The $30 million question

September 22, 2015September 21, 2015 ~ Sasha ~ 1 Comment

I’ve just heard a story of a major nonprofit organization that receives tens of millions of dollars annually from a single donor – around half of its operating budget – but is laying off staff because they don’t have enough unrestricted operating cash.

Again, Dan Pallotta’s awesome TED talk notwithstanding, we find ourselves having the same conversation, one that boils down to: is it a wasteful to pay nonprofit professionals to do their jobs well?

I wonder if it is we in the nonprofit space who need more guts when we take on this question. Maybe it’s time to say something along the lines of, “if you want your money to go directly into the hands of very poor people who need it, you should do just that and give to Give Directly.” GiveDirectly is optimized for this, they are efficient and transparent in their operations, they rigorously study their results, and they’ve shown the effectiveness of direct cash transfers for creating both short- and long-term improvements in people’s lives. It’s a completely legitimate way to help others, and it’s a great benchmark against which to measure our work.

“Or,” we should have the courage to continue, “you can have the point of view that the programmatic work that we’re doing is better than giving cash.” “Better” can be because it does different things (fights corruption); “better” can be because the impact of giving a dollar is more than $1 (investing in a scalable social business); “better” can be because of long-term return on investing that’s higher than the social return on giving cash (supporting a child’s education).

“But,” we should be sure to say, “if you believe that the IT that we do matters, if you believe that there is something real that we are bringing to the table that goes above and beyond your money ending up in the hands of someone who will benefit from it, then you’re saying that our judgment, our relationships, our expertise, our capacity for oversight, and our ability to create leverage for each dollar you give is real. This means that you trust this judgement and our expertise. So please give in a way that respects that judgment and expertise, or don’t give at all.”

Our homework is to really look in the mirror and evaluate why what we’re doing is, in fact, better than the money going directly to our beneficiaries. And, once we’ve sorted that out, we must have the courage to make that case and the willingness to look someone in the eye and say, “if you don’t believe this, then you shouldn’t give to us in the first place.”

Breaking point

November 4, 2009November 3, 2009 ~ Sasha ~ 1 Comment

When do you push so hard that customers get to the breaking point? And do you think you hear much from them until the moment when they’ve had it with you?

Here’s what you have to do in order NOT to run up a $4,000 cellphone bill when traveling internationally with your iPhone.

Figure out your monthly data usage (either by logging on to the AT&T website, assuming you know how to do that, or knowing to ask the customer service rep this, after 5 minutes of navigating the voice response system). Mine is nearly 300MB on an iPhone 3GS
Pre-buy a certain amount of “international data” (sold in 20MB, 50MB, 100MB, and 200MB increments)
Pray that this sticks (it didn’t for me, so I had to do this twice, once from the US and once from abroad…what would I do without Skype?)
Go on your international trip and use your phone. (Note: phone calls still cost at least $1/minute)
Come home and tell them you’re through with the data service
(oh, and there’s a catch here — if you discontinue after two weeks they only credit you with half of the data you purchased, so if you bought 100MB, used 75MB, disable the international plan after two weeks, you’ll be charged $4/MB for the 25MB “over” you went)

Why share all this detail? Just to illustrate the 2+ hours I had to invest to figure this out (and hope that I’m saving others this wasted time). Do you think AT&T is trying to make me happy or make as much money off of me as they can? And aren’t iPhone users their best customers?

Imagine if they put as much effort into making their best customers happy as they do into creating a system that naturally results in “gotcha” $4,000 cellphone bills which date back to 2007

You know when you’re treating your customers right and when you’re milking them for all they’re worth. Which strategy do you think is going to work in the long term?

(Oh, and this is the same thinking that got us into the subprime mortgage mess.)

Kiva Customers Don’t Receive the Loans you Give

October 13, 2009 ~ Sasha ~ 39 Comments

If I wanted to get your attention, that’s the headline I’d write. Strictly speaking, it’s true. And when you only have a minute to grab someone’s attention, isn’t it your job to grab their attention?

That in essence is what’s at the core of the conversation that’s swelled up over the last two weeks about Kiva. David Roodman’s “Kiva Is Not Quite What It Seems” post kicked things off; Tim Ogden took things further in his post on the Philanthropy Action blog, and Sean Stannard-Stockton provided the definitive summary of the conversation, with his take on it, on the Tactical Philanthropy blog in a post titled “Is Kiva Misleading the Publc?”

Here’s the low-down: you can log on to Kiva, find a microfinance client in the developing world who needs a loan, and fund that person. The catch is that that person has already received their loan. In fact all the clients on the Kiva website have already received their loans. The microfinance organizations that gets money from Kiva does receive those funds, but the funds don’t go to that individual client. The GiveWell blog provides the picture that’s worth a thousand words by showing what the Kiva donor is told (graphically) and what the microfinance organization is told.

The thing is, what Kiva’s doing is nothing new. Heifer International raises tens of millions of dollars a year by sending out millions of catalogs that are every bit as sophisticated as the LL Bean or J Crew catalogs, only instead of buying rugby shirts you buy a chicken or a cow for a family in the developing world. But you’re not really buying that chicken or that cow. On the bottom of every page for every cow or chicken or trio of rabbits you “give” to someone, there’s a small-print disclaimer:

Gifts made through this catalog represent a gift to the entire mission. To help the most number of families move toward self-reliance, Heifer does not use its limited resources to track gift animals from donation to distribution. We use your gifts where they can do the most good by pooling them with the gifts of others to help transform entire communities. And, because you are helping Heifer fight hunger and poverty, your gift is tax deductible.

So the gift of a cow isn’t buying a cow, just like the Kiva loan isn’t going to that actual Kiva borrower.

Before we get on our philanthropic high horse, let’s be clear about what is and isn’t true here. To keep it as simple as possible, imagine you run a nonprofit that provides food aid to people struck by natural disaster. The simplest story goes:

People are suffering as a result of this natural disaster
One can buy food for one person who is hungry for one week for $10
We’re in the business of buying this food
So give us $10 and we’ll buy the food.

And when you’re writing a catchy headline to get a high open rate for your emails, you’ll lead with “A $10 gift will buy someone food for a week.” This is, strictly speaking, true.

So the question here isn’t really about truth, it’s about how big a sin of omission each nonprofit can and should commit as they play this game. Is it the responsibility of the nonprofit sector and donors alike to break down the myth that each gift does or doesn’t buy a specific thing? And will those who take the high road ever win out in the marketplace of ideas? It’s an empirical fact that people give more to help one person than to help many (check out this excerpt from Made to Stick for the startling experimental data), and this is wired deep into our brains, it’s not something that was created by the nonprofit sector.

Which is why I think Nathanial Whitttemore has it right when he says that this “problem” is here to stay, namely that nonprofits will, by and large, tell almost-truths to their donors – focusing on a specific connection between their dollars and a given outcome – and that a major shift for the majority of the giving population won’t happen any time soon (if ever), even though as professionals our aspiration might be to change the narrative to investing in nonprofit organizations, as Sean suggests. It’s a good aspiration, and we should keep at it, but it will never be the bread and butter for most nonprofits or for most donors.

It is true that philanthropists who makes major giving decisions and give considerable time and energy to these decisions have the opportunity to break this cycle; and the supporting infrastructure of philanthropic advising has an opportunity to push this conversation forward, aided by nonprofits who are willing and able to tell a different story. But let’s not pretend that we will someday divide the world into two, with the masses being duped into emotional decisions that get them to dig into their wallets while major donors dig in deep analytically and primarily make educated, highly rational, institutional-building investments. If it doesn’t happen in the stock market, why will it happen here?

All givers are essentially the same, essentially human, making rational and emotional decision based on the information they have and the amount of time they have to give to their giving decisions. The emotional connection is the starting (and often ending) point for everyone, and what matters is the ability of every individual donor (whether they give $20 or $20 million) to insert themselves into the narrative of a particular nonprofit organization, the problem they’re addressing, and the role that the philanthropist and their gift have in addressing that problem.

The “your money buys this” message isn’t going anywhere soon. If anything, what Kiva and Charity:Water and DonorsChoose have shown is that there’s a way to take this approach and adapt it to 21^st century tools – so that you can see an online photo of the microloan recipient or the well that was dug or the classroom that was helped — if not directly by your money, at least by that same amount of money as the amount you gave. It’s interesting that making this association more visible and tangible is calling into question the veracity of these claims (no one’s writing about Heifer, right?), when in fact all Kiva et al are doing is strengthening a tried-and-true narrative. The mechanics of gift -> organization -> recipient haven’t changed one bit.

If you think about it, it’s nearly impossible to change these mechanics and run an efficient, global nonprofit. So why are we all acting so surprised?

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