Sunday, December 13, 2015

Lowest Overhead or Biggest Impact: What's the Best Way to Choose a Charity?

Once again, this year the non-profit I work for was named to the top 25 list of best Canadian non-profits to give to. I am not promoting the favourable ranking.  Why? First, I don’t agree with how the rankings work, giving highest marks for lowest overhead. Second, it isn’t fair to all the other charities that do good work, but don’t make the list. As it turns out, Bruce MacDonald, CEO of Imagine Canada, feels the same way about charity rankings, as the interview below shows. 

Are you planning to make a year-end donation to charity?

If the answer is yes, you’re not alone. It is estimated that over $5 billion is given by Canadians to non-profit organizations in the last six weeks of each year.

Much of that is given by people of faith. Research repeatedly shows that the more religious a person is, the more they give to charity.

Many donors have already decided who to give to. But others may not yet have made up their minds. With over 86,000 charities in Canada, it can be hard to choose. What to do?

Many people will turn to the increasingly-popular lists of Canada’s “best” charities. These rankings, which rate charities according to their financial efficiency—the best bang for the donated buck—get a lot of publicity in the media around Christmastime.

For many Canadians, they are a popular way to determine which group to give to. It saves a lot of time, and donors can know their money went to the "best" non-profit groups, the ones that spend the least on overhead. 

Or is that the case? Bruce MacDonald doesn’t think so.
According to MacDonald, President and CEO of Imagine Canada, an umbrella group for Canadian charities, the problem is that these rankings measure the wrong thing.

While glad the media is interested in the charitable sector, these rankings “are invariably skewed to having a heavy emphasis on the cost side of business,” he says, adding that they “perpetuate the belief that ensuring adequate resources to deliver quality programs is a bad thing.”

What MacDonald objects to is how the highest rankings are given to groups that spend the least on things like staff salaries, administration, communications and fundraising. The ones that need to spend more to deliver their programs end up with lower scores.

He agrees that charities need to be careful with donated dollars. But, he says, this way of measuring charity effectiveness is “a poor reflection” of the real worth of non-profit organizations.

“One size doesn’t fit all,” he states. “The issues the different groups address are complex. It’s hard to compare a group that digs wells in Ghana with an organization that treats people with AIDS in Vancouver.”

What MacDonald would rather see measured is impact—what effect has the charity has on the lives of people it is trying to help? And if it costs more to help someone beat an addiction or escape poverty to do it, that should be money well spent.

“If you want real impact, you need to have real investment,” he says. “It’s hard for groups to achieve life-changing outcomes if they can only invest a little.”

In addition to affecting donor behaviour, MacDonald also is critical of how these rankings promote the idea that “charity costs nothing.” 

He is also concerned about the effect on charities themselves. The rankings, he says, have created what he calls “a race to the bottom” as groups try to out-do each other and get higher scores by touting lower overheads.

MacDonald knows the rankings won't stop. But what he would like to see is the media doing a better job of putting charity effectiveness in context. And he would also like to see charities decline to participate in the ranking process, or refuse to do any publicity if they get a good ranking. 

“We need to stop defining ourselves according to someone else’s playing field,” he says of Canada's non-profit sector. “We need to reframe the narrative about the sector so we talk more about impact, not just about costs.”

As someone who has worked in the non-profit sector for most of my career, what MacDonald says rings true for me. 

The truth is that doing good well costs money. Groups need well-trained staff, up-to-date technology, great accounting and skilled oversight to ensure donations are used effectively and for their intended purposes.

So as you prepare for your year-end giving, the best advice is always to start early and do your own research. Then, once you have chosen a charity, stick with it—that way you will always know how your donations are being used.

But if you have waited to the last moment, don’t just rely on the rankings. If you can, take a bit more time to find the one that gets the best results.

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