Building an Effective Philanthropy for Real Donors

Underlying much of the recent discussion about whether donors care whether nonprofits are effective and how to build a more effective field of philanthropy, is a recurring focus on how philanthropy experts think donors should behave. I thought the New Philanthropy Capital blog captured the silliness of this approach most aptly in their recent post poking fun at the idea that we should expect donors to “be more rationale” by asking if we can find any Vulcan donors (the character Spock from Star Trek).

What if instead we tried to build a more effective philanthropy that was designed for real life, human donors?

The first step of course would be to actual ask donors what they wanted. So today I’m glad to be able to point to the newly released Money For Good report from Hope Consulting. The report was underwritten by the Hewlett and Rockefeller Foundations as well as a number of other well known organizations.

The Money for Good report tries to answer three questions, 1) how can we increase charitable giving from individuals, 2) how can we increase donations to the highest performing nonprofits and 3) how can we realize the potential of impact investing.

The report opens with this quote:

“It is our nature to see the world based on our own context, experiences, and points of view. People in all walks of life struggle with this bias every day. How can a new product fail when you and your cohort believed that it was a great idea? The need to understand the world as it is – not as we wish it were – has caused primary market research to become a multi-billion dollar industry.

The motivation behind the Money for Good project was to seek the ‘voice of the customer’ for charitable giving and impact investing.”

The report is in depth and I encourage you to read the whole thing. But today I want to focus on a particular chart that explores the opportunity to “improve the quality of giving,” which is the critical question motivating the movement for a more effective philanthropy.


The percentages refer to the amount of donors who currently do the things mentioned in the dark blue boxes. So if we want donors to give based on relative performance, to make donations that are as effective as possible, we need to help donors move from the left to the right on this chart.

The first, promising sign is that 85% of donors do care about the performance of the nonprofits they support. But only 32% of donors do any research at all to determine if the nonprofits they support are actually any good. This finding is similar to the survey that kickstarted the recent posts here and on other blogs about whether donors care.

The second major gap is how to encourage donors to use quality information. Charity Navigator proved over the last decade that donors can be encouraged to research nonprofits. The problem of course is that the overhead expense ratio metric they popularized (the Money For Good report confirms that overhead expense is the #1 most important piece of information for donors who do research) is very low quality in determining effectiveness. But Charity Navigator should be noted for their hugely successful campaign to close the Care vs Act Gap. Today Charity Navigator is working to implement a major overhaul of their rating system that they hope will increase the quality of their ratings (disclosure: I’m on the advisory board for this effort).

The Money For Good report argues that closing the “Care vs. Act” Gap and the “Quality Information” Gap so that donors go from just caring about the effectiveness of nonprofits to actually doing high quality research, means:

  1. Creating many initiatives that address these issues simultaneously.
  2. Providing simple information donors will use.
  3. Pushing information to donors.
  4. Building board awareness around select key messages.

The final goal, closing the Good vs Best Gap, or helping donors support the best nonprofits not just any that are doing a good job, is in some ways a wholly different goal. According to the Money for Good report, only 15% of donors even state that they care about supporting organizations that are better than others at achieving their goals.

To me, this means that we have two separate issues at stake,

  1. We need to help the 85% of donors who already care about supporting effective nonprofits act on this interest by creating high quality information that is designed in ways that donors actual want to use it.
  2. We need to work to increase the percentage of donors who care about maximizing the effectiveness of their giving by supporting the best nonprofits.

The first issue is one of meeting a pre-existing demand. The second is about creating demand. Both can be done. Both sorts of issues are tackled all the time in various markets.

But the one thing we can’t do is simply build philanthropic products and services for imaginary “rational” actors who are seeking massive amounts of data and metrics, and love to run Excel spreadsheets before every donations. These donors are as imaginary as Vulcans.


  1. Rachael Barrett says:


    Thanks for blogging on this report. It is incredibly insightful. Of course there is another gap…the gap between what donors say and what they do, which Hope seeks to address in their behavioral analysis.

    What would happen if organizations limited or severely decreased solicitations? We are taught, you want to get, you need to ask (again and again).

  2. That’s interesting Rachael. I’m a big believer that donors should proactively seek out the organizations they want to support rather than responding to solicitations. But I think if nonprofits stopped asking, donors would assume the need had disappeared and stop giving!

  3. David Lynn says:

    On the other side, wouldn’t it also be easier to allow those funders that are doing quality research to share what they found? I’m more inclined to believe that experienced donors did a good job of selection than that I can make a better decision on my own by reading what Charity Navigator posts.

    It is still such an unacceptable practice for a foundation to share exactly why they chose to fund – or more importantly, why they didn’t – a particular organization. If they already did the research, and did a good job of it, then that information combined with other research is extremely valuable. Yet the culture is not there to support this level of transparency and sharing.

    Thanks for this continuing thread, Sean.

  4. HeatherO says:

    Good stuff! Very insightful and well written! I’m off to share with my NP clients and connections!

  5. Dien Yuen says:

    Hello Sean,

    One of the reasons I love your blog is that it provides me with inspiration and dreams of where I wish we could be soon. Day to day, we are in the trenches working with our donors – slowly – but we are moving forward. To give you some sense of where some of our donors are, I thought I would share with you a small piece of a paper that Andy Ho and I wrote, “Chinese American Diaspora Philanthropy: A Perspective on History, Characteristics and Potential,” that will be published this Fall:

    In general, Chinese American diaspora donors are very involved with their philanthropic activities. They express their personal involvement in information gathering, site visits, and asking friends about particular organizations. Some also enjoy taking friends along with them when traveling to see the projects that they have supported. For some donors, the opportunity to do research and closely work with the organization delivering the service fulfills the emotional need to be connected to the causes they support. However, this hands-on approach is also the result of bad experiences in the past. Lack of communication on project status, local officials taking or redirecting funds and the inability to trace what the charitable funds were spent on are common complaints of donors giving overseas.

    Chinese American donors are generally interested in direct service projects that have an immediate impact on the ground level. They are interested in tangible results and want to know the direct impact of their gift, specifically, who and how were they benefited. In other words, the impulse for their philanthropy is to do something specific. General funds and open-ended theme funds without a specific focus geographically are not as attractive to them.

    Chinese American donors giving to Asia prefer projects that have a specifically defined group of beneficiaries working in programmatic areas that appeal to their philanthropic interests. Completing due diligence on the organization, evaluating the status of the project, periodic reports and communication, and site visits, whether by the donor or their representatives, are important tactical steps that further trust and relationship-building with Chinese American donors.

  6. As a known sceptic about measurement-mania it’s interesting to me that advocates of this approach are having to find ever-more elaborate scenarios to avoid the more obvious conclusion that their basic asumptions are flawed.

    I’m glad that many of these assumptions are at least being raised up , but the “view from the field”in this debate is completely missing – it’s dominated by donors and their advisers looking down from the top – yet it is non-profits on the ground that feel the impact of new approaches most of all, and many of them are hurting badly.

    Last week I was in Toronto discussing “Small Change” with Canadian philanthropy and non-profit leaders and heard about the Canadian Government’s decision to remove funding from CCIC – the Canadian Council for International Co-operation – the national non-profit network that has been doing sterling work for the last 40 years. What reason did the government give? “Effectiveness criteria of sustainable development results. We have many NGO organizations and partners that are actually feeding children who are starving.”

    So learning, advocacy and network-building no longer count, literally and metaphorically, yet changes in government development policy – whch CCIC has helped to bring about – could have a far greater impact than expanded non-profit service provision. Is this an isolated example? I don’t think so, and it points to a hugely-important conclusion: there are no universally-accepted measures of non-profit performance, only different interpretations of what different people think are important and significant, and that’s why it’s so dangerous to use data to “drive resources to high-performing organizations” rather than for learning and sharing.

    I hope those who are pushing narrow aproaches to impact-measurement are aware of the damage they may be doing. After all, isn’t that what acountability is all about? Fran Barrett and I are organizing an event at the Foundation Center in New York later in the year to get at these issues, so I will post details of that event when I have them.

  7. Michael,
    You are debating a straw man. The discussion on this blog are about creating robust evaluation. I write regularly about the need to use left and right brain techniques, not just “data”. I write about the power of empathy. There might be some people in the sector that think we can use spreadsheets to drive all of our giving, but that’s not the discussion being held here.

    “learning and network-building” no longer count? I’d like to think that they are a major focus of my work here at Tactical Philanthropy.

    I think your criticism is off base or at best a critique of a simplistic , straw man version of the discussions being held here.

  8. Thanks Dien. I believe that making donations based on a strong understanding that the nonprofits you support do great work is the most emotionally satisfying sort of philanthropy. So it is interesting to hear how Chinese American donors find this to be true.

    Of course, the fact that your donors arrived at this after seeing their earlier donations “fail” is worrisome. On the other hand, Jeff Mason, who often comments here, has repeatedly stressed the need to educate donors about how nonprofits can actually create harm through poorly performing programs. I think this negative approach is misguided, but maybe he’s right.

  9. Thanks Sean, there’s no reason to be so defensive just because someone disagrees with you. My comment was a general one – it has nothing to do with you or your blog personally.

    As I say above, if more people could see things from the bottom up, I think they would see that the ways in which some donors are using measurement and evaluation are already having damaging effects out there, regardless of whether or not you or I share their interpretation. Or do you think the 16 people who lost their jobs at CCIC because of someone else’s “robust evaluation” are the victims of some straw man? I don’t think so – I think it’s a crucial question, and one that’s well worth exploring. Perhaps you could even explore it on your blog

  10. Ha! OK, fair enough. My response was defensive. I guess I’m tired of people rejecting “measurement” or “data” across the board because they see examples of bad measurement or decisions based on poor quality.

    When you write, “advocates of this approach are having to find ever-more elaborate scenarios to avoid the more obvious conclusion that their basic asumptions are flawed” who are you pointing to? I assumed you were labeling my post as an one of these elaborate attempts.

  11. Was in the midst of writing a summary blog post on the Money For Good report, and came across your post on the subject. The whole concept of having your heart and passions lead you to the cause and your mind lead you to the org is something we feel strongly about and your comment about “one thing we can’t do is simply build philanthropic products and services for imaginary “rational” actors” really struck home. We’ve tried (and failed) in the past at trying to provide solutions that donors “should” want, and it took us awhile to realize that.
    As usual, you have done a much better job at distilling the issues and I appreciate your participation on the advisory board as well as your ongoing commentary on this and other important topics. I will make sure to post this and give credit where it’s due.

  12. Thanks Justin. I’d never heard of your group GoodSpark. Looks like you are doing neat stuff!

  13. Sean –
    Thanks so much for your post on Money for Good. And for calling out Tris’ Vulcan reference – those Brits (note to reader: Tris Lumley of New Philanthropy Capital is a Brit, or at least he sounds like one).
    You highlight two separate opportunities in your post:
    1. Helping the 85% of donors who already care about supporting effective nonprofits to act on this interest
    2. Increasing the share of donors who care about maximizing the effectiveness of their giving by supporting the best nonprofits
    You correctly say that both of these opportunities can be addressed. We’d argue, however, that they shouldn’t be. Given scarce resources for shifting donor giving, we believe that it makes the most sense to focus on opportunity #1, where the potential impact is the greatest.
    Here’s why we believe it makes sense to focus on opportunity #1. First, the sheer number of donors that care but don’t act, or that do some research but don’t research performance, means that more dollars can be moved to higher performing nonprofits by focusing on these gaps than on the tiny sliver of donors who do comparative research.
    Second, changing donor behavior is hard, and opportunity #2 asks donors to significantly change their behavior. I know that we’re preaching to the choir here, but increasing the share of donors who do comparative research requires asking 97% of donors to work against their core behaviors. Most notably, 63% of the donors who do research do so to make sure they’re not giving to a “bad” nonprofit, and half of donors today look to the nonprofit or those close to it for information. Asking donors to compare between organizations requires that they change these core behaviors, and that’s a tall order. We’d prefer that the focus shift to approaches like a seal of approval, which are likely to have more impact because they allow donors to improve the quality of their giving without changing their existing preferences or behavior as much.
    Third, and finally, we believe that one of the best ways to increase the share of donors who give to the best nonprofits is to gradually migrate them to better giving over time. Today, most donors believe that the nonprofits to which they give perform relatively well. Donors therefore don’t see the need to do much research on their gifts. Let’s focus our resources today on getting more donors to recognize that some research on their gifts can help to improve nonprofit performance, and to do something about it (opportunity #1). As donor appetite for information grows, we can encourage donors to become more sophisticated in their giving and, ultimately, to give to the very best nonprofits.

  14. While I agree that #1 has more near term opportunity, #2 is critical for a real shift. If there was just one big entity trying to shift everything, then plowing all their resources into #1 might make sense. But given the multitude of players, I’d like to see different groups going after #1 and #2 progress.

  15. Thanks Sean. GoodSpark was actually created to address many of the issues you’ve covered in your blog. We started out with the sole purpose of creating an engaging way for people (specifically young professionals) to give effectively and efficiently online. A post response isn’t the right place to bore you with our history, but suffices to say that we felt the existing resources at the time fell far short and there was opportunity for improvement. We worked hard to put together a more robust way to evaluate organizations (rather than a one-size-fits-all or “financials tell the whole story” methodology), leveraged technology to provide an engaging user experience (as well as keeping the costs down), and really tried to focus on ease of use and creative ways to make the content/tool digestible.
    As I mentioned in my comment, we learned the hard way about trying to supply donors with what we thought they should want. It wasn’t the grand success we had planned, but did manage to get the attention of a few larger organizations that have since leveraged many of the things we developed that were working and putting them to much greater use than we could have.

    I’ve been closely following the discussion between you Holden and Jeff regarding the performance vs impact debate. Holden was actually one of the people I first voiced many of my concerns to about the sector back in late 06/early 07 and I found we shared a number of the same frustrations. I’ve also spoken briefly with Jeff in the past about the work he’s doing with Alliance for Effective Social Investing.
    Although the discussion regarding your definition of high performing nonprofits is interesting (so much so that we’ve used your bullet points refine our strategy), what I’m really finding compelling is the discussion focused on evolution. Is a great nonprofit born or does it evolve. I particularly liked this piece “I think it is a great practice for a nonprofit to gather as much proof as possible that their programs are working before they undertake significant growth.”
    Looking forward to seeing that discussion evolve.

  16. Simon monk says:

    Interesting discussion. Our experience was that by far the majority of travelers (our particular audience) do care, so we tried to lower the bar to action by making it small, easy and part of something they were already doing online.

    We also tried to provide choice and transparency in project information; donors do care to be told the outcome, but it is a small percentage of original donors.