In the world today, there are a number of social, economic, political, and environmental challenges that threaten the security and prosperity of our ever-growing human population. With problems like these that are global and wicked in nature—i.e. climate change, world hunger, animal welfare, etc.—the question begs: who is in charge of solving them?
As a society, we're constantly being told that we should be giving more money to charities in order to save the world. We're encouraged to make charitable donations on a regular basis and give even more during major holiday seasons like Christmas or Thanksgiving. But when it comes down to it, does philanthropy have the best return on investment for the global change fund?
Charities are often viewed as beacons of hope, illuminating and solving some of the world's gravest challenges. What would the fight against climate change be without Fridays for Future, marine conservation efforts without the Ocean Conservancy or biodiversity preservation without the World Wildlife Fund, for example? But given this elevated level of respect, recognizability and praise, are we asking these underfunded organizations to do too much? Assuming this inflated pressure exists, which efforts on our laundry list of asks are currently prioritized by these organizations and how does this decision impede or promote charity “effectiveness?"
The unfortunate truth is that charities tend to be small organizations without sufficient money or resources at their disposal, despite their definitive passion. Ephemeral donations are simply not enough to sustain their effective work for a lot of groups.
Call it pessimistic or cynical, but one thing is for sure. Charities alone are unable to change the world. There are three main reasons for this:
1) Charities don't have enough money to fund their work effectively
2) Many charities aren't able to optimize their approach to solving problems
3) Most charities don't have access to high-quality data about their beneficiaries' needs and wants
In order to throw a wrench in major productivity hurdles affecting such institutions, we must deeply understand these current shortcomings. Only then can we tackle the issues preventing them from achieving their goals on a case-by-case basis.
Lack of Financial Resources
First and foremost, charities are facing a funding crisis. The amount of money they receive from the government has been falling for the past several years on a global scale, despite the fact that the demand for their services has simultaneously risen.
In fact, a survey of more than 600 charities by the Charity Finance Directors' Group found that the majority have had to cut their spending in the past year in order to cope with a lack of governmental support in the midst of the pandemic. The survey also found that 46% of charities felt their funding was not sufficient for them to be able to deliver all of their services. Of those who said they did not have enough funding, 42% said this led them to cut back on some services and 37% said they were forced to reduce staff numbers.
The report also found that more than 80% of charities are worried about future funding sources and believe that they will need to diversify their income streams in order to ensure sustainability. Due to financial instability, therefore, charities are often inhibited from conducting the necessary steps their organization would need to take to actualize their mission statements.
Lack of Strategic Oversight
Another disheartening truth about charities is that they are oftentimes mismanaged–which can make their organization and output less than ideal. Although charities may be prided for their exceptional resourcefulness, there tend to be unexplored opportunities for resource maximization and operational leaning.
For example, the US spends over $300 billion a year on nonprofits and foundations, giving away about 8% of GDP — but the progress associated with these massive investments has been underwhelming. The scale and inefficiency of the nonprofit sector have been criticized by everyone from Charity Navigator to the New York Times over the past several years, and strategic mismanagement has been explained by reasons such as:
- There's no real accountability or oversight, so it's easy for organizations to take advantage of their donors
- Most charity evaluators focus on overhead rather than impact, which means they end up rewarding inefficiency, and
- Many charities have become dependent on government grants, which leads them to focus on short-term goals instead of long-term outcomes that might benefit society to a larger degree
Charity Navigator's list of top-rated charities rates only 2% of charities at four stars (out of four), while more than 80% get two or three stars. Interestingly, only about 1% of nonprofits bother applying for Charity Navigator's seal of approval, which may indicate a broader disconcertment in the charity realm with efficiency and effectiveness. Knowing this, we can infer that stagnation and inefficient use of time, money and resources can be attributed to a lack of strategic management in some cases.
Lack of Reliable Data
Last but not least, most charities don't have access to high-quality data about their beneficiaries' needs and wants–which results in potentially uninformed initiatives.
Many nonprofits are still using spreadsheets or paper surveys to gauge whether they're making a difference in the lives of the people they serve. This makes it hard to determine whether or not they are truly effective at meeting their goals.
All in all, the dismal reality is that charities alone cannot save the world. Nor can solely governments, solely businesses, or solely individuals. Nonetheless, nonprofits and other third-party organizations are critical to several social and environmental justice (amongst other mission-driven) causes. By pinpointing weaknesses within these groups, whether that be a foundational lack of funding, structure, or critical data, we can strengthen the contribution of this sector to make all of us more well-off.
Here at BOAS, we take great care to work with only the best and most effective charities through our work! We look to platforms such as Charity Navigator and GiveWell to inform our donations, and we are always open to feedback from you, our LifeSavers, regarding which organizations we should or should not partner with!