Charities: Following the Money Trail

Questioning the effectiveness and impact of charitable organizations has long been a topic for discussion. 2,800,000+ mosquito nets dispersed. 1500+ phones donated. 1350+ wells dug. The average donor may wonder about the numbers, but likely doesn’t take the time to look behind them, to verify them, to understand them. We take them at face value and assume that they represent the work of these charitable organizations and of our dollar – after all, how could an organization working for the common good misrepresent itself, or even worse, lie? We trust these organizations and the numbers they market. But, should we? Staff writer Adrienne Villani investigates.

In the philanthropic community, there have been loud calls for greater organizational transparency, for organizations to be held accountable for how they spend their money and deliver their services. While this movement in philanthropy has been building steam for quite some time now, many parallels can be drawn between what is happening in the philanthropic world and what is happening in the business world. In the wake of the financial crisis, people are calling for a new economic system, a new brand of capitalism, a new breed of business.

And with this, enters a new breed of charitable organization that WANTS to share its numbers, that WANTS its donors to understand, that WANTS you to trust it. We are at the precipice of a paradigm shift, with transparency assuming prominence.

“The Life You Can Save”

To raise money, charitable organizations pull at our heartstrings. They barrage us with photos of “the life we can save.” They then tell us how many of these “lives we can save” with just a small donation, or in some cases, even without a monetary donation, but with action. Take any cause, be it number of textbooks bought, number of teachers trained, number of school lunches distributed—how can we ever be sure?

These organizations balance the compulsion of saving one life with that of saving thousands of lives. Peter Singer, in his most recent book, “The Life You Can Save,” explores why we are willing to try to assist a stranger in front of us, while we are unwilling to donate to save strangers half a world away.

Nicholas Kristof, the New York Times columnist, writes ,“There’s growing evidence that jumping up and down about millions of lives at stake can even be counterproductive. A number of studies have found that we are much more willing to donate to one needy person than to several…For example, in one study, people donate generously to Rokia, a 7-year-old malnourished African girl. But when Rokia’s plight was explained as part of a larger context of hunger in Africa, people were much less willing to help.”

Marketing expert Seth Godin echoes this sentiment, writing, “The problem with enormity in marketing is that it doesn’t work. Enormity should pull at our heartstrings, but it usually shuts us down…If you’ve got a small, fixable problem, people will rush to help, because people like to be on the winning side, take credit and do something that worked. If you’ve got a generational problem, something that is going to take Herculean effort and even then probably won’t pan out, we’re going to move on in search of something smaller.”

Essentially, organizations are advised to downplay the enormous problems they are addressing. They are told it is best not to communicate how big the problem actually is.

This may be because people give to feel good, often giving out of selfish motivations. It is easiest to feel good when you can write a check and the problem is solved. But, when the problems are enormous, they become seemingly unsolvable – eliminating global hunger, eradicating malaria, delivering safe and clean drinking water. The feel-good rewards disappear.

This new type of organization, though, is challenging these oft-held beliefs. While humanitarians have been infamous for being ineffective at selling their causes, these organizations are both thinking and talking big. They are standing up to the old saying “one death is a tragedy, a million – a statistic.” We are no longer numb to statistics; instead they galvanize us. We believe in something bigger than us, bigger than the individual, bigger than one.

They do this by telling a true story, through being transparent, and by selling honesty.

Truth in Advertising: Honesty Sells

Honesty breeds credibility. Applied to people or organizations, especially in light of the “shady business” that preceded the global economic meltdown, honesty, credibility, and perhaps most importantly, transparency, are necessary to tell an authentic, believable story.

Suddenly, organizations want to tell you everything. They share metrics, they want to justify them, they want to back them up with hardcore data. The organizations that talk the talk have gained traction, have made a name and reputation for themselves, and have created opportunities to scale through their adherence to best practices, while pioneering next practices.

Charity: water is leading this pack. Their accountability and simplicity of purpose set it apart from other organizations. Their value proposition is as follows: one-out-of-six-people on the planet does not have access to clean drinking water. Five thousand dollars buys one well for an African village. Every dime you donate, goes to these wells because of the innovative charity: water model. You can even watch the wells being tapped for the first time via Web video. Separate donors cover all administrative costs – “rent, salaries, travel, printing, and even paper clips!” – in order to ensure that every dollar the public donates goes directly to water projects.

According to Carrie Sanders, charity: water’s Development Director, “When charity: water was founded, we set out to do things differently – we wanted to guarantee that 100% of every dollar given to build water projects actually did just that. We wanted to prove every project that we funded used innovative technology, photos, and GPS – connecting people to the reality of the problem and to the viability of the solution in a real way.”

“Earlier this month (September), we went one step further when we launched our new website – www.mycharitywater. org – that is able to track every dollar donated to a specific project. So whether someone donates US$20 or US$2,000, they can see exactly where their money went. Our goal is to be as transparent as possible, and we’re always looking for innovative ways to close the loop with our donors.”

Charity: water is going above and beyond. “We have made every effort to protect the integrity of our funding model and ensure the sustainability of our work,” Sanders adds. In addition to their innovative fundraising model, they closely monitor and evaluate their on-the-ground implementing partners, ensure financial transparency of their partners. She continues, “We divide our funding into allotments. Partners must reach certain milestones in their progress and complete certain levels of reporting in order to receive each installment of funding. Funding is not dispersed until the partner demonstrates necessary outputs and outcomes in correlation with our water program standards.” If their partners do not adhere to their 100% model for direct project costs, they are not eligible to receive further funding.

Nothing But Nets, a grassroots campaign working to save lives in Africa by preventing malaria, operates along a similar model as charity: water. A contribution of US$10 will send a life-saving mosquito bed net to a family in Africa. One hundred percent of each donation is used to purchase nets, distribute them to families, and provide education on the proper use of the net. “Our funding partners enable us to continue our life-saving work and expand our reach, to ensure that every US$10 donation goes directly to the purchase, distribution, and education on the proper use of a bed net,” notes Amy DiElsi, Communications Director for Children’s Health at the UN Foundation.

FreeRice, the highly entertaining and interactive website where users can play various educational, multiple-choice games in order to raise money to fight world hunger, guarantees that for every correct answer, 10 grains of rice are donated to the World Food Program (WFP). Even better, the WFP claims that the reported quantity of rice is actually dispersed and received by those in need. Pierre Guillaume Wielezynski, who handles Online Communications for the WFP in Rome, explained, “As a publicly accountable UN organization, WFP closely monitors distribution of rice and other food aid very carefully and reports all findings to its stakeholders. Through its efficient distribution of food assistance over the years, WFP has developed a reputation for transparency and earned the trust of our partners. We believe that ultimately, WFP’s reputation is the best guarantee.”

Although not as granular in their reporting standards, Oxfam Unwrapped, the branch of Oxfam that allows donors to purchase gifts for those in need in the developing world, is not shy. They openly admit that “due to the high volume of gifts sold and the potentially large administration costs of tracking each individual donation, we cannot track every gift that is sold. Because we do not track every donation, we are not able to identify when the income has been spent on another item or service (people choose the item they wish to gift). But, we take a category approach to the funding that we receive from Oxfam Unwrapped customers. This means that we restrict the money to items, services, and activities within the category that the gift falls.”

Kudos to Oxfam for being transparent.

Numbers Are King

Numbers guide our decision-making on a daily basis. We, as human beings, do a cost-benefit analysis for almost every decision we make. As a result, charitable organizations, while feeding us photos of “the life we can save,” also barrage us with numbers. Numbers quantify need, they make it accessible and understandable. A world without numbers is a world without comparison.

More than just simple quantifiable numbers, though, these numbers are marketing tools. According to Josh Nesbit, Executive Director of Hope Phones, “We want to package something that people can read and respond to.” Hope Phones collects old cell phones at a recycling center, where the phone is given a value. Then, 100% of the value is used to purchase appropriate, usable cell phones for community health workers at medical clinics in Africa. According to Lucky Gunasekara, Co-Founder of Frontline SMS:Medic, a sister organization of Hope Phones, “We never draw a penny out of the phone.” The average donated phone in the US allows Hope Phones to purchase 2-3 cell phones for clinics.

Hope Phones’ leading metric states that “a $10 cell phone will give 50 families access to emergency medical care, health information, transport services, and clinic resources.” This is an approximation, we learned, based on much field exposure. Nesbit explains, “Generally a community health worker is linked to 50 families – 1 to 2 villages. You can further extrapolate based on demographic data and the size of the village. It would be tough to interview every single community health worker and see who they are looking after, but 50 families is probably a very modest approximation.”

The Paradigm Shift…

While there is much to be positive about in this space, the picture is probably not as rosy as one would like. Plenty of organizations launch with great intentions, only to become lax about their transparency and accountability.

However, the public how has a powerful voice in the matter. Organizations are in less control of their image than at any other point in history. As ideas and information now spread virally, anyone can get to the root of the claims made by companies and non-profits. Organizations in a web 2.0 world must ensure that the claims they make are foolproof. It is literally their only choice – otherwise they will face viral outrage.

In response, many new charitable organizations are establishing new communication strategies. Due to how dramatically exposed global organizations are in our world of twenty-four-hour internet, ubiquitous Twitterers, and social media mavens, transparency is proving to be the best marketing strategy available.