With Charity for All

I've been reading a lot lately about how to measure charitable organizations and where best to give your money, which has already prompted a rethinking of which organizations I want to support. Most of that has been shorter, on-line blog posts, but I've been wanting a deeper analysis. This is the first of a couple of books I've found on the topic. (The second, an analysis of microfinance, is waiting for me to have more time to read.)

For this kind of book, the background of the author matters a lot. Stern was the former CEO of National Public Radio for eight and a half years, so he has practical experience in the business side of non-profits. He's credited with improving NPR's financial position and management and oversaw an era of rapid growth. In With Charity for All, he speaks frankly about his own personal experiences as well as his research. My impression is that he's typical of competent business managers of non-profits: not particularly radical, focused mostly on business issues, and the sort of person that a non-profit needs to turn a mission or cause into a sustainable organization.

It's worth noting in advance that With Charity for All is specifically about the United States charitable sector and US laws and approaches. Some of this may generalize to other countries, but non-profit and charity law is very different between different countries, and the US attitude towards government, non-profits, and the appropriate division of responsibilities between them often doesn't match the prevailing view elsewhere. This book may well be interesting to people outside the US, but only if they're curious about the US charitable sector.

The short summary of the message of this book is that we're not getting our money's worth out of charity, either as donors or as taxpayers who are indirectly subsidizing these organizations. This is not (usually) due to any outright fraud, although there certainly is some of that due to the almost total lack of oversight of charitable organizations. Rather, it's the result of a complex combination of history and institutional momentum, focus on the aspects of a charity that play well to potential donors, a concerted effort at feel-good marketing, well-intentioned but misguided donor dictates, adoption of approaches and business practices from the for-profit sector, and, above everything else, the almost complete absence of evidence-based evaluation of charities.

Evidence-based evaluation is currently a hot trend among charities. I heard about this book via one of the organizations that is focusing on this (GiveWell). This is not what sites like Charity Navigator do, and indeed Stern talks at some length about the serious limitations of the Charity Navigator approach. All that sites of that type can do is look at spending breakdowns. Stern makes a strong argument that a focus on reducing overhead, as measured by those financial forms, is misguided and leads to very ineffective and unorganized charities. Worse, all Charity Navigator can tell you is if the charity is spending money on something they declare to be in line with their goal, not whether that money did any good whatsoever.

The short and depressing news is that most of that money does little or no good, and worse, that most charities have no systematic way of measuring whether it does any good.

I'm particularly interested in how to ground charities in more concrete evidence, and Stern's discussion does not disappoint. But one of the things I liked about the book is that he doesn't stop there. Other topics include the dizzying variety of charities and the resulting confusion and dispersion of resources, the non-profits that are practically indistinguishable from for-profit companies except that they get huge tax breaks (sports organizations, as you might expect, are probably the worst offenders, but Stern has harsh commentary on the US hospital system), the mess of compensation in the non-profit sector, and the serious problems created by major donors who want to get directly involved and oversee how their money is spent. All of these topics are fascinating, if a bit depressing in the aggregate.

As is typical for a book of this sort, it's a lot easier to see the problems than to describe the solutions. Stern does try to offer his own prescriptions, most of which are variations on more oversight: more regulation, more effort put into measuring results, more concrete standards for success or failure, and a stronger culture of treating tax-exempt status as a privilege, not a right, that has to be defended by showing clear social benefit. I'm convinced those steps would be helpful, although less convinced that we're able to get there from here. One of his ideas I am already using on a small scale: pooling charitable donations with professional evaluators who can take the time to look deeper than financial breakdowns and do some independent measurement of results, or at least survey relevant studies done by others and possibly demand more be done. This model of a mutual fund for charitable giving has some promise, I think (more than a managed mutual fund, in fact), and is very similar to what GiveWell is doing.

This is an advocacy book, and one that's primarily focused on concrete, measurable deliverables and on the finances. There are a few places where I have reason to be dubious of the black-and-white conclusions Stern draws. For example, he makes much of the bill collecting practices of charitable hospitals, which I agree is a travesty, but doesn't mention that non-profit hospitals produce better health outcomes. I'm also not sure his analysis is as directly applicable to advocacy organizations, where measuring success is a much more challenging proposition. I think the Southern Poverty Law Center is one of the best charities in the United States (admittedly based largely on gut feeling and presentation), but the nature of their work is not amenable to the style of analysis that Stern is doing here. It's therefore worth taking this book with a grain of salt.

But, that said, Stern's conclusions are in line with things I've read elsewhere. I think he's pointing in the right direction, and I would recommend this book to anyone who gives regularly to charity. Hopefully it won't just cause you to stop. There are charities out there that are trying hard to measure their results and ensure they deliver social value for the money that we give them. Our system just doesn't support them very well, yet.

Rating: 8 out of 10

Reviewed: 2014-04-07