Data Driven Donations

The holidays seem to trigger everyone’s altruistic side. Indeed, many charities have dubbed the months of October to December as the Giving Season, since that is when most charities receive the majority of their donations. Yet despite their good intentions, a large majority of charities are not using their money effectively. While corporations have incorporated data into their decision making processes in order to ensure efficiency and productivity, philanthropic organizations have lagged behind.

According to a survey done by the Nonprofit Technology Enterprise Network, only one in four nonprofits uses data to influence its organization’s strategies and programs. Often, charities will simply spend funding in the same ways they always have without looking for better alternatives, or they will choose to run an initiative that sounds appealing without checking if it is numerically the best choice for their cause. Unlike businesses, nonprofits are not directly affected by the free market and the creative destruction that it brings. Thus, the root of the stagnation seen in the nonprofit sector mostly comes from the fact that charities do not need to innovate in order to stay operational.

The nonprofit sector needs to quantitatively approach all aspects of its day-to-day operations.

Collecting and analyzing data will take time and may incur additional costs, but such actions would more than pay for themselves in the form of increased efficacy of charities. For example, Friends of the Earth thrives due to the “data-centric culture within their organization” that was achieved as a result of its fundraising team “tracking outcomes, testing channels and measuring supporter response.” With their data analysis, Friends of the Earth saw that its Street Fundraising Program was costing them more than it was worth and ditched it in exchange for more advantageous forms of fundraising.

In Pro Bono Economics, economists are even willing to help assess a charity’s impact and improve their existing programs for free. Sue Holloway, former director of PBE, recognizes that its economists had “worked with a number of charities where the evidence had not been conclusive that they [were] having a big impact.” So yes, data may show charities that their current approach to addressing humanitarian issues just is not working. Yet, instead of fearing and ignoring the news that data may bring, charities need to welcome it as it may lead them to come up with new methods of helping that are far more effective. Charities do not deal with the competition corporations face, leading to stagnation and a lack of innovation. Given that philanthropy is a multi-trillion-dollar market, higher standards must be held by both charities themselves and by donors who can show preference to charities that have more transparency when it comes to data.

The aid charities supply is no excuse for them failing to spend the public’s donations with fiscal responsibility. The nonprofit sector needs to quantitatively approach all aspects of its day-to-day operations by researching which modes of fundraising it will use, implementing programs with the highest reach and success rates and regularly re-evaluating its latest approach to philanthropy. Philanthropic organizations undoubtedly already help society a great amount; taking a factual approach to giving would only help them help others even more.