Demands by Foundations and Watchdogs Waste Resources, Says Donor Adviser

The good that charities do is often obscured by the ways that watchdog groups evaluate nonprofits and the demands donors put on them, says Caroline Fiennes in her book It Ain’t What You Give, It’s the Way That You Give It. In an interview, Ms. Fiennes, director of Giving Evidence, a company in London that advises people on giving, and former chief executive of the Global Cool Foundation, a conservation group, discussed her concerns:

How do donors waste time and resources? Are charities to blame?

There’s no natural feedback loop between a charity and its donors, so the donors won’t necessarily know whether they are doing a great job and the charity won’t tell them because it doesn’t want to bite the hands that feed it.

That’s why there are all kinds of things that donors do that turn out to be quite unhelpful. Application processes and reporting processes are the primary ones in which a huge amount of money gets wasted.

Foundations can do a lot about that in terms of harmonizing their application processes. When I was a charity CEO, I would quite often call donors or foundations and say, “Hey, I wrote an application to something very similar the other day. Would you mind if I sent the same thing?” And generally donors were fine with that.

What do you wish donors would do to fix this?

To just use the same application form.

You criticize watchdogs that evaluate groups because they spend too much on overhead. Why is that bad?

There is a negative correlation between administration costs and performance.

A lot of what is buried in that overhead number is the work organizations do to understand the problem they’re trying to solve, coordinating with other organizations, and then trying to understand the effectiveness they achieve and ways to improve that.

Charities should shut up about what their admin costs are. Every time charities talk about how low their administration costs are, they reinforce this notion to donors that this is somehow a useful metric.

If there was more of a concerted effort by charities to talk not about boring things like how much money they raised or how much they didn’t spend on administration, but about what they achieved, that would really help. Nobody is inspired by somebody having a low administration ratio.

What can American philanthropy learn from that of the United Kingdom?

The structural problems in philanthropy are the same everywhere: The donor has no incentive to perform.

So rather than learning from philanthropy in other countries, it’s more fruitful to look at what we can all learn from other disciplines.

What disciplines can philanthropy learn from?

Medicine seems way out in front. It’s highly analogous to philanthropy, in that it’s about doing things to other people to improve their lives and using finite resources to do so. But they’re better at it than us.

They’ve sorted out a decent mechanism for comparing the amount of improvement which different interventions provide. They have a very powerful set of tools for understanding the change which an intervention makes, and isolating that change from all other effects. A key tool is the randomized control trial.

Those are standard practice in medicine; they’re being used somewhat in international development. Domestic charities are miles behind.

The evaluations of drugs and interventions are done independently—by academics, funded independently. Most charities’ “evaluations” are done by charities themselves or by consultants whom the charities pay. It’s not hard to see the conflict of interest, especially as “evaluations” are used as marketing material, and as a result, most of the data is rubbish.

Self-evaluations are laughed out of court in medicine.