Making Every Philanthropic Dollar Count
Jenna Valentine and her husband wanted to give to charity for the holidays, but they also wanted to be sure their giving made a difference. And that’s where the problem was.
“I was really frustrated,” says Valentine, a stay-at-home mom from Palo Alto, California. “I looked locally first, but there’s no easy way to know which organizations are really good at what they do. I don’t have time to look at annual reports or measure outcomes.”
Valentine posted her problem to her online mothers’ club and learned about a recently launched Web site called Philanthropedia. At the site, she was able to read the advice of experts in three giving areas – climate change, education, and Bay Area homelessness – and learn which organizations they considered most effective. Comfortable that she knew which ones deserved her family’s money, Valentine selected her favorites from among those recommended and made her donations right on the site.
“For people like me, who want to do something and want it to be easy and effective, Philanthropedia was very helpful,” she says.
Multiply Valentine’s quandary by the estimated 40 million individuals in the United States who give to a charity each year, and the stakes become clear. If would-be donors could be sure they were giving to the most effective charities, it seems likely the collective social impact of the work would increase. And if everyone with a few dollars to spare could be confident his or her money was going to an effective organization, the universe of donors would be likely to grow.
Achieving both these ends is among the goals of the Hewlett Foundation’s Philanthropy Program, which has funded Philanthropedia and another Web site dedicated to smart giving, GreatNonprofits, among others.
“In the business world, investors have a wealth of data to help them decide the best place to invest,” says Jacob Harold, a Hewlett program officer who specializes in making grants to improve philanthropic practices. “In comparison, the millions of people who want to make the world better by contributing to a social cause do so in the relative dark. We’re hoping the grants we make to innovative start-ups like Philanthropedia and GreatNonprofits can help change that.”
Measuring Success is No Easy Task
Of course, compared to measuring success in business – if it makes a steady profit, it’s probably a success – calculating an organization’s effectiveness in tackling a social problem is a complex task. For one thing, philanthropic work is so varied (consider combating maternal mortality in sub-Saharan Africa or helping China improve its air quality) that no universal measures will serve.
Nor does judging an organization by its finances and administrative costs alone, as some advocate, answer the question. An organization with low overhead might well be starved for the administrative resources it needs to be effective, while one with higher costs could have a great deal of impact in its chosen field.
“It makes sense for donors to use every tool available to them to make their decisions,” says Deyan Vitanov, chief executive officer of Philanthropedia and a recently minted Stanford MBA. “We think donors should look at all of them and consider them together.”
For its approach, Philanthropedia asks a range of experts in a given area their opinions about which nonprofit organizations working on that social cause are most effective and why. Among the experts typically consulted are foundation program officers, academics, employees of nonprofits, researchers, journalists, and politicians.
“Sometimes small, lesser-known organizations are selected as among the best,” says Vitanov. “The Community Housing Partnership in San Francisco is a good example. They’re not as well known in the community as some groups that work on homelessness in the region, but they were among the experts’ picks.”
The recently launched Philanthropedia Web site has nearly forty nonprofits rated in three subject areas and currently is working to add organizations that specialize in microfinancing, but the plan is to add a great deal more. Over time, Vitanov says, the goal is to rate hundreds of nonprofits across a dozen areas of work. Donors can choose a single nonprofit whose cause they find compelling, or follow the experts’ advice and contribute to a “mutual fund” of organizations in a given area.
Small Donors the Focus of the Work
And while it is the multimillion-dollar donations that often grab the headlines, it is the everyday, small donors who are the focus of Philanthropedia’s efforts. Based on their research into giving, Philanthropedia founders describe their typical ideal users as people thirty to forty years old, a majority of them female, who typically give about $1,000 a year to charity.
In many ways, GreatNonprofits’ approach is the mirror image of Philanthropedia’s. Rather than aggregating the opinions of experts, it relies on the wisdom of crowds. GreatNonprofits aggregates and shares the opinions of those who use a nonprofit’s services, those who work for it, and other interested parties – much like the Web sites Epinions or Yelp, which rate products and services based on user comments.
GreatNonprofits was founded by Perla Ni, the former publisher of the Stanford Social Innovation Review (another Hewlett Foundation grant recipient), which is a scholarly quarterly that publishes strategies and ideas for nonprofits, foundations, and socially responsible businesses.
The impetus for the new venture came when Ni wanted the Review to write a piece about how nonprofits were helping the victims of Hurricane Katrina. It quickly became apparent that, despite reporters’ access to far more information than the typical donor has, determining which organizations were most helpful was not easy. It wasn’t until a Review staffer went to Biloxi, Mississippi, and heard from the residents about which nonprofits were the most helpful, that she could begin to answer the question. And the answer was that the knowledge was in the community – people who were served by the nonprofits, the nonprofits’ volunteers, donors, and partners – they were the ones who had first-hand information about the impact of those organizations.
“I realized there needed to be an online Zagat of the world of nonprofits,” says Ni, referring to the international restaurant guide that’s based on the opinions of diners.
GreatNonprofits was the result. That was November 2007. Today the site has more than 17,600 reviews of more than 2,300 nonprofits, with a goal of having 10,000 reviewed by the end of next year, Ni says.
Those looking for worthy nonprofits can read users’ reviews of the organizations’ services. And a nonprofit can fill out its own profile on the site, so anyone can post comments, including the organization’s own employees. Ni sees the site as a place where nonprofits can connect with their constituents, learn how to improve their services by hearing what others say about them, and increase traffic to their own Web sites, among other things. The site also has a “Needs & Offers” section that functions like a swap meet for various organizations.
Multiple Tools for Better Giving Decisions
According to Ni, GreatNonprofits offers a combination of evaluation and marketing and has partnered with GuideStar, another charity evaluator that focuses on financial analyses, to give would-be donors another way to rate a group. GreatNonprofits’ reviews, although not its other features, also appear on the GuideStar site.
And if the goal is to identify effective – or at least well-regarded – nonprofit organizations, it seems to be working. The Oral Cancer Foundation of Newport Beach, California, is a good example. The tiny nonprofit provides vast amounts of authoritative information about a disease that strikes 35,000 Americans each year. Its Web site also offers what its president and founder, Brian Hill, describes as the world’s largest support group for survivors of head and neck cancers.
This summer, when the foundation’s profile appeared on the GreatNonprofits site, an outpouring of nearly 200 people from around the country shared stories of how the organization had helped them through their ordeals. “I couldn’t believe it,” says Hill. “I knew we were doing good, but this was real confirmation that we were changing people’s lives.”
“You know, the world changes because great stories are told,” he says. “You can change people’s opinions. These stories were little microcosms that were powerful. They spoke to the human nature of our disease and the things each person got from the Oral Cancer Foundation. And what they got was human beings helping human beings.”
In part as a result of reading the stories, Hill says, the Entertainment Industry Foundation made a grant to the Oral Cancer Foundation that doubled its budget.
Of course, for both Philanthropedia and GreatNonprofits many questions remain.
One is demand. Most people who make charitable donations do so without regard for the efficacy of the nonprofits they are supporting. A significant number of donors will need to change their habits for the two organizations to increase the effectiveness of the nation’s giving. Then, too, both still must find ways to become self-sustaining and to measure the impact their work is having on giving.
Meanwhile, Perla Ni, whose own family immigrated when she was a child and depended on nonprofit organizations to get by, is excited by the ways GreatNonprofits has begun to share news of their work.
“Sometimes I’m sitting here wondering why I started this, and then I read some of these reviews,” she says. “It’s just a start, but we’re starting to see that we have the chance to make a real difference.”