Philanthropy: Rethinking How to Give

By Amy Feldman in BusinessWeek

When disaster strikes, as it has in Haiti, Americans dig into their pockets and give. While such generosity is unquestionably a good thing in a terrible time, few individuals do much research on the groups they’ve chosen to receive their money. The uncomfortable truth in philanthropy is that it’s not easy to know whether the group you’re giving to is particularly effective at what it does. With Americans giving more than $200 billion a year, that’s a lot of ambiguity.

A growing movement to review and rate charities on their real world results could give individuals a far better idea of where their donations can do the most good. Moreover, it could guide nonprofits to focus on the programs that have the most impact and to jettison those that aren’t working as well.

Charity Navigator, the largest nonprofit rater, is overhauling its rating system to look beyond financial measures and gauge effectiveness. Other online evaluative efforts includeb GiveWellPhilanthropedia, and GreatNonprofits. Their approaches vary, from crowdsourcing to research reports. In addition, GuideStar, which serves as a clearinghouse of information on nonprofits, has begun including some of these rating reports on its site. Two other initiatives, fromRoot Cause and Partners for Change Initiative, are working to get more and better rating information to financial advisers so they can help clients make giving decisions.

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