Plum Lomax

I was contacted recently by a friend who has quit her job in investment banking to travel solo on her motorbike from London to Cape Town. She wants to devote at least a month of her time to working with a charity en route, and wanted advice on how to choose an effective organisation that could best use her time and her fundraising capabilities. Her concerns and questions are common to all of us making decisions about which charities to support, however large or small our donation of time or money. 

At NPC we have spent years looking at charities of all sizes, at all stages, working in all fields, across a multitude of countries. This has enabled us to develop a framework for effectively analysing charities to help funders make good decisions about which to support. We recently started to offer training sessions for donors on choosing good charities and putting the framework into practice – the first couple of sessions, each involving about 12 donors or grantmakers, have been a fascinating opportunity to hear about the different approaches taken and the common challenges faced in finding and choosing between charities.

So what do we recommend donors do? It partly depends on the amount of time you have to devote to the process, the size of your donation and the size and stage of the charity you are thinking of supporting. Don’t expect such good-quality data or information such as external evaluations from smaller or early-stage charities with fewer resources. We suggest funders start by looking at a charity’s website – a good opportunity to see whether its information is transparent and accessible. You should also look at the charity’s accounts, either on their website or on the relevant regulator’s website depending on the country of registration.

If you are making a more substantial gift, you should try to talk to the charity, either by phone or in person. Meeting a chief executive can help you understand more about the charity, and get answers to questions you haven’t been able to find through your own research. It is also a chance to assess their leadership, which is sometimes difficult if they are a good fundraiser. You may want to talk to other staff, trustees or even service users of the charity to get a clearer picture of the quality of the leadership, its activities and impact. But you need to be careful to make sure the effort from the charity matches the size of your grant: a chief executive’s time is very valuable and the size of your potential donation needs to merit a phone call or meeting.

There are some key questions that will provide you with a good understanding of the effectiveness of an organisation:

•       What does the charity do and why?

•       What impact does the charity have on the lives of the people it supports or the issue it tackles?

•       How does the charity know what it is achieving?

•       Does the charity have a clear vision? What are its longer-term ambitions?

•       Does it work with other organisations and how?

•       How is the charity run? Is it well managed and governed?

•       Does the charity have the money it needs to sustain its activities and does it manage its money well? Does it expect any major changes to its funding streams?

•       What are the biggest risks facing the charity and how is it mitigating them?

One thing we are certain on is that donors should never judge a charity by its admin costs. Reported admin costs vary considerably, depending on how accountants choose to allocate costs, so can be misleading. For example, one charity may include a direct mail campaign in its admin expenditure, while another may include it in its campaigning costs. More importantly, solely looking at admin costs doesn’t show you how effective a charity is. It doesn’t tell you the impact the charity has on the lives of the people it works with, or even how efficiently it is run. Ideally your decision about whether or not to support a charity should be based, above all, on its results.

I was able to pass on these questions to my biker friend, along with a copy of NPC’s The little blue book, which provides a more detailed framework for analysing charities. Hopefully she’ll choose an effective organisation on the basis of these key questions. Sadly, she’ll already be somewhere in Africa by the time of our next Selecting Great Charities event in September!

Plum Lomax is a senior consultant at New Philanthropy Capital

Further articles from Alliance magazine related to these topics:

• Selecting charities on the basis of good impact reporting
• Ratings shake-up as Charity Navigator launches CN2.0