Wednesday, January 16, 2008


Search any philanthropy blog or do aGoogle search for GiveWell, and you will find a firestorm of comments, critiques, give-and-takes, and back-and-forth in the philanthropy blogging "community".

Apparently the co-founding executive of GiveWell -- the latest and greatest effort to rank and rate nonprofits -- was caught anonymously promoting his group through blog comments, and denigrating competitive groups such as CharityNavigator. (He apparently left anonymous comments and questions on blogs, then responded anonymously to them, and highly rating his own answer, etc.).

I am not even going to offer links to all this, because it is very redundant, difficult to digest, and you can find it yourself if you want to spend your time that way.

So why am I even bringing it up?

Because the important core questions are buried by the broiling controversy.

They are: Does it make sense to rate and rank nonprofits? If so, to what end? And what is the appropriate way to do so?

Understanding and "judging" nonprofit organizations is a more nuanced and complex effort than purely examining financial documents, establishing a formula for the correct amount spent on "overhead", etc.

On the other hand, the web does enable easier access to more information than previously available. For example, Guidestar makes the tax returns (form 990) of nonprofit readily available, where paper copies previously had to be requested on an individual basis.

The GiveWell approach apparently attempts to go beyond pure numbers, using grants as "bait" to find out as much as possible about groups, and then award grants to those they regard as the "best".

Subjectivity, Social Capital, and Proximity

The vast number of nonprofits alone means that subjectivity, social capital amongst funders and nonprofit leaders, and proximity all play important and valuable roles in deciding who gets what.
This negative side of this: Those who have the social capital win; those with less access are left out. The less equitable the socio-economic situation is, the less equitable the sector is.

The positive side of this: Social capital is a liquid asset. People and organizations can be upwardly mobile in a marketplace based on relationships, trust, etc.


In the for-profit world, it is best practice to create a brand and aura around a company, and to grow demand for a product that many not have been previously needed. Marketing strategies appeal to base human instincts (jealousy, sex appeal, desire to be wanted, etc) to fuel sales - even when a product has absolutely nothing to do with the attractive person on the billboard. This is accepted as fine, as long as customers go along for the ride, and the product or company behaviour does not betray the image.

While the capitalist system is supposedly built on the rationale choice of individual consumers, the secret hiding in plane view is that the market does everything it can do steer us away from rationality, so that we rely on instinct and feeling. Heart rules over head.

Well, my friends, I am afraid to say that nonprofits - where the heart really belongs at play - subjectivity also plays a critical role.

If we were to be completely rationale in making choices, donors and foundations would have to rank each and every possible worthy cause before deciding on about 3-5 focus areas. Instead, the personal history, values, politics and passions of donors drive them to identify issues and organizations that are meaningful to them.

Social Capital

One common saying in philanthropy: we don't fund an organization, we fund a leader. The relationships, trustworthiness, experience, politics, reputation (at large, with peers, with other funders, etc.), likability, of any given nonprofit leader can influence and sway donor and funder views.


The vast and ever-growing number and variety of organizations in the nonprofit sector, combined with the general provincial nature of philanthropic giving, means that proximity matters. Social capital tends to have a relationship with "place" of one sort or another as well.

Of course the web, air travel, the demise of long-distance rates via cell phones, and other factors help to mitigate the limited nature of place. However, organized philanthropic giving on the whole remains locally-driven by high-touch, low-tech people and processes.

Just answer this question: which fundraising strategy is more likely to be successful: sending out 100 copies of the same proposal to 100 funders (with the only change in the name and address), or meeting in-person two times each with ten funders? Why did you answer the way you did?

The vastness also means that nonprofits are always changing - new start-ups and grassroots groups are created, while great executives leave existent groups or they simply become less relevant for some reason. This is a very "liquid" field, like the earth itself, constantly shifting, evolving, changing. Try to find rate and rank sand castles. By the time you go to print, the whole scene has changed.

Given all these factors, I question the critical value of ranking and rating nonprofits.

One additional note:

Given the fact that GiveWell was created by two Wall Streeters, perhaps their poor performance will take some of the wind out of the sails of those who believe that the magic bullet solution to the nonprofit sector's human resources and leadership needs are to important management from the business world.

1 comment:

Dahna Goldstein said...


You make a number of good points: that relationships matter, and will continue to matter, in funding decisions; that the majority of philanthropic giving is locally-driven; that metrics like overhead expenses are flawed; that we operate in a very liquid field.

I accept all of those premises and yet draw a different conclusion. Yes, there is a lot of subjectivity that informs funding decisions. Yes, relationships matter. And neither of those things is likely to change (nor should they, necessarily). But other elements of the sector – and other elements of how funding decisions are made – can and should change. The fact that our field is very liquid suggests a need for the field as a whole to be adaptive. While the constant shifting to which you allude suggests that ranking and rating nonprofits is difficult, it also suggests a need to provide more structured and accessible information to donors, many of whom are interested in maximizing the social impact of their philanthropic dollars, and do not know how to find the best information to support their funding decisions. For those donors looking to make an impact, they will still ultimately choose which issue areas and which nonprofits to support based on what speaks to them (the heart), but providing better information to those who seek it would – and will – empower them to evaluate (the head) how best to achieve the social impact they seek.

The actions of GiveWell's founders should be condemned. But that doesn’t mean that bringing transparency and providing better information about nonprofits – the ostensible mission of GiveWell – is a bad idea.

In fact, the Hewlett Foundation is embracing the notion of an improved market for nonprofit information. While the jury is still out on whether the foundation will support GiveWell in light of the actions of its founders, Hewlett's President, Paul Brest, published an essay in the foundation’s 2006 annual report calling for an Online Information Marketplace for Giving". And there are other interesting examples of organizations trying to promote improved access to information about nonprofits that goes well beyond looking at how much money is spent on overhead. GreatNonprofits is one such organization.

You question the value of ranking and rating nonprofits; I'll ask a question in return: how would you advise a donor who wants to find out which nonprofits are creating the most impact in the issue area he/she has chosen to support so that his/her philanthropic dollars can do the most good for the most people?