference and have the ability to do so…”

    As a young person and a traveler I think that a major potential benefit of lots of measurement in philanthropy would be showing young people and people from different places that it actually helps, and what exactly that means. From where I am sitting (which admittedly has a quite limited view) better measurement and more talk about it would be a great help in planning a life where hopefully my obit says “he made a difference.” In other words, more measurement in philanthropy has positive externalities for all us kids who want to save the world.

  3. Spot on, Rich! Now we just need more people to get the message, or perhaps to write their own eulogy. As it did for you, I’m sure legions of people would truly have an Aha! moment if challenged to go through that exercise.

  4. Measuring outcomes for charity donations is an important metric the donor should know about. Very interesting, and I agree.

    I’d like to mention a great opportunity for philanthropy here if I can.. There is a relatively new non-profit organization called United Prosperity (www.unitedprosperity.org). On their site you can browse the profiles of entrepreneurs in developing countries living in poverty who need a micro loan to help start or grow their business. Anybody can give however much they’d like as a loan guarantee, and choose who they’d like to support. UP then issues the guarantee to a local bank, which issues a much larger loan to a local MFI, which then gives the loan to the entrepreneur. Once the loan is repaid, the guarantor actually gets their money back! At that point, they can choose to support another entrepreneur if they’d like.
    Guarantors can check for updates on the entrepreneur’s profile on the website.

    So, in the spirit of measurable outcomes, this is a great opportunity! What do you think?

  5. In the spirit of measurable outcomes, I’d like to mention a great opportunity for philanthropy. With United Prosperity (www.unitedprosperity.org), you can help alleviate poverty in the developing world by guaranteeing micro loans. You can browse the profiles of entrepreneurs on the website, and give as much as you’d like. You choose who to support, then United Prosperity issues that guarantee to a local bank, which then issues a much larger loan to a microfinance institution, which then distributes the money to the entrepreneurs.
    You can follow the entrepreneur’s progress on their profile on the website, and once the loan is repaid, the guarantor gets repaid!

    So, through this person-to-person loan guaranteeing model United Prosperity has created, you can help alleviate poverty directly, and read about the results.

    Thoughts?

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