The ideology of impact

Against a dark background of austerity, double-dip recession and record levels of inequality, it’s no surprise the spotlight shines on the numbers—GDP growth, output, unemployment, credit ratings—the list goes on. And in the world of charities, it seems that the subject of impact falls into the same category—data, numbers and ratios.

We often debate what impact means—a discussion that’s usually about definitions and technical distinctions. But recently as I was talking about impact with a group of trusts and foundations, the question of what impact means ideologically was raised.

A concern was raised that the increasing focus on charities measuring their impact was motivated by a desire to marketise the charity sector. The more we focus on impact, the more charities compete with each other in a marketplace driven by contracts to deliver services. If we wait long enough, the big charities won’t look any different from Serco, the argument goes.

Understanding impact isn’t about making charities jump through hoops.

But I don’t think that’s what impact is about. A focus on planning, managing, and measuring impact means a focus on understanding the lives of the people that charities aim to help, and the changes they bring about in those people’s lives. By understanding this, they can work to make the biggest positive change possible. Impact measurement is a tool for social justice, not marketisation.

Take the charity The London Pathway, for example, which works within hospitals to integrate and improve healthcare for homeless people. It grew from a recognition that healthcare outcomes for homeless people were much poorer than for an average person—they are admitted to hospital four times as often, they stay in hospital three times as long—their overall health is much worse. By focusing on the needs of the people they aim to help, and understanding their life situation, The London Pathway has been able to massively improve these outcomes. And the reason it understands these needs, and can make a big positive change, is because it monitors the impact of it’s work. That’s social justice—better outcomes for people suffering multiple disadvantage.

The thing is that The London Pathway, and other charities that deliver outstanding impact for the people they help, not only improve lives but also save society a pile of cash. In the words of Harvard Business School Professor Michael Porter, it ‘is an excellent example of how a value-based approach can better serve patients, reduce inequalities, and deliver better outcomes that matter to patients per pound spent’.

At NPC we’re passionate in our belief that by focusing on impact—the real change they create in people’s lives and society—charities can achieve better outcomes for those who are worse off. And this will reduce inequalities and improve social justice.

Of course there’s a danger that impact measurement is used as a technocratic mechanism to bludgeon charities, favour those with the resource to build fancy systems and research methodologies, and marketise the sector. But if we really get to grips with impact, embedding it in charities’ practice and funders’ decision-making, what we can do is something much more positive, much more powerful: we can help charities to back up their passion and conviction with a compelling case that should help them get the resources their work deserves.

I hope we remember that understanding impact isn’t about making charities jump through hoops. It’s about putting the real changes to people’s lives at the heart of what charities do.

Tris will chair two conferences in London and Manchester later this month on how charities can embed an impact approach in their work, which will focus on the practical, with a wealth of guidance, experience, support and tips on measuring and managing impact.

We need your views!

Impact measurement has come a long way in the last ten years. It’s no longer just the niche interest of organisations like NPC; it’s now a key part of many charities’ everyday operations. Today, impact measurement is the focus of major conferences, popular tools and guides, and even entire organisations like the Social Impact Analysts Association. Some charities even have members of staff dedicated to monitoring impact.

But although we hear a lot of anecdotal evidence to support the view that charities are serious about measuring the difference their work makes, we don’t have the data to back this up. We don’t know how many charities in theUKare actually measuring their impact, what they are measuring, and how they are doing it.

This is why we’re very excited to be working with NCVO, ACEVO, CES and TSRC to carry out a major research project to dig deeper into questions around how charities are measuring the difference they make. Over the next few months, we will be working with Ipsos Mori to conduct a representative survey spanning the wholeUK charity sector—looking at charities across England, Scotland, Wales and Northern Ireland, and building on research carried out in 2007 and 2008 by CES. We want to build up a detailed picture of what charities think about impact measurement, how they approach it, and what kind of results they get.

We want to know if charities are collecting output data or outcomes; how sophisticated their level of evidence is; whether they are using quantitative research methods, randomised control trials, matched samples or academic literature. But we also want to find out what charities think are the major barriers to measuring impact, so that the sector can start to think about how these can be overcome.

Ultimately, we hope that the information we gather from this survey will help charities to measure better. By finding out what is holding charities back from measuring their impact, the organisations involved in the project can act to help overcome these stumbling blocks. For example, one common complaint we hear is that different funders demand different sets of information on impact, or information presented in a different way—something which might ultimately be changed with work in different subsectors on standardised reporting.

We’ll be publishing our findings in a free report later this year, and we also hope to make the anonymised data from the survey available to those who want to do further analysis. So keep an eye out for an email about the survey from Ipsos Mori, and a follow up phone call to hear your views and experiences.

Your responses will help us create a true picture of the impact measurement landscape in theUK. We hope to use this to help set the agenda on impact measurement over the next few years, and help make it easier for charities to prove the difference they make.

We’re grateful to our funders at the Big Lottery Fund, the City Bridge Trust ,The Northern Rock Foundation and the Paul Hamlyn Foundation for making this project possible.

Impact reporting: We need your views!

Regular readers of this blog will know that we’re pretty keen on encouraging charities to talk about the impact of their work. Last year we published Talking about results, which looked at the annual reports, annual reviews, impact reports and websites of 20 of the top 100 UK fundraising charities to see how they talk about impact. We found that nearly all the charities we analysed were good at describing what they did—their outputs—but less than half talked clearly about the changes they achieved in people’s lives—their outcomes.

But good impact reporting is difficult, and requires charities to think through and get to grips with exactly how their activities work together to achieve their final vision. Other areas of charity management, such as financial reporting or governance, have clear guidelines and dedicated organisations to help. Until now, impact reporting has lacked this kind of guidance.

Earlier this week, NPC, along with ACEVO, CFDG, NCVO, the SROI network and IoF, launched a set of principles for good impact reporting, which we hope will help charities to talk about their impact. We want charities to have more control over shaping how they are perceived by the public, shifting the focus away from the dreaded admin costs and towards what really matters: the difference they make in people’s lives.

Download the impact reporting principles here.

We want you to let us know what you think of our suggestions – are they a good basis for approaching impact in your organisation? Are they easy to understand? Can they be used by everyone in the voluntary and community sector? And most of all, would you use them?

Feel free to leave your feedback in the comments below, or email tlumley@philanthropycapital.org and tell us your views.

Read more about the principles of good impact reporting in a blog post I wrote for the Guardian public leaders network blog earlier this week.

Nudging the head and the heart towards more effective giving

NPC believes that donors should seek out the greatest possible impact when they make their giving decisions – it’s a fundamental part of our mission to help make that easier to do. But we also know that giving’s a matter for the heart as much as (and often more than) the head. As I’ve written before, here, research shows that there are at least six different types of donor behaviour. As much as NPC would like donors to do their research and seek the most effective charities, we know that in reality giving rarely works this way.

We also believe that charities should focus their communications to donors on the impact they create. As our paper Talking about results outlined, we think they can do that by answering the questions: What’s the problem we’re trying to solve? What do we do? What are we achieving? How do we know? How can we improve? But as that paper showed, most charities struggle to communicate the impact they’re having, and how they’re progressing against their big picture goals.

So if donors aren’t generally seeking out impact, and charities often aren’t communicating it, what can anyone do to try to nudge both sets of behaviour towards being more impact focused? We were excited to team up with the Guardian and Observer newspapers to help them design a 2010 Christmas Appeal that would work on both angles at once. In short, the mechanics of the appeal are built around charities’ ability to communicate their impact.

We asked charities to answer essentially the questions I pose above, and screened them on how well they did – how well they could talk about their results. The ten charities that got through the process are truly excellent organisations – making huge differences to the lives of the vulnerable young people they work with.

But when readers are moved by the stories they read, like this one about the huge challenges young carers face, and how one of the charities helps them to bring a bit of normality back to their extraordinary lives, they won’t give because of the structured and clear answers Action for Children gave in our application process. They’ll give because the stories they read inspire them, move them, and make them want to be a part of helping those young people.

So by working with the Guardian to build a selection process centred on how well charities talk about their results, we’ve been able to shift default behaviours of both charities and donors within this appeal. The charities that won do talk clearly about their impact. And the readers that give to the appeal are giving on the basis of communicated impact, they just don’t know it.

If you give to the appeal today or tomorrow (6th or 7th December) you’ll also double your donation through matched funding generated by the Guardian partnering with the Big Give. The Big Give’s model is an obvious winner – you give, and your donation’s matched by funding from a philanthropist or foundation – you double your money. Added to the exciting angle the Guardian and Observer appeal has taken by partnering with NPC to focus on charities that really talk about impact, I hope you’ll be inspired to give. A decision that works for both head and heart.

Why running an effective charity is like flying a fighter plane

As I was listening to Stephen Bubb talking yesterday at Acevo’s conference on the role of the CEO in difficult times, I got to thinking about the particular challenges of leading a charity that’s committed to making the greatest possible impact. One of Stephen’s points was that CEOs need to maintain absolute optimism (among staff, but also externally) about their charity’s future, even in the face of huge financial risks and evidence that might make lesser mortals veer towards pessimism.

That point was well made, but it made me reflect on a different challenge. In my experience, charity CEOs have a pretty unshakable belief in their charity’s approach – that it’s right, that it’s better than the competition, that it really changes people’s lives. That belief is required to maintain the optimism that’s needed, to put on a brave face when navigating the storms of turbulent times like those we’re in right now.

But to lead an organisation that’s committed to impact and performance, you need a different set of attributes. You need to be open to questioning your approach. Challenging your assumptions. Gathering data and responding to it. Embracing change in order to improve what you’re doing. And you need to propagate those attitudes throughout your charity – to be a role model for your team. Because in my experience, high performance charities are driven by a culture and leadership committed to continuous improvement, not by what or how they measure.

How can a CEO combine these two apparently conflicting sets of characteristics whilst maintaining their sanity? How can you have absolute belief that your organisation’s doing what’s right, but also be completely committed to finding out how it’s wrong and needs to be changed?

Modern fighter aircraft are designed, unlike more traditional aircraft, to be inherently unstable. Left to physics and pilot control, they would simply fall out of the sky. But with a host of computers making minute adjustments to their control surfaces every moment they’re in flight, they are able to maintain stability. They’re designed like this because an inherently unstable aircraft can be incredibly agile, so it can outmanouevre anything else in the sky.

What’s my point? I think being the CEO of a high impact charity is like flying a modern fighter plane. You have to combine a fundamental belief that what you’re doing is right with an equally fundamental openness to challenging your assumptions and changing your charity’s approach. But just like the modern fighter jet, if you can master these forces in tension, the result is an organisation that’s much more effective than the traditional alternative, more agile and able to manoeuvre through stormy weather and competition. And as a charity CEO, that ultimately means creating the greatest possible impact in your efforts to change people’s lives, whatever the world outside throws at you.

Why don’t charities talk about results?

I owe everyone who’s heard me speak at conferences an apology. Not for ranting on about the importance of charities measuring and communicating their impact—that’s my job, and my passion. But for something that I’ve said pretty often in the past without having much evidence to back it up.

I’ve talked a number of times about impact reports, and how they’re a bit of a euphemism. How charities use them often to give the impression that they’re talking about their results, while they’re actually doing nothing of the sort. How impact reports are often simply a glossier version of the annual review, with a few more case studies. Given NPC’s focus on charities using evidence in their work, it was high time that we actually put together some evidence to back up this sort of sweeping generalisation.

In a paper we’re publishing today, Talking about results, we show that we were mostly right. Charities are good at talking about their missions, and about what they actually do. They’re less good at talking about their results. Only 41% of those we surveyed communicated effectively what they achieve, linking their activities to the outcomes they create and backing up these outcomes with evidence.

But we didn’t want our report to be doom and gloom. So we also included examples in our report of how charities can get better at communicating what’s important—we’ve highlighted these because we often hear from charities that want to improve their reporting, but aren’t sure where to start. We also highlight the five key questions that charities can structure a good impact report around. See whether you could use them to revolutionise your charity’s communications.

NPC and the Guardian team up to find effective charities

Today sees the launch of the Guardian and Observer newspaper’s Christmas 2010 charity appeal. This year’s appeal is being run in association with New Philanthropy Capital, and is looking to find the most transformative charities and projects working with young people aged 13-24 at risk in the UK.

NPC has worked with The Guardian and Observer to develop the application form for charities to use. And unlike other appeals, this one looks a little different. To be shortlisted for this appeal, charities will have to be able to communicate clearly the impact their charity makes.

Successful applicants will be asked to talk about the problem they’re addressing, the outcomes of their work and the evidence they’re gathering to prove their impact. They’ll also be innovative, having thought about what does and doesn’t work in their field, and making a conscious decision to do something different and more effective.

This focus on impact won’t surprise anyone familiar with NPC’s work. Finding ways to encourage and help charities and funders to increase their impact is at the centre of pretty much everything we do. Next week sees the launch of our latest think piece, Talking about results, which explores how charities can improve the way they communicate their impact. In it, we assess the annual reports, websites and impact reports of some of the largest charities by fundraising income in the UK to see how well they do it. I won’t say too much about it yet, but you may find some of the results rather surprising.

If you are a charity interested in applying for The Guardian and Observer Christmas Appeal you can do so on The Guardian website. It doesn’t matter what sort of organisation you are, whether you’re a charity helping young refugees in Hull or a charity mentoring young people excluded from school in London. As long as you can tell us the results you’re achieving. Good luck to everyone that applies.

Transparency and the informed donor

How much should charities care about transparency? Will donors care if they are more transparent about the difference they make? We’ll be writing much more on these questions over the coming weeks, but for now, check out my blog post as a member of the ImpACT (Improving Accountability, Clarity and Transparency) Coalition over on its blog.

Do donors care about impact? Why we need six answers.

Martin Brookes of NPC wrote last week about the results of a YouGov poll, which showed that while donors care about how well (or badly) the charities they support are doing, they don’t necessarily want to hear about who’s performing best. Sean Stannard-Stockton picked up on this over on his Tactical Philanthropy blog, making some important points about what this all means, and Jacob Harold, Philanthropy Program Officer at the William and Flora Hewlett Foundation added his thoughts too.

To recap: most donors say they care about how well charities are achieving the impact they aim to achieve; but most do not seek out research to help them give to effective charities. Sean believes that donors are more interested in getting help to achieve their personal philanthropic goals than in being told who to give to. Jacob points out that sometimes people don’t know that they want something until it’s offered to them (like philanthropy advice). And even helping the minority of donors who might already be interested in seeking out data to inform their giving, he argues, can influence huge flows of capital.

My experience at NPC resonates with all these points. Giving is driven by the heart, not by the head. Either we can try to make people more rational (unless we can find people who are basically Vulcans, this doesn’t sound too promising) or we can find ways of incorporating impact and effectiveness into people’s existing motivations for giving. In other words, we find ways of making effective giving a default behaviour.

For example, giving vehicles like Donor Advised Funds, Community Foundations, and online giving marketplaces could incorporate due diligence to ensure a certain level of effectiveness of all the programmes donors fund through them. Philanthropy advisers could provide a standard level of reviewing impact in all their work. We could even look at philanthropy from the other side and suggest that all charities should answer some basic questions about their impact in their public communications.

Recent research from Hope Consulting sheds some light on the subject of donor motivations, and gives us some fascinating insights. It finds that wealthy donors are not different from regular donors – in contrast to what’s often written about wealthy donors caring more about the impact of their donations. It says all donors can be characterised as one of six types of givers: Repayer, Casual Giver, Faith Based, See The Difference, Personal Ties or High Impact. And High Impact makes up just 16% of all donors.

What’s my point? Well, it sometimes seems like the effective philanthropy movement is trying to make all donors change their motivations for giving so we end up with 100% High Impact donors. Instead, I believe we need six different strategies, finding ways of incorporating impact and effectiveness into the motivations of these different giving segments.

How do we make Casual Givers more effective? Maybe through payroll giving programmes that include incorporate effectiveness as the default option. How do we make See The Difference donors more effective? Maybe by helping them learn how to spot signs of high impact and high performance in local charities they visit. How to build impact into Personal Ties giving? Maybe a club for donors to meet high impact charities.

One thing’s clear – in the drive to make philanthropy more effective, one size definitely doesn’t fit all.

Do you have ideas about how to fuse impact into giving for any of these segments? Or even thoughts about segmenting those that aren’t currently giving? I’d love to hear from you – please post your thoughts below.

What impact would an impact fund have?

NPC launched a manifesto for social impact this week, to add its voice to the throngs of charities launching manifestos right now. So what’s different in ours? What does NPC have to add to the policy landscape around charities and their funding?

One of the recommendations we make is that an impact fund should be established. What do we mean, and why? One of the most striking things we’ve found as we’ve researched sector after sector of charitable activity, is that most charities still don’t have their own framework for measuring, analysing, managing and communicating their results. I don’t mean a theoretical framework. I mean a real management information structure:

• Our strategic aims are a, b, c, …
• Our measurable goals are x, y, z, …
• Our activities addressing these goals are 1, 2, 3, …
• Our management information allowing us to see how we’re doing, tweak it, improve it, share our results, raise funds based on what we achieve – inputs, outputs, outcomes (maybe even impacts)

These frameworks are incredibly rare, partly because they’re just difficult, but partly because despite many funders professing a commitment to good monitoring, evaluation and reporting, they generally want charities to report back on the projects they fund, not the organisation as a whole. When we did research on the costs that charities incur reporting back to funders, and how reporting could be improved, we found that charities really struggled to report on their whole organisation, because no-one had ever asked them to.

Why does any of this matter? It matters because if we want charities to up their game and build the evidence base the sector so badly needs, the incentives have to line up. Government funders, grant-makers and individual donors alike currently force charities not to invest in good management information, by obsessing over the importance of low admin costs. When they fund evaluation, it rarely results in building charities’ capacity and systems to measure their outcomes and relate them to their mission and strategy.

Mario Morino made a vital observation in his recent post about charities and measuring outcomes. Based on his years of investing in effective nonprofits, he said that you can’t impose this stuff from outside; it has to come from within.

So an impact fund would provide resources that those leaders of charities who are “genuinely hungry for reliable information to assess their value to those they serve” could build on. It would give these leaders resources that their boards may not have yet felt able to commit to measuring their results. It could unlock the potential of really promising, but not yet proven, models. If it worked, it would seek out those organisations and leaders with outcomes in their DNA, and give them the resources, recognition and support to become truly outstanding charities.

Add your voice to the debate

Do you feel that civil society is being overrun by market thinking? Or are you frustrated by good intentions and faith not being backed up by evidence and analysis in charities and their funding?

Or perhaps you see the truth in both arguments, but are working to forge a new path, fusing what’s most important in civil society with what’s most constructive and appropriate in markets and metrics?

NPC and Keystone have contributed to a debate launched by Alliance Magazine on its new blog around these issues. We believe that charities and philanthropy cannot move forwards without synthesising the best insights of both civil society and market paradigms, so we hope this debate can draw out some of the excellent work that’s happening at the intersection of these worlds.

Why do we need this debate? Because we don’t know enough about what works tackling deep-rooted social problems, and what’s most promising or effective doesn’t attract the funding it should. And because the increasing application of measurement and targets to the nonprofit sector is inevitable, and we know how dangerous that can be if we don’t ensure that the right people design what gets measured, and that we measure the right things.

Get on over to Alliance’s site and tell us what you think.

Social capital markets vs civil society?

Michael Edwards has long been a critic of social capital markets and philanthrocapitalism. Some of his criticism may well be fair, when these concepts are swallowed whole without an understanding of the history and values of charities (or nonprofits, depending which local flavour you prefer). But his recent post on the dangers of social capital markets, at the excellent Philanthropy Central is, I’m afraid, an example of the kind of simplistic and dangerously reductivist polemic that he claims to want to move beyond.

His argument boils down to social capital markets vs civil society – impact measurement vs social justice, data vs values, competition vs solidarity. And in this binary view of the world, he threatens to undermine the very real progress that’s being made towards a much more balanced and realistic perspective.

Michael and I already touched on this debate around my recent post on the dangers of measurement, and the need for a balanced approach. My argument is that great charities are indeed founded on their values and driven by a desire for social justice, but they also need data, evidence, knowledge and learning to check their vision against reality, and work out whether they’re helping to change the world in the right direction.

Pretty simple really. Charities are passionate, driven and committed to positive change because they care about inequality and understand the issues they’re trying to tackle through their relationships with their stakeholders. But to avoid those good intentions creating unexpected or negative consequences, they need a feedback loop to compare their vision with what seems to be happening.

When we talk about data, evidence, and knowledge at NPC we mean a spectrum of types of information that’s quantitative, qualitative, objective, subjective and instinctive. We don’t mean reducing a charity’s impact to a few numbers or key ratios. We mean a full and nuanced understanding of its effect in the world. We work hard to make sure that our analysis of a charity is based on this balanced, and comprehensive, view, and that we always strive for better and richer analysis.

Michael Edwards claims to be eager for progress beyond the social capital markets vs civil society debate. But his reductivist arguments undermine that chance of progress. He claims that Guidestar, GiveWell, Charity Navigator, GreatNonprofits and New Philanthropy Capital are too narrow in their analysis of charities and too concerned with ranking who is best to be able to help us move forward.

So why did this group of organisations, and Philanthropedia, come together to lobby for donors to think more deeply about their giving and stop obsessing on simplistic and meaningless metrics like what proportion of a charity’s costs are spent on administration rather than front-line services?

Of course, I’m biased, I work for New Philanthropy Capital. But what has upset me most in my relatively brief career researching and analysing charities is that the argument that Edwards presents is dangerous, because while it’s based on some sound principles, it’s also often used as an excuse to cover up charities not achieving real change for the people they claim to represent.

There are hosts of amazing charities out there, changing the world every day, speaking up for those whose voice is rarely heard, protecting the most vulnerable and forgotten members of society, making people and communities happier and stronger. There are also charities, and foundations, that have lost their way, have started to put their organisations before those they supposedly represent, have not kept up with changing needs in the world, and most fundamentally do not have a clear strategy that connects what they want to achieve and what they do.

Measurement is dangerous, there’s no doubt about it. It can be used for good and for evil, as can any ‘technology’. Values are just as dangerous, if they’re not related back to the world and become pure faith. We urgently need to combine these two perspectives to move forward. And we all need to honestly, critically assess whether we are comfortable with our own values and our own impact.

Otherwise, we should all pack up and go home, shouldn’t we?

The dangers of measurement

Mario Morino, Chairman of US organisation Venture Philanthropy Partners, has been one of the leading proponents of charities measuring their outcomes, and funders shaping their investment in charities around these outcomes. So his recent article might come as a shock, as it warns of the dangers of outcomes measurement, even going so far as to suggest that “the vast majority of funders and nonprofits are achieving, at best, marginal benefit from their efforts to implement outcomes thinking”.

His argument can be boiled down to charities:

• Focusing on metrics that don’t give a true measure of a charity’s overall impact, but reduce their work to a few measurable but overly simplistic indicators.
• Neglecting the stuff that’s harder to measure but more closely tied to an organisation’s real mission – measuring ‘hard’ but less relevant outcomes at the expense of ‘soft’ but more important changes in people’s lives, communities and society.
• Being driven by funders, trying to measure outcomes to satisfy funders’ requirements, rather than capturing data that’s truly useful to the charity itself.

I couldn’t agree more. Funders, like grant-making trusts, often commission evaluations of the charities they fund, allow a portion of their grants to be spent on evaluation, or define their reporting requirements to include some outcomes measurement. If they do this, they may think they’re doing their bit to help charities tackle the outcomes agenda. But these evaluations (in my experience) rarely lead to charities building real management information – data that charites’ leaders can use to learn about the results of their work and refine what they do.

Great organisations (charities, but also businesses) are built around great data. Data that allows them to understand the needs they address, what activities are likely to best address these needs, what actually happens as a result of these activities, and how to allocate resources and tweak what they do for even greater impact. This data can then also be used to communicate to stakeholders – not just to funders but also to the people who the charity’s trying to help.

So measurement that’s driven by charities is an essential piece of the puzzle for effective, high performing organisations. But too often, funders set the agenda with their own requirements, limit the budget (by driving down overhead costs) that charities can devote to capturing, analysing and using appropriate data, and so cripple the organisations they’re trying to help. Trying to turn the tables is tough, as we found in our action research on the subject.

I’d love to see a fund created that’s available to charities and social enterprises that want to build their own capacity to measure and analyse their own outcomes. To build real outcomes management information, and then use that as a platform for telling funders, beneficiaries, and other charities what they’re achieving. To invest in systems for capturing the right data. To spend on support from experts who can help organisations build the data they need. Why doesn’t such a fund exist?

Better ways to analyse charities

Yesterday a group of US organisations that analyse charities (nonprofits in US parlance) and advise donors issued a press release about the best and worst ways to decide which organisations to give to this Christmas. This is a key moment which I hope we will look back on as a turning point in how people think about giving to charities. NPC is part of this movement, and we join Tactical Philanthropy in congratulating these organisations for speaking out clearly together.

What they said is that donors often get hung up on choosing charities that minimise what they spend on administration (that make sure as much as possible of their spending is on projects directly helping beneficiaries). And that’s bad, because low cost charities aren’t effective charities, they’re just cheap.

Cost ratios tell you nothing about what charities achieve—their impact on people’s lives. They are calculated in so many different ways that the figures themselves are meaningless. And charities with low admin costs aren’t spending money on many of the things that are vital for being effective, like research into what works and strategy to help focus on the greatest needs and opportunities.

But donors ask about admin costs, I believe, because they want to maximise the impact of their giving. They’re just asking the wrong question, and charities that answer the question are perpetuating the myth that cheap equals effective. It doesn’t. Charities should encourage donors to ask the right questions instead.

NPC has been working for seven years to scour existing research and the minds of experts to find out what works. We synthesise what we find and publish it freely for all in our reports, like our study of young people not in employment, education or training, Getting back on track. We advise donors to help them act on this research and fund effective charities, like Fairbridge. We work with charities to help them ensure what they’re doing is as effective as it can be at transforming lives. And we’re trying to help the people that measure and analyse charities’ impact by creating a network (an Association of Nonprofit Analysts) that will help them to work together in future years and get much better at assessing effectiveness and communicating it those that need to know.

We’ve also recently taken on the work of Intelligent Giving, a charity that rates charities’ annual reports on how transparent they are. We’re working on improving the way Intelligent Giving analyses charities, by basing transparency ratings more on what annual reports tell us about the charities’ impact on people’s lives—watch this space. Just like Charity Navigator, we’re trying to make these ratings a better guide to how much impact a donation can create.

This work isn’t easy. It’s much harder than looking at admin cost ratios and giving on the basis of these. But it’s the only way of making sure charities, and charitable giving, are as effective as they can be.

So congratulations to GiveWell, Charity Navigator, GuideStar, Philanthropedia, and Great Nonprofits for pulling together to change how donors give. And if you want to make your giving as effective as it can be, or you want to help support our work, get in touch.