Thursday, May 6, 2010

Small and Effective

Over this past year working for a small non-profit, I've been thinking about how someone could reasonably make a social investment in a small organization without much capacity to prove its impact, or without a established history to show the changes its made in a community. It's easy to make a donation to one of these smaller organizations, but harder to see how your donation (and by extension, the organization) is making a difference.

To do this, one needs data. Most small organizations do not have the resources to evaluate, making it difficult to know if you will ever see any returns on your social investment. GiveWell lays out some pretty good criteria that need to be met before a donor should donate to a small, unproven non-profit (abbreviated here):
  1. The donor has significant experience with, and/or knowledge regarding, the nonprofit’s client base and the area within which it’s working...
  2. The donor has reviewed whatever information is available about past similar projects and about the assumptions underlying this project. If similar, past projects have failed, the donor has a clear sense of why they failed and what about the current project may overcome those obstacles.
  3. The donor has a good deal of confidence in the people running the nonprofit, either because s/he know them personally or because s/he has an excellent sense for their previous work and past accomplishments...
  4. The donor feels that the organization is doing whatever it reasonably can to measure its own impact over time. The donor is confident that– within a reasonable time frame – if the project succeeds, it will be able to prove its success; if it fails, it will see this and it will fold. Until impact is demonstrated, there is no need for the kind of scale that comes with taking many donations from casual donors... [Emphasis in the original]
As you can see from the last sentence, this is not advice for the casual donor. Following these steps is a lot of work for someone who only wants to give a small donation. For the microphilanthropist social investors, it might make more sense to donate to a larger charity with proven impact, rather than risk wasting our money on a small non-profit with nice stories but not a lot of data to back up the smiling faces on its website.

However, there are many non-profits who have made it out of the initial stages of growth, but haven't made it to the level where rigorous impact evaluation is possible. These organizations have been around for a while, have somewhat sustainable funding sources, but are constantly looking for new funding to ease the financial tension that comes with being a small non-profit. For these organizations, small contributions can go a lot further than at larger organizations which aren't as strapped for cash. It is also these small organizations that do not have the resources to prove their impact as well as the larger ones, or decide not to spend time on rigorous evaluation because it will disrupt the flow of services. Unfortunately, because of this, small organizations can usually only offer potential donors nice stories and smiling faces.

So, I don't really know how to offer advice to those who want to invest in a small organization while also ensuring whatever organization chosen will have a real impact on the population it serves. One way goes off of GiveWell's point #3: Actually knowing the individuals who work there and having an extensive knowledge of how the organization works. Another piece of advice I can think of is to use Charity Rater, which guides you through the evaluation process for a non-profit you choose. Besides those, as much as I hate to admit it, all I can come up with is to find one you have a good feeling about and support capacity building efforts to help it prove its impacts.

Each of these options has drawbacks--most casual donors are not intimately involved in a non-profit, Charity Rater is set up to evaluate aid organizations and (most significantly) a small donation can't go far when it comes to supporting evaluation techniques. But I'm hesitant to admit defeat and say that these are the only options out there for those of us interested in choosing a small, effective organization, but without a lot of time or money to put into our investments. There has got to be more guidance out there, I just can't think of them.


Thanks to Mark for passing along this post idea.


  1. Jeff, great post as always (really, always). You did a much better job than I would have. I really like point #4. An organization that isn't measuring outcomes [yet] should at least acknowledge that, explain why, and, ideally, have a plan for doing so in the future.

    However, I'm most intrigued about capacity building. In the business world, people don't always invest in businesses that are making money or even have the strongest business plans (twitter, facebook, youtube). The rise of venture capital has led to people accepting that you can invest in a company before it is profitable if you see a way forward for them and you think the business has a great VISION. Similarly, if an organization flounders for a time, keeping them afloat isn't always a bad thing. Great businesses (Apple comes to mine, Chrysler is desperately trying) can go through terrible times.

    I'm definitely digressing, but I suppose my conclusion is that outcome measurement is a form of capacity, and without early investors, no nonprofit organization ever would have survived long enough to have outcomes worth measuring.

  2. Mark,

    Thanks for the comment. I think you are right that organizations at different levels need different types of funding. (See comment on an earlier post here that discusses this.) Also, you can read a little bit more about supporting organizations with a good vision instead of profit over at Tactical Philanthropy.

    My one issue when applying these ideas to small non-profits is that it doesn't seem like there is any room for a small donor. Small donors can't really be a part of venture capital. (Although, this would be a pretty cool Kiva-like idea; bringing together small donors to create venture capital funds.) However, when you look at the fact that there are many small non-profits that are well beyond the stage of venture capital, but without the capacity to evaluate, that's when the small donor becomes needed. It's just that they don't have the evaluation to prove impact. And small amounts of money can't really encourage evaluation to a significant degree.

    But, bringing it back to your original point, which I think is key, if you believe the small non-profit does have a good VISION, then, it doesn't matter if they cannot prove their impact. Supporting their vision is something that a small donor can be a part of. You just need to find a way to learn about its vision.

  3. Great post. I often deal with very small charity projects. Sometimes even a reassurance (or clear evidence) that the money is going where it is supposed to is the biggest priority and also an advantage for a small charity. They should be telling their story and blogging about all the points you mention above.

    As well, I would find it very surprising if any donors are not some how personally connected to the project at least to begin with. Small charities should start by reaching out to their personal connections and then building their reputation and support from there. Again, social media is a great way to do this.