A grand unified theory of effective giving starts with beneficiaries

This article first appeared in Alliance Magazine.

‘What do you think of our team?’ asked the chairman of a new foundation. I hesitated, fearing he would dislike my answer. The trustees were experts in only two of their three focus areas: none knew much about the third.

That this would impede the foundation’s ability to serve its intended beneficiaries seems obvious, just as the merit or error in other practices seems obvious, even if the proximate issues are quite diverse. Demanding that charities report on each of their umpteen restricted grants? Nope. A large foundation hiring a ‘learning officer’ to mine its data for insights? Yes please. Donors’ missions driving their giving but not their investment strategies? No thanks.

It is not by reference to The Great Philanthropy Book In The Sky that we distinguish good practice from bad. So, I reasoned, perhaps these situations speak to some unarticulated principles buried within us. I went in search of them.

I followed erudite footsteps. The fruitful obsession of science is unifying apparently unrelated phenomena. For example, you feel you get forced backwards as your car starts, yet thrown forwards as it brakes: physical inertia explains both. Tree-frogs have huge eyes, but worms have none: adaptation to circumstances explains both.

Unashamedly, the principles I propose flow from the question ‘what’s best for beneficiaries?’ That is, what will improve the world as much as possible? Yes, that may sound blindingly obvious, but that doesn’t matter: if that really is our overriding goal, we should invoke it constantly. And it can’t be that obvious, since much in charity and philanthropy patently doesn’t revolve around beneficiaries. In any case, many scientific findings – that objects keep doing what they’re doing unless something stops them, for example – sound obvious once stated, but weren’t always obvious at all and have surprising implications. (Just as the law of inertia doesn’t dictate where you drive, these principles won’t dictate which beneficiaries a donor should serve, but rather how they best serve them.)

Straight from that goal flow four principles. My contention is that any decision in philanthropy can be resolved by reference to these principles. To my knowledge, this is the first set of principles for charitable giving ever articulated, and I’m genuinely interested in whether you find them helpful, complete and consistent.

We’ll consider a few implications of each principle.

1.     Use everything you’ve got, and to its best advantage

‘Everything you’ve got’ may encompass talents, contacts, knowledge, cash, investments and experience. So there is the case for impact investing, since it deploys investment capital to serve beneficiaries. This principle also suggests that companies include charities in bulk purchasing arrangements; purchasing power is a useful ‘thing they’ve got’.

‘To its best advantage’ implies that investment bankers shouldn’t use their volunteering time for painting walls. Goldman Sachs’ pro bono work on the International Finance Facility for Immunisation (IFFIm) hastened the development and deployment of vaccines which have immunized half a billion children, fully 3 million of whose lives are thought to have been saved by the IFFIm alone.

Most major donors’ resources include an ability to assess charities. That benefits beneficiaries when they recommend good charities to other donors and share their logic. Hence the frustration of GiveWell (the rigorous charity analysts in the US) when the Gates Foundation wouldn’t publish logic or detail of its giving to Japan after the tsunami.

2.     Make good decisions

The obvious implication here is to find high-performing organizations – by using decent independent research and funding it if it doesn’t yet exist. Hence the wisdom of the foundation mining its own data for learning, which might improve its decisions.

Solving beneficiaries’ issues requires understanding them, which immediately implies focusing on just a few problems. The new foundation was right about that, but clearly lacked expertise to reliably make good decisions in one of its areas. Similarly, we rightly distrust celebrities endorsing charities: how does your success (normally) in a totally unrelated field imply that your decisions are good for beneficiaries?

3.     Maximize the amount available

A few large gifts create less waste in the cash transfer process than do several smaller ones. And if funders could use common application forms – as even eccentric old universities have managed – they’d spare charities the absurd costs of writing the same data in umpteen formats, leaving more ‘available’ for supporting beneficiaries. Similarly with streamlining reporting requirements.

This principle is why we applaud donors sharing infrastructure: for example, Eurostar partnering with the established Ashden Awards for its new award. And why we deplore NatWest’s CommunityForce,which ran a laborious process for finding ‘community projects’, when it could have just asked a community foundation.

4.     Help, and don’t hinder

Restricting a gift is a good way of hindering because it denies a charity’s management the flexibility to serve beneficiaries’ changing needs. As is giving things the charity doesn’t want, gloriously ‘celebrated’ by aid agencies’ annual prize for Stuff We Don’t Want.

And donors should ask whether they’re helping in a way that limits the charity’s risk in answering, as the Grantee Perception Report does.

Let’s test-drive

Should you give anonymously? These principles show the way. If association with you would hinder the charity’s ability to serve beneficiaries, then yes. If it might attract more resources for serving beneficiaries, then no, because ‘everything you’ve got’ may include an ability to inspire and motivate others.

You have £20 million to give: do you give in your lifetime or in perpetuity? The principles recommend giving relatively rapidly. To take just one argument, this makes more money available, because the money is managed over fewer years, incurring lower management fees.

None of these principles pertain to the amount which is given, but they all relate to process and deployment. Because the impact of a donation ain’t determined by what you give, but the way that you give it.

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