The Challenge of Choice

Charitable giving can suffer from information overload. How can donors reliably find good organizations?

Making choices can be difficult. In a world of endless possibilities, the freedom to choose can quickly become a source of anxiety if not navigated well. From choosing an outfit to what to have for dinner, the ratio is the same: more options equals more exciting possibilities, but also higher stakes. You can feel like you didn’t make the right choice, or missed out on something better. These are not great feelings.

Anyone who has donated to charity knows the pangs of an unconfident choice. You may try finding a small nonprofit helping overlooked communities, but be bogged down in the giving process by the sheer number of options. It can be difficult and frustrating to find a nonprofit that is aligned with your personal interests, and is supported by the right reviews. Sometimes the brain short circuits, and you panically donate to the first nonprofit that asks — or to a large organization like the Red Cross or Oxfam, because it seems like the easiest option.

How can this process be made simpler? Smart giving is about knowing the systems you’re working in: both the nonprofit world and your own psychology. Fortunately, there are ways to easily navigate both. The key is to have a reliable compass to guide your decision making.

Think of choosing a nonprofit like choosing an ice cream flavor. If you go to an ice cream stand with over a hundred flavors, all of the choices might make you want to order vanilla. You would like to discover a great new flavor, but after a long deliberation, vanilla is the easiest choice, even if it is not your favorite.

When it comes to nonprofits, there are many organizations implementing solutions to different issues in almost every part of the globe. Being able to see many nonprofits at once gives you the agency to choose from a wide spectrum of options. Of course, being confronted with too many choices can cause another brain freeze and make you want to jump ship. How can you decide what nonprofit is best to contribute to?

Third party sites often rank nonprofits based off what is called “overhead costs”. Overhead costs are the percentage of donated funds that are used for administrative operations instead of projects. Conventional belief is that the lower the overhead costs, the more effective the program. This is not always true, and that assumption can be harmful to the entire donation process. Let’s go back to the ice cream analogy: overhead costs are similar to choosing an ice cream flavor based off its ingredients and nutritional content. Obviously, if the ice cream is made with mostly salt instead of sugar, it is probably not very good. However, the differences in calorie counts do not predict how the ice cream will taste. And trying to crunch all of those numbers in your head will make you want that plain vanilla cone, just to get it over with.

Social reviews are a different way of making smart decisions.

For any choice you need to make in life, it is easier to decide if you can ask a friend. Friends can tell you what new flavor of ice cream is best, based off their own experiences. They can also warn you if a certain order made them sick, or tasted bad. With nonprofits, social feedback from other donors can let you know which organizations are doing good work. Most donors have similar concerns: they want their money to go to a good cause and to be used well. This doesn’t have to mean the most effective way of spending funds, but rather funding the most effective projects. Other donors can tell you if a nonprofit gives regular updates on programs and keeps an engaged relationship after a gift is made. These are important markers if you are looking for a nonprofit that is transparent and effective. Overhead costs can be useful, but it is equally essential to know what happens after a donation is made. What the ice cream is made of is different from how it tastes. This is why social reviews are helpful in choosing good things — whether it is a nonprofit or a soft-serve cone.