How do you select a charity?

Over the past few months, I have done a lot of reading on what to look for when selecting a charity. I’ve spent time talking to friends about what is important to them when selecting a charity and have tried to dissect my own donation habits. My hope was to find common themes I could use to help vet and select charities. Yet, the more I dug, the more I started to see how difficult it can be to pick the “right” charity. Many of us have trouble parting with our hard-earned money on basic daily purchases. This becomes even harder when donating money, as we want to make sure we are having the biggest impact. The number of charities to choose from can be overwhelming and the amount of information that is there to help make our decision easier may actually be doing the opposite.

Currently, we have over two hundred charities listed on MicroHero. Our goal is to provide a vetted list of quality charities so our MicroHeros are confident that the money they earn is going to a worthy cause. We have been able to rely on a few organizations (Charity Navigator, Charity Watch, Charity Intelligence Canada) that specialize in charity ratings. These organizations have some very detailed ways of determining the highest rated charities based on a various categories (e.g., financial transparency, fundraising costs, administrative costs, social results reporting, etc.). We have found these resources to be a great way to confirm that charities we’ve selected are credible.

As part of the work to continue to improve our process we are always looking to learn from leaders in the industry. Christian (MicroHero CTO) recently recommended I listen to the TED Radio Hour episode Giving It Away. This episode had a few great interviews worth listening to, but one of them made me question everything. This was the interview with Dan Pallotta which references his 2013 TED talk — The Way We Think About Charity Is Dead Wrong. Dan walks through many examples that hit home with me. He starts by saying:

“We have been taught to think about giving and about charity and about the non-profit sector and are actually undermining the causes we love and our profound yearning to change the world”.

He describes the five rules (compensation, advertising and marketing, taking of risk on new revenue ideas, time of seeing a return, profit to attract risk capital) that have been set out for the non-profit vs. for-profit sectors and shows how the differences effect a non-profit’s ability to make an impact on such large complex social problems. He shows how the negative view of overhead and fundraising are putting a stop to growth. Charities are forced to keep overhead low and then expected to produce results, which is an unfair expectation that we wouldn’t even consider for public sector companies. He challenges the listeners to invest in charity growth. Dan urges them to ask these charities about the scale of their cause, how they measure progress, and what resources are needed to make these goals come true, regardless of overhead as long as problems get solved. I would recommend listening to his talk, as I’m not giving it the full justice it deserves.

This interview has me questioning the way I have been viewing non-profit organizations and asking:

  • Why isn’t it acceptable for them to play by the same rules as public sector companies?
  • Why can’t they compensate their leaders like private sector companies to help attract the top talent?
  • Why don’t we put less emphasis on reducing overhead and focus more on outcomes?
  • Why don’t we recognize charities that invest in fundraising activities leading to huge returns?
  • Why don’t encourage these organizations to take risks that go against traditional thinking?
  • Why don’t we treat them more like start-ups and praise innovation, scale and growth?

This got me thinking about the charities I follow and I was curious how many of you select the causes you support. So, we put out a survey to 250 MicroHeros asking them to rank what is most important when selecting a charity. Here is what we found:

I found it interesting that the top two responses focused on the cause and mission. I was happy to see this, but expected that financial transparency or low overhead would have been ranked higher. With a small sample size it is hard to make any definitive assumptions. But this does give me reason to believe that if people feel the most important factor when selecting a charity is the cause itself, then there is a chance they may be willing to look at things differently. By teaching new ways to support their cause and challenge the traditional thinking, leading to encouragement and support for non-profit organizations to take innovative actions.

At the end of the day, the rating services that are available are a great way to help many people make an informed decision. However, there is a lot we can do to help change our thinking to enable charities to focus on growth, while still being socially and fiscally responsible to their donors.

Can we all help to transform the rules that govern the non-profit space into those more similar to the start-up world? Can we get people thinking about charities the same way we think about start-ups? Can we build a charity incubator/accelerator focused on developing a culture of extreme growth? The opportunities are endless but it is going to take a community to continue to build on these ideas and create something ground breaking.

What are your thoughts?

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