We define philanthropy as the giving of resources in an engaged and strategic way for maximum impact and in a tax efficient manner. It can include the giving of money, assets, time, talent, voice and one’s social capital. We believe in the power of philanthropy as a great social connector and the source of many great opportunities.

City Philanthropy

A Wealth of Opportunity

Picking your portfolio

Jun 24th 2012
Good Better Best

Once upon a time, I taught in India, in a village in Tamil Nadu. It had just one road, and our school – the only one in the village – had about 40 children on the register, aged between three and eleven. Each morning, some 20 or 30 pupils would arrive: we rarely had a full house. I wondered why they came so sporadically.

Many children in the village didn’t come at all. Some clearly wanted to come: they stood at our windows and watched, or even dropped in on lessons. Sometimes I’d see them in the fields during school time – maybe working, maybe just playing – or going to the well, or doing errands, or just sitting. I wondered why they didn’t come.

Other people have wondered this too. Unlike me, they’ve gone to the trouble of identifying the reasons, and researching what happens if those reasons are addressed. Poor transport to and from school is one factor. Another problem is the price of school uniform. A third is that parents take children out of school, perhaps to deal with the harvest or care for younger siblings. All of these factors were visible from my classroom window. But a fourth factor I hadn’t seen. In villages like mine, many children have intestinal worms – amazingly, one in four people globally has some form of worms – which cause anything from malaise and lethargy to severe pain, and which prevent children from doing anything much, including coming to school. Charities run programmes to solve each of these four problems. They all do some good.

But what a variation in how much good they do! One type of programme addresses the issue of parents keeping children out of school, by giving them a payment when the children show up at school. These ‘conditional cash transfer’ programmes cost about $1,000 to keep a child in school for a whole year (including all the management costs). Another programme distributes school uniforms. There, $1,000 achieves rather more – and not just a little bit more. It achieves ten times as much: for the same amount of money, school uniforms can get ten children into school for an additional year. One child or ten: it’s no contest. And even that isn’t half the story. Dealing with the worms isn’t ‘just’ ten times as good. Deworming (as it’s charmingly called) can keep a child in school for a year for just $40. It’s 25 times better.

To put that another way, if you put $1,000 into a conditional cash transfer programme, you’ll do some good. But you could have done 25 times that much good – there’s a whole gaggle of children out in the fields who could have been in school. That is, every time a donor puts $1,000 into the wrong programme, fully 24 children needlessly miss out.

Really effective donors know that this pattern repeats right across the charity world: some charities are better than others. It sounds almost heretical to say it because we tend to think that all charities are good. But we also think that teaching is a good thing, and so is providing medical care, and yet we’re familiar with the notion that some teachers are better than others and some doctors are better than others.

Wouldn’t you rather that your donations achieved a lot rather than just a little? In these coaching sessions, we’ll learn how to do just that. The first step is -

Finding a great charity

Unlike in the City, where an army of analysts and ratings agencies provides independent analysis of companies and assets (yes I know that they’re not without their short-comings), there is very little of that in the charity world. The single biggest factor in most people’s choice of charity is being asked – a charity approaches them in the street, calls them up, or puts a flyer through the door. This is bizarre if you think about it: nobody invests in companies which put flyers through their door. Clearly, there’s no guarantee that the best charities in the world are the ones which find you, so get proactive.

The quickest way to find good charities is to ‘borrow’ analysis already done by somebody reliable. There are some great independent analysts like GiveWell who publish lists: they’re effectively like banks’ analysts (except they don’t get any money at all from charities, so there’s no conflict of interest at all). And some of the big grant-making foundations have great processes for finding effective charities, and publish lists of charities they support. BBC Children in Need, or Comic Relief, or the BBC Radio 4 appeal are examples. Obviously, those lists aren’t exhaustive but they’re pretty reliable.

If you want to do the analysis yourself, check first that the charity:

  • is a registered charity. For UK-registered charities, that means that it will be on the register of the charity regulator: the Charity Commission for England and Wales, the Office of the Scottish Charity Regulator or the Charity Commission for Northern Ireland; and
  • reports publicly on how much its work achieves and how it is improving its work. It should have detail about that on its website or available if you ask.

Even if a charity has approached you – say by post or via a fundraiser in the street – check these two things. We’ll talk more in future about doing further research you should do to assess a charity’s effectiveness. Meanwhile:

Don’t look at how much it spends on administration!

People often think that good charities don’t ‘waste’ much on administration or overheads, and therefore they ask ‘how much of my money reaches the beneficiary?’ It’s nonsense – like judging a teacher by how much time he spends teaching, rather than how much students learn – and routinely ruin charities. ‘Admin’ isn’t waste (it often includes time spent learning, which is obviously a good move), it’s got nothing to do with effectiveness (we’ll see in a future coaching session how some charities could waste 95 per cent of their income and still outperform their peers). And hence, when a Yale economics professor did the maths, he found that high-performing charities have higher admin costs than poor-performing ones: it’s partly their admin spend which makes them better.

In future coaching sessions, we’ll look at other essential issues, including how to help if you’ve got no money, how to operate if you’ve got lots of money, why giving is much more like medicine than it is like business, the best ways to use your skills, how your company can get involved, how to choose a cause, the best uses of charitable money ever, and how rubbish donors waste the whole lot.


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