As we embrace the holiday season and look forward to Giving Tuesday, it’s the perfect time to reflect on the way we choose the charities we support.
When evaluating a charitable organization, it’s easy to get caught up in the traditional metrics like overhead-to-field ratio, but it’s crucial to shift our perspective towards a more impactful approach. After all, everyone wants to maximize the good they’re doing in the world.
Consider the following scenario: Two charities each raise $1 million.
Charity A boasts a low overhead of 10%, with 90% going directly to the field, positively affecting 50,000 lives.
In contrast, Charity B has a higher overhead of 40%, with 60% reaching the field, but because overhead goes toward innovation, they can now help 500,000 people.
While outdated evaluation methods might favor Charity A, the actual impact tells a different story. Charity B’s innovative approach that helps more people clearly demonstrates that impact is far more important than traditional overhead ratios.
To make more informed decisions when choosing a charity, it’s crucial to understand the different roles that charitable organizations play. There are two main categories: “awareness charities” and “doer charities.”
Awareness charities primarily focus on raising awareness and support for a cause. They excel at fundraising, and a substantial portion of their donations is allocated to raising more funds. However, it’s essential to recognize that many awareness organizations will pose as doer charities. These organizations may even contribute some funds to a few doer organizations to show some engagement in the field, but unfortunately, the percentage allocated is typically low. While awareness charities serve an important purpose, donors should be well-informed if their donations are primarily supporting an “awareness” or a “doer” charity.
Doer charities are often smaller in scale and prioritize direct fieldwork. They aim to have a meaningful impact on individual lives. Doer organizations typically allocate most of their donations to the field. These organizations are akin to the girl tossing a washed-up starfish back into the sea; they can’t help everyone, but the help they offer has a huge impact on the individual.
To critically evaluate a charity, consider the following factors:
Is this charity sustainable?
Ask whether the charity’s work would continue if they ceased operations tomorrow. Is there an economic incentive for the locals to maintain it? Does the charity have an exit strategy?
Is this charity solving or bandaging?
Determine whether the charity’s projects aim to eliminate the problem or merely alleviate its symptoms. Support organizations that focus on solving the root causes.
Reward innovation.
Encourage innovation within charities. The current focus on overhead measurements can stifle creativity, so it’s essential to support organizations that think outside the box.
Is the charity giving things away for free?
Giving things for free can foster dependency. Promote models that create economic opportunities, even during disasters.
Insist on “cost of impact” details.
Examine the cost-effectiveness of a charity’s projects. Don’t be misled by the claim of “no overhead.” Every charity sets aside funds for overhead expenses, even when it’s not explicitly stated.
Be a critical thinker.
Challenge charities to deliver on their promises to have a concrete impact. Ensure that their actions align with their mission statements and that they can demonstrate their success.
Be cautious of misleading messages.
Recognize that many large churches and social organizations unwittingly act as “awareness” charities. They may have very low overhead expenses, but if they donate to a charity with huge overhead, then the percentage of your donation that reaches the people in need is drastically reduced.
By focusing on the real-world impact of an organization and considering its sustainability, innovation, transparency and mission, we can ensure that our contributions make a tangible difference in the lives of those in need.
This holiday season, let’s be diligent and critical donors, dedicated to making a meaningful and lasting impact.
John Renouard
John Renouard, founder and executive director of the Utah-based nonprofit WHOlives, is known affectionately in Africa as “Bwana Maji,” or Mr. Water. His invention, the Village Drill, has created more than 13,000 wells in 40 countries, empowering more than 12 million people with clean water, health and opportunity. John is also making major progress in the fight against child marriages and female genital mutilation (FGM) in Kenya. The American Red Cross presented him an International Hero Award in 2015.
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