"Giving Back" by Steven Ketchpel

Bottom Line:  Sean Stannard-Stocktongave an insightful discussion of how today’s “value-creating” second-wave of philanthropists (Gates, Zuckerberg) differ from yesterday’s “value-extracting” first-wave (Carnegie).  They’re more concerned about impact, but it’s still the emotional appeal that brings in the most dollars.  5 great questions to ensure your non-profit is metric driven.

The Changing Face of Today’s Philanthropists

The entrepreneurs who have made a fortune and intend to give a big chunk of it back are taking the same approach to their philanthropy that they took to their businesses:  deep involvement, relying on data, metrics, and experimentation to reach a good outcome.  A less-well known example is the Aldermans, who, as a testament to their son killed in 9/11, set up a foundation that offers mental health treatment to victims of terror and mass death world-wide.  Their clinics have treated over 100,000 people, in countries like Haiti, Uganda and Liberia where other mental health professionals are few and far between (1 per 1.25M people in Uganda).

Evaluating non-profits

The “second wave’s” emphasis on results was shown in a survey that said that 85% of donors do care about the impact that their gift has. But only 32% did any kind of research, and only 21% did performance-based research, and just 3% used the relative performance to make their grant decisions.

This distinction between performance research and more general research (generally fund-raising expense ratios) was a key point. Stannard-Stockton was highly critical of the over-reliance of non-performance metrics, implicitly endorsed by the main rating agencies like Charity Navigator and GuideStar, because the financial metrics are so much easier to get than the performance metrics. I’d written a blog post about this before, but Sean convinced me that I need to move even more in this direction, and support efforts that do get at performance metrics (like GiveWell.org and Philanthropedia both of which are presented in GuideStar’s TakeAction portal.)

How to motivate giving:  Stories vs. Statistics

You might think that this impact-driven generation of philanthropists would be hyper-rational about their giving, and look to the statistics to choose their donations.  You’d be wrong.  “Spreadsheets are not going to trigger giving,” Stanndard-Stockton said.  He cited a study on a donation appeal where one group got an “identifiable victim” (a person’s story with a name that the giver could relate to); a second group got the “statistical victim” (I took it to be a series of bullet points of facts and stats about the need for giving); a third group got both.  The results:

Treatment	Average Given
Statistics	$1.14
Identified Victim	$2.38
Both	$1.43

So, the “story only” did the best, by more than double the “statistics only”. Adding statistics to the story pulled the average level of giving down by about one-third. Sean didn’t talk about the particular audience for this experiment, and I expect it was a general audience, not specifically the “impact-driven” givers, but the point is well worth noting. There is further evidence that “activating logical thought processes in the brain dampens empathy.” Sean talked about an experiment where subjects were primed with simple arithmetic tasks, and then given the “story only” treatment. Their response was similar to the “story plus stats” case. That is, doing math before hearing the story made people less generous in their response, whether the math was stats about the giving need or entirely unrelated.

Sean said that doesn’t mean that non-profits should exclude the logical, evidence-based information from their appeals, they should just think about the narrative, and present it as a story, rather than math. (I *really* need to remember this, personally.) He offered a couple of resources that can help:

• Andy Goodman, a communications consultant
• Sean’s blog posting analyzing Kiva’s Intercontinental Ballistic Microfinance Video (interesting concept, but at 4.5 minutes, dragged a bit for me)
• Acumen Fund’s approach

Cause-based “mutual funds”

Given the challenge of doing your own research, shouldn’t there be a way of having donor advisers allocate your money the same way that mutual fund managers allocate your investments? This is an idea that I’d toyed with a bit 7 years ago, but never did anything substantial. Sean said that others have tried it, with varying degrees of success.

• Calvert Giving Folios were already around when I thought I was breaking new ground, but they have since gone defunct
• NewProfit.org describes a portfolio approach, and lists 4 sectors (education, workforce development, public health, or poverty alleviation) but you have to “invest” when they are “raising a fund” and it’s not clear what the minimum level of participation is.

5 Questions to Ensure your Non-Profit is Improving

1. What research or evidence did you use to design your program?
   (Unless you are intentionally an R&D project, you should be using the best known approach to tackle your problem…)
2. What information have you collected about the the results of your programs?
   (It may be hard for a non-profit to establish direct causality, but you should be showing contribution. And as a funder, if you’re asking for stats that the non-profit wasn’t already collecting, are you sure the stats are worthwhile? Your grantee didn’t think so before you showed up on the scene….)
3. How do you systematically analyze the data you do collect?
4. Have you adjusted your activity in response to your analysis?
5. Do you have absolute focus on producing results?