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What Not To Do / Charity  / What Not To Do When Deciding Where To Donate

What Not To Do When Deciding Where To Donate

Since starting my career, I have been in the privileged position to be able to donate a percentage of my income to charity and I have learned many things from researching how I can do the most good with these donations. There have been many changes in my donation habits over the years, and I have had to adjust my view many times on what “doing good” means, as I’ve learned more about the world of nonprofits and how they operate.

Learning On The Way

The non-profit industry itself has evolved in recent years with regard to how work is evaluated and what good interventions look like. Recently this effort received international attention when the 2019 Nobel Prize for Economics was awarded to Ester Duflo and her team for bringing the idea of randomised control trials into the world of non-profits and government interventions and driving change in how money and resources are used to improve people’s lives. We now have solid academic research to support the interventions that charities execute on, and we have been shown that development economics is a research field with much potential.

This having been a rather recent effort also means that there is continuously new research coming out and I personally have to be prepared to change my views with new evidence emerging. Reflecting on my time making charitable donations, I can see that some optimisations can be made. I am changing my behaviour to avoid certain approaches in order for my donations to have the most impact – there is still much to learn about charity evaluations.

“Giving With Your Heart” Versus “Giving With Your Head”

The first realisation I had once I started looking more into the evidence behind charities is that the rigorous testing of interventions and ‘giving with your head’ do not have to be the opposite of ‘giving with your heart’ to organisations that you care about.

In the beginning, I was struggling to understand that it is not heartless to look at the charity sector objectively and evaluate it as you would any other business. Over time I have learned that researching charities and holding them to a high standard doesn’t just help me feel more confident in my donation decisions, but gives me the assurance that I am helping as many people as I can.

I personally care about global health and for everyone to have equal opportunities to a healthy and prosperous life. I can combine this deeply held belief with researching these organisations in order to find the charities that have already proven to effectively achieve these goals.

Focusing On Overhead Costs Only

Many evaluators focus on overhead costs as their main metric to evaluate the effectiveness of a charity. While it is a good indicator of efficiency, it doesn’t always reflect the impact that a charity has.

A good example of this is Development Media International, an NPO focusing on running evidence-based media campaigns to change behaviours and improve lives in low-income countries. While their overhead is very high, due to heavy investment in researching the right messages and translating them into local languages, their proven impact is just as high.

Similar to investing in companies, it makes sense to look at cost effectiveness rather than overhead costs as in some cases high overhead just reflects the business model rather than the efficiency of the charity.

The metric of cost effectiveness helps me to not just think about the output a charity produces but also what impact this output has and how good it is at achieving the goal I care about.

Not Looking Beyond Borders

Another topic that could hold people back in doing the most good might be not looking beyond one’s own country’s borders at potential charities.

In my early days of supporting charities, I held the belief that supporting local non-profits would always be preferable to supporting any working internationally, as I felt I can observe their impact better.

Over the years I have realised that I am not actually observing any of the impact local charities have as the ones I supported often reported on output (e.g. school supplies provided) rather than impact (how these supplies helped the children). It makes more sense for me to rely on independent studies and randomised control trials to evaluate a charity’s work.

One thing my economics studies taught me is that my money can go so much further in a developing country due to exchange rates and the general cost of living. There are many countries in the world that are still battling preventable diseases that cause children to fall sick with illnesses like Malaria that have been largely eradicated in the majority of the developed world. Preventing these diseases is often very cost effective and a little can go a long way.

All in all, I truly believe there is no single correct answer to the question of “which charities should I support?”. Even when taking the research into account it is still a personal choice, but I hope that sharing the mistakes I have made in the past can help others get a head start in their donating journey.

Top Tip

Researching charities can be time consuming and I am very glad that there are many organisations out there already doing the heavy lifting for us. Non-profit evaluators like Givewell.org are a great place to learn more about which interventions are most promising and which charities are best at delivering those interventions.

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