Seven Surprising Ways Your Clients Can Improve their Charitable Giving

Seven Surprising Ways Your Clients Can Improve their Charitable Giving

Article posted in Values-Based on 5 February 2014| comments
audience: National Publication | last updated: 5 February 2014
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Summary

Eric Friedman is an individual donor who has spent several years trying to understand how to maximize the impact of his giving, including traveling to Africa to see his giving in action. He is an actuary and graduated from Stanford University with majors in mathematics and economics. Read his opinion on how your clients can improve their giving.

By Eric Friedman

Americans reach into their pockets and give over $300 billion to charity annually. Many of your clients are likely part of that total.  Giving makes them feel good and does good, but it falls short of its potential in both of these areas.  It fails to benefit the world as much as it could because conventional wisdom on selecting charities often leads people astray. And by advancing their knowledge about giving and becoming more effective donors, donors can gain more personal satisfaction from their giving.  This article presents seven important, but often overlooked ways your clients can increase the impact of their giving.

  1. Give to three or fewer charities. Make larger donations to a small number of groups in which they have the most confidence. Giving smaller donations to many good charities spreads resources thin and often reflects a lack of sufficient engagement to prioritize, whereas focusing where it matters most is more likely to achieve greater results.
  2. Don’t let overhead costs dictate the choice of charities. Nobody wants their donations to be wasted on excessive overhead costs, but overcompensating by selecting the charities because they have the lowest overhead costs is a surefire way to give to mediocre organizations. Overhead costs are necessary for most charities to be healthy and productive. Do donors really want to give to charities that skimp on things like modern computer systems, staff training, and program evaluations? Probably not—a good infrastructure can help charities become more effective. Don’t be fooled by charity rating agencies that give top ratings to those with low overhead without regard to the quality of their programs.
  3. Don’t limit their giving to just helping people like them. Many people are most generous with charities that help people who have something in common with them: they give to the universities they attended, the churches where they worship, the medical causes that have touched their lives, or the homeless shelters in their hometown. It is often done because donors don’t know of more effective ways to vet giving opportunities.  It may be a good strategy if the donor’s primary goal is to help people like them, but it is probably not the best approach if they want to do the most good for the most people. A better approach is to be open to a broader set of causes and charities.
  4. Give to organizations that provide effective solutions efficiently. Many nonprofits actually brag about how inefficient their solutions are, and donors often respond by giving more. For example, private universities tell prospective donors how expensive they are when asking for scholarship funds. Hospitals often remind donors how costly health care is in America. Is spending $250,000 per person for a four-year degree or $7,000 daily per patient really the best use of donor money? Certainly private universities and hospitals do good work, but the fact that their solutions are so expensive lowers means that the same donation might achieve a lot more good with an organization that can achieve results at a lower cost.  (We’ll give some examples later.)
  5. Give to people in distant countries. This advice surprises and even offends many people, as we still have plenty of problems right here in America. However, there can be no denying that we are one of the wealthiest countries in the world, and many countries have much more desperate problems. We have virtually eradicated diseases like malaria and tuberculosis, nearly every American has access to clean drinking water, and we have a literacy rate approaching 100%. This wasn’t always the case, but we solved these problems decades ago, so the solutions are known, effective, and cheap—for example, it is much cheaper to save lives by distributing mosquito nets in Africa to prevent malaria than to provide chemotherapy to cure cancer. The issue is not whether donors want to help people in America versus in other countries, but that giving money to the poorest countries in the world can achieve more dramatic results.
  6. Prefer development over disaster relief. The victims of disasters like typhoons, earthquakes, tsunamis, and hurricanes are among the most needy people in the world. However, it’s important for donors to keep in mind that 18,000 children die every day of preventable causes—mostly a lack of nutrition and basic medical care in poor countries. While it would be wonderful if there were enough resources to fulfill all the needs of both development and disaster relief, that isn’t the case, so priorities must be set and tradeoffs must be made. Major disasters often get so much media attention that they receive more donations than can be utilized effectively, and it is extremely difficult to help people in those areas because the local roads and other infrastructure is often destroyed. In contrast, many programs designed to reduce the preventable-cause deaths are already up and running efficiently, and ready to be expanded with more donor funds. Is it heartless to not contribute to disaster relief efforts? Maybe, but I think it is less heartless than to ignore the daily 18,000.
  7. Give to charities that demonstrate proven results. I am continually amazed at how many donors fail to ask charities for evidence that their programs work. Take a look at fundraising material for just about any charity. You’ll often see stories about individuals who benefited from their programs or descriptions of what the charities did, but not reliable evidence of results. A homeless shelter may have a hundred participants in its return-to-work program and can show you a profile of one successful participant, but that doesn’t mean the program is very good. Such weak evidence is one reason why many people—including me—are skeptical of most charities. Luckily, new resources are emerging for donors looking for more rigorous ways to assess evidence. Specifically, charity evaluators such as GiveWell, The Life You Can Save, and Innovations for Poverty Action are helping donors identify the best ways to allocate their giving.

Though many of these tips challenge conventional norms, that’s exactly what is needed for donors to maximize the good that comes from their giving. Donors who embrace both the art and science of giving often get more satisfaction from their giving.  As an example, think about how passionate Bill Gates is about his approach to philanthropy.  For advisors, helping donors become more skilled at giving can not only give your clients more satisfaction from their giving, but also from their relationships with their advisors.  

Eric Friedman is the author of Reinventing Philanthropy: A Framework for More Effective Giving. An excerpt is available at www.ReinventingPhilanthropy.com.

The views and opinions expressed are those of the author(s) and do not imply endorsement by Planned Giving Design Center, LLC or its hosting organizations.
 

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