About Bob Bob serves as President and CEO of GuideStar and serves on the boards of Vision TV, Grameen Foundation USA, and the AAFRC Trust for Philanthropy. More...
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Although we wouldn’t presume to have the answer to Sigmund Freud’s famous question, we do applaud the approach that Cynthia Gibson and Bill Dietel take in their provocative article “What Do Donors Want?,” in a recent issue of Nonprofit Quarterly. At GuideStar, we have long known that the majority of donors give according to their hearts. They look for nonprofits that align with their own sets of values, and they look for the nonprofits themselves to prove that they are worthy of the donations. That’s what makes the nonprofit sector so interesting – there’s something for everyone.
We think it’s important that nonprofits make that emotional connection for donors. But in a crowded marketplace, with multiple nonprofits working towards the same mission and providing similar programs, we also believe it’s the high-performing nonprofits that, in fact, deserve these generation donations. And that’s a distinction that we have to make.
In fact, many donors who are solely motivated by strong personal interests─religion, education, health and friend─will probably continue to be the vast bulk of donors. But even here data can play a role: one person told me he gives to the same organizations every year, but uses GuideStar to make sure everything is still okay.
And it must be said: sometimes it is the most passionate donors who seek data. In our experience, an increasing numbers of donors who are determined to solve a problem or make a difference are the ones most likely to want to know about the results of the organizations they support. If a person’s goal is to, say, provide low income housing or end malaria, these passionate donors want to make sure the organizations to which they send their hard earned money actually know how to make a difference. During the Haiti earthquake crisis we were flooded with phone calls from people not about whether to make a contribution, but which organizations had the capabilities and experience to actually deliver. Passion often demands data.
Above all else, we know that we need to understand better what drives charitable giving in order to understand better how to drive that giving to high performing nonprofits. We recently partnered with Hope Consulting to conduct and market test research on this topic to better understand and inform the philanthropic sector on the behaviors, motivations, and needs of individual donors, foundations, and those who advise them. We hope to use the findings of this research to help shape our core offerings of nonprofit data and information to the world.
As President Obama recently remarked at the Millennium Development Goals Summit in New York, New York, “Guided by the evidence, we will invest in programs that work; we’ll end those that don’t. We need to be big-hearted but also hard-headed in our approach to development.” In other words, the job of providing data to donors is tough, but somebody’s got to do it.
Posted By Bob Ottenhoff on August 9th, 2010, in these categories: Donors | Giving WiselyWhat do you think of the efforts of Bill and Melinda Gates and Warren Buffett to urge their fellow billionaires to donate more to charity? So far, about 40 billionaires have responded positively, and I’ve seen one estimate that the amount pledged so far is approximately $600 billion.
I had several reporters call me last week, and I told them that I think this campaign is a big plus for the nonprofit sector. First, it increases public attention of the vital work the nonprofit sector provides and the need for financial support. More media attention about the importance of giving to charity should help heighten people’s awareness about their own giving habits. Warren Buffett was quoted as saying, "At its core, the Giving Pledge is about asking wealthy families to have important conversations about their wealth and how it will be used." Mayor Bloomberg said, "By giving, we inspire others to give of themselves, whether their money or their time."
Second, although many of these signatories are already major philanthropists, this effort should result in more money going to charitable causes. That’s a good thing, too.
I wish more attention had been paid to giving wisely. The Bill & Melinda Gates Foundation has earned a well-deserved reputation for strategic thinking, deep due diligence, and careful monitoring of results and impact. When Warren Buffett announced several years ago that he was asking the Gates Foundation to manage his charitable giving, he said it was harder to give away money wisely with impact than to earn it. We haven’t heard much yet about making sure this increase in donations ends up sending more money to high-performing organizations that are carefully measuring what they do and how they do it. Maybe that will come later.
What type of activity the billionaires support isn’t as important to me as making sure the money is carefully spent and leveraged as much as possible. I hope we’ll see some instances of pooling of money to increase the impact even more. Some of the billionaires on the list are already major philanthropists and regularly make huge gifts to important institutions. Not every one likes that: Pablo Eisenberg commented in the Chronicle of Philanthropy, "Very wealthy individuals have [an] unbalanced record when it comes to philanthropy. They give their biggest donations almost exclusively to universities and colleges, hospitals and medical centers, and arts institutions. They rarely make large gifts to social-service groups, grass-roots organizations, or nonprofit groups that focus on the poor or minorities."
Finally, Steven Pearlstein had a very thought-provoking column in last Friday’s Washington Post. He says the pledges remind him of the "hollowing out" of the middle class in America. He points out, "The latest data from the Congressional Budget Office show that in 2007, the top ‘quintile’—the 20 percent of the households at the top of the income ladder—took home 52 percent of the nation’s after-tax income, with the top 1 percent of households earning 17 percent. The Center on Budget and Policy Priorities calculates that from 1979 to 2007, the average after-tax, inflation-adjusted income of households in the middle of the ladder increased 25 percent; for the top 1 percent, it rose 281 percent."
Pearlstein urges us to reconsider our public policies that help all Americans improve their economic status. "With its ‘giving pledge,’ the Gang of 40 has taken an important step in revitalizing America’s philanthropic institutions, but it will take much more to revive the virtuous cycle by which wealth begets opportunity which in turn begets more wealth. Whether at an individual company or in the country at large, it is the feeling that we are all in it together that creates the basis for a truly vibrant economy and just society. Trickle-down alone won’t cut it."
Although I’m thrilled that the Giving Pledge has billionaires making strides towards significant philanthropy, I encourage these individuals—and all donors—to give wisely. Research and evaluate the organizations that support your beloved causes. Ask nonprofits about their performance and their results. Ultimately, make sure your dollars are making a real and sustained difference. It is this kind of due diligence that can ensure the billions being donated are maximizing impact.
Posted By Bob Ottenhoff on February 18th, 2010, in these categories: Donors | Economy | Giving WiselyHow many times have we heard critics say that donor decisions in the nonprofit sector are all too often subjective and irrational? Why, say these critics, can’t nonprofit decisions be more like those in the so-called real world, where decisions about stocks and houses are based on rationality and solid facts and figures? They say we need more rigorous criteria to make decisions, more focus on metrics to track performance, and a better way to measure outcomes.
Now I’m not disagreeing with the advocates of introducing more rationality into philanthropy. After all, that is one of the bedrock positions on which GuideStar is based. We believe that armed with more information, donors can indeed make better and more informed decisions.
But I’ve just finished reading a fascinating book by Robert J. Shiller called Irrational Exuberance (taken from Alan Greenspan’s famous speech in 1996), and if you think the so-called real world is the perfect model for what we want to do in the nonprofit world, you may want to think again.
Shiller is a professor at Yale, a prolific author, and co-creator of the S&P/Case-Shiller Home Price Indices, the place where we learn the depressing news about the declining values of our homes. So he comes with some credibility to his subject matter. Shiller’s book tries to explain why our economy seems to experience a constant roller-coaster ride of boom and bust. You can learn more about his book here: www.irrationalexuberance.com/index.htm.
Shiller gives many reasons for why irrational exuberance happens, but it all boils down to this: people make lots of irrational decisions.
Here’s how he sums it up:
The high valuations that the stock market attained at its peak in 2000, and the relatively high valuations that it still shows today, came about for no good reasons. The high valuations that the prices of homes attained in many markets by the opening years of the twenty-first century came about for no better reasons. The high stock market levels did not, as so many imagine, represent the consensus judgment of experts who have carefully weighed the long term evidence. The markets have been high because of the combined effect of indifferent thinking by millions of people, very few of whom have felt the need to perform careful research on the long term investment value, and who are motivated substantially by their own emotions, random attentions, and perceptions of conventional wisdom. Their all too human behavior has been heavily influenced by news media that are interested in attracting viewers or readers, with limited incentive to discipline their viewers or readers with the type of quantitative analysis that might give them a correct impression of fundamental value.
Wow, let me repeat that again: "motivated substantially by their own emotions, random attentions, and perceptions of conventional wisdom."
My conclusion: Continue to give with your heart. Sprinkle in some passion, too. Try, if you can, to introduce methods for a more rigorous analysis and steer more of your giving to the those who can demonstrate they are high-performing organizations. But whatever you do, don’t use the same methods you used to select your last stocks or purchase your home.
Posted By Bob Ottenhoff on February 5th, 2010, in these categories: Donors | General | Giving WiselyI went to the supermarket the other day to do the weekly family food shopping and, while I was paying my bill, the checkout clerk asked me if I wanted to make a contribution to a charity. I said no, but I felt a little guilty about it. When I left the supermarket with my bags of groceries, there were kids on the curb asking for contributions to local charities, all of them good causes. When I got home I paid my bills, and my insurance company asked me if I wanted to make a contribution to their nonprofit. I’m not sure what it does. That one was easy to reject; I just didn’t click the box. No human interaction required.
What’s going on here? Eric Felton wrote about this growing trend in the Wall Street Journal last month. He thinks these requests are annoying at the very least—and ultimately bad for charities:
My guess is that putting the touch on people in semicaptive situations such as the grocery-store checkout line isn’t necessarily a good thing for charity. Perhaps I’m wrong, and quotidian solicitations will make us more mindful of the plight of others and more open to helping the sick and the needy. But I suspect that the growing number of stores asking customers to chip in may end up creating a backlash. There was a time when telephone solicitations for charity worked—and so they proliferated. But after a while, people became ever more practiced at saying no.
I wonder how committed to promoting charity the retailers will be if they find shoppers have started to look at their storefronts with the same dread that greets the phone ringing at dinnertime.
I personally am not offended by this approach. There are probably some people who donate very little to charity, and this may be one of the few times they think about making a contribution. I personally won’t give to these requests, however, because I have my doubts about how much money actually ends up in the hands of charities after it has gone through all the corporate processing. And these are usually not causes that are of primary interest to me. More important, I’m concerned about whether this approach underscores the stereotype that suggests that charities are nice people doing nice work but not really that important or serious.
For me it boils down to the head/heart dichotomy again. Giving spontaneously from the heart is a good thing to do occasionally. I personally go out of my way to support street musicians, because many of them are really good and I appreciate their effort to make my world a little more enjoyable. We can all afford a few dollars here and there, and there are lots of good causes. But let’s not kid ourselves: if we’re really serious about tackling an issue, it’s going to take some solid research about organizational effectiveness and impact—as well as some serious money—to make a difference.
Posted By Bob Ottenhoff on January 26th, 2010, in these categories: Disaster Relief | Donors | Giving WiselyLast Friday’s New York Times included an excellent article by Ariel Kaminer on giving to Haitian recovery. It includes two questions that my colleagues and I have been answering since the crisis began:
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"What about in-kind donations?"
The article tells of a store in New York City where generous patrons donated food, clothing, and water for Haiti. "By early last week, the donations had been stacked into huge piles, and a plan had come into view: the store would lead a delegation of 25 people to Haiti, to rescue the children stranded at the Life for the World orphanage in the town of Source Matelas. Doctors, nurses and anyone else who wanted to come would each carry two large suitcases stuffed with food and medical supplies." Logistics, however, were a problem. Toting pounds of donations in suitcases was problematic, and "no one was sure if they would even be allowed to enter Haiti."
At GuideStar, we advise people that monetary gifts are more effective in the early days after a disaster. Even if your in-kind gifts do get to the scene, they may not be what’s need most right there, right then. If you feel compelled to give things rather than money, be sure to give them to an organization that can get them where they are needed most.
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"The best charities are the ones where most of the donations go to the cause, not administration, right?"
If you have been reading this blog for a while or are familiar with GuideStar’s stand on financial ratios, you already know our answer to this question. Katherina Rosqueta, executive director of the Center for High Impact Philanthropy, expressed our point of view perfectly in the NYT article: "What really matters in this situation is not their ratio of overhead to other expenses. … It’s their experience and record of having impact in Haiti."
The tragedy in Haiti has inspired outstanding dialogues on giving wisely and measuring impact. I hope that these lessons stay with us long after Haiti and its citizens are on the road to recovery.
Posted By Bob Ottenhoff on January 21st, 2010, in these categories: Disaster Relief | Giving WiselyIt seems that everyone—including GuideStar—has a list of organizations helping in Haiti. And with these lists come questions. From donors: Which organization(s) should I support? From nonprofits: How does my organization get the public’s attention?
Working with our partner GreatNonprofits, we have created a Haiti Disaster Action Center. This page lists more than 40 organizations working in Haiti. Here’s where you can help in a different way. If you have personal experience with any of these organizations—as a donor, volunteer, board member, or person helped out in a time of need (but not as a paid staff member)—share that information by writing a review. Your rating and comments will help donors decide which nonprofits to contribute to and also provide valuable feedback to the organizations themselves.
The reviews appear on both GreatNonprofits and GuideStar. And their impact will last long after the relief workers leave and Haitian citizens are able to resume their regular day-to-day activities. For there will be other disasters in the future, and these organizations will be there to help. Your reviews will help create a complete picture of each nonprofit’s effectiveness in times of crisis and great need.
Posted By Bob Ottenhoff on January 20th, 2010, in these categories: Disaster Relief | Giving WiselyI just read an excellent post on Tactical Philanthropy. In it, Sean Stannard-Stockton looks at responses to previous disasters and encourages donors to take those lessons into account when giving to relief efforts in Haiti.
We at GuideStar agree completely. In fact, during the Katrina crisis we began reminding reporters and donors that the problems of New Orleans existed long before the hurricane, and that taking your time with a wise giving decision was better than a rushed donation to an ineffective organization. Since the Haiti crisis broke, we have been telling donors much the same, and to consider long-term as well as short-term giving. As I noted last week, "‘Disaster relief’ is a long-term process, as we’ve seen in the aftermath of the December 26, 2004, tsunamis and Hurricanes Katrina and Rita."
Another issue is restricted versus unrestricted gifts. We recommend that in times of disaster a donor consider giving to a well-experienced organization’s general disaster-relief fund, rather than earmarking the gift for Haiti. Remember that relief organizations can’t wait until donations start coming in to respond to a disaster—they have to get to the scene as quickly as possible. By giving to a general relief fund, you give the organization the ability to use your donation where and when it is most needed. Perhaps that will be in Haiti today. Perhaps it will be at some other location in the future. But your gift to a nonprofit’s general relief fund will make a difference.
Posted By Bob Ottenhoff on January 13th, 2010, in these categories: Disaster Relief | Giving WiselyLast night a powerful earthquake shook Haiti and devastated much of that impoverished island nation’s capital, Port-au-Prince. It goes without saying that our thoughts and prayers are with everyone who has been affected by this disaster.
As always, donors in this country have been quick to offer their help. Here’s how you can give wisely to relief efforts in Haiti:
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Be pro-active, not re-active.
It’s not necessary or wise to respond to every call or request. Instead, follow the steps below to give wisely.
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Determine what kind of relief you want to support.
What are your values and priorities? What matters to you? "Disaster relief" has many faces—emergency housing, provision of potable water, medical assistance, feeding the hungry, sending in search and rescue teams. Decide which one(s) you want to give to.
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Do a little research.
Use a reputable source, such as GuideStar, or one of our partners, such as Network for Good or JustGive, to identify charities doing the work you want to support. All of the charities listed on these sites are legitimate organizations recognized by the IRS, and you can contribute directly from the sites.
If you already have an organization in mind and are familiar with its Web site, you can do your research there. Be careful, however, if you haven’t been to the site before or don’t know the organization well. Con artists often post bogus Web sites and run scam donation campaigns immediately after a disaster. If you aren’t already familiar with a relief organization’s site, protect yourself by linking to it from a trusted site such as GuideStar, Network for Good, or JustGive. Avoid new Web sites and links provided in e-mails.
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Ask questions.
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Does the charity have experience working in disaster relief and in particular Haiti?
Time is of the essence—lives are at risk, so you want to give to organizations that have the ability to get relief where it needs to go quickly and efficiently.
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How does the charity describe its mission and programs? Its accomplishments?
Do the programs support the mission? Does the charity use concrete measurements to evaluate its accomplishments?
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How do people who have firsthand experience with the charity evaluate its services?
Check GuideStar or our partner GreatNonprofits for reviews.
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Consider making another gift in a few weeks or months.
"Disaster relief" is a long-term process, as we’ve seen in the aftermath of the December 26, 2004, tsunamis and Hurricanes Katrina and Rita.
My colleagues and I hope that these tips will help donors give wisely as well as generously.
Posted By Bob Ottenhoff on December 31st, 2009, in these categories: General | Giving WiselyI just finished reading Being Generous by Dr. Ted Malloch. It’s a neat little book and especially relevant as we make our last charitable giving decisions for 2009.
I’m going to devote much of this post to quoting (with permission) from a post by my friend Dennis Whittle of Global Giving, which he wrote for the Huffington Post last month:
What makes [this book] especially powerful is [Malloch's] description of his own journey from self-described narcissism to compassion: "It never came easy. I have always had a "meritocratic" outlook. That is … you get what you earn, what you deserve. … I found it hard—often very hard—to give what I had earned away."
Being Generous weaves personal narrative with a brief description of the injunction to generosity in Christianity, Judaism, Islam, Hinduism, Buddhism, Native American and Aboriginal spiritualism, Confucianism, and secularism. Malloch then weaves in stories about an exceptional mosaic of givers, both big and small, well-known and obscure.
The diversity of personalities, viewpoints, and displays of generosity is arresting, and makes it clear that religion is not the sole motivator of generosity. The vignettes range from Henry Ford, Bill Gates, Oprah Winfrey, Jeff Skoll, and John Templeton to surprising stories about figures such as Johann Sebastian Bach and Felix Mendelssohn. Malloch also highlights many lesser known and smaller donors, including six donors to projects on GlobalGiving (to which royalties from of the book are being donated).
In a previous post, I argued that passion is essential for a successful nonprofit and needs to be part of our giving decisions. One might conclude that from Malloch’s perspective, generosity is the most important motivation, suggesting that compassion and a sense of obligation are what drives our giving. But Malloch ends his book by saying that generosity also requires giving time and energy: "The time needed to follow things through and the energy needed to convey your gift into the hands of the ones whom you wish to help." He urges donors to get personally involved in the nonprofits they support. In many cases that may be the right thing to do. But however one does it, generosity—just like passion—is best served with some careful due diligence and high expectations about organizational effectiveness.
Posted By Bob Ottenhoff on December 2nd, 2009, in these categories: Giving WiselyI was happy to be part of a news release issued yesterday that dispels the myth of using ratios as the only valid way to evaluate a charity. For more than a decade, GuideStar has preached the mantra that judging a nonprofit’s effectiveness is based on how well that organization delivers on its mission and not by running overhead or other ratios based on Form 990 financials. It’s one of the most frequent issues I speak to reporters about.
As a pioneer in the field of nonprofit transparency, GuideStar has collected information well beyond financials from thousands of nonprofits. Our data collection tool has always included a section where organizations can elaborate on their missions, program activities, and annual outcomes. You might also be interested in checking out two of the many resources we make available on our site: "A Donor’s 10-Step Guide to Giving Wisely" and "Why Ratios Aren’t the Last Word."
Finally, this year, through a partnership with GreatNonprofits, we’ve added third-party reviews to our nonprofit report pages as another way to help donors evaluate how well a charity accomplishes its mission. Thousands of reviews are now available.
We are excited that others share our view, and I commend my colleagues who collaborated on this release for standing together to deliver this very important message.
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