Impact information: Supply and demand

William Jacks has spent the last 2 years conducting research into the transparency and reporting of charities in the UK. Prior to that he worked for several third sector organisations. 

The Money for good UK research, launched by NPC back in March, provides detailed insight into donor motivation and behaviour based on a survey of over 3,000 high-income and mainstream donors. The report has a wide scope, but I want to focus on a few findings that highlight the current low levels of impact-based giving among ‘mainstream’ donors and consider how this could be improved.

It is encouraging that 60% of respondents care about the impact a charity has. While it seems somewhat intuitive that donors would rate the impact of a charity as important when asked, this finding demonstrates the potential for large numbers of donors to consider information on impact when making giving decisions.

But despite this high number, a smaller proportion [around 38%] of mainstream donors actually do research before making a significant donation. Most use it to help them decide whether to donate, 18% look for information to help them choose between multiple charities (7% of all donors), and only 2% use an informed assessment of impact to help them make that decision.

So… Why do so few donors spend time researching impact before making a donation?

The reality is there is still a chronic lack of awareness and demand for this type of information. Donors give to charity for a variety of social, emotional and moral reasons, and although impact reporting is increasingly embraced as best practice within the sector and by high level philanthropists, it still struggles to gain traction with the general public -most of whom are not aware of modern developments within the charity sector.

There is also a supply-side problem. Despite the improvements in outcome and impact reporting over the last decade, donors do not have access to standardised, easily understandable information. Outcome and impact reports, while of undoubted value to funders, sector experts and charities themselves, are often complex and full of technical terminology, and therefore of little use to the mainstream donor. It is also massively time-consuming to search for the outcomes of a large charity or one of its programs, let alone analyse and compare them.

It’s worth looking to the US for inspiration, where several organisations set up to evaluate charities are now providing donors with simplified information about a charity’s impact. Charity Navigator has broadened its approach to include information on a charity’s transparency and the quality of results reporting. This allows a donor to identify charities that provide basic results reporting information and avoid those that don’t. Givewell conduct in-depth research and spend a great deal of time evaluating international aid and development charities. They highlight three charities each year that they believe represent outstanding value for money donations.

Both these sites have their limitations. Charity Navigator’s methodology, despite efforts to increase the scope of its evaluations, could be seen as simplistic and somewhat reductionist. Givewell has perhaps veered too far the other way in providing a bewildering amount of information about its internal research processes that could discourage mainstream donors. However, they should both be commended for taking up this considerable challenge and providing a valuable resource to donors.

The long-term vision of a charity sector where impact measurement is shared and comparable across different organisations remains some way off. However, this should not stop efforts to provide donors with usable information on impact to help inform giving.