THE BLOG
12/04/2013 09:35 am ET Updated Feb 03, 2014

The Failures of Common Charitable Giving Strategies

What would you think if I told you that the decision you made to give to the local hospital or cancer group was actually hurting people? That the charitable choice you thought would make the world a better place was actually doing the opposite? That the causes you felt so good about were contrary to what you thought?

There's a dark side to giving that people rarely discuss. Any time a donor chooses one health care charity over all the others (or makes no donation at all), the donor is literally making a decision that affects who gets sick and who doesn't, who is cured and who isn't, and--at the extreme--who lives and who dies. For every person a donor helps, countless others are not helped. Donors who choose an average charity over a great one have failed to do as much good as they could have. Their choice is directly connected to real-life consequences, sometimes half a world away.

This issue doesn't just apply to health care charities. For example, when donors choose one anti-poverty charity over others, their decision affects the life outcomes of those who are helped and those who are ignored. And when donors choose an anti-poverty charity over a health care charity, they are making tradeoffs between health and poverty. More people might die if a donor chooses the anti-poverty charity, but more people might live in poverty if the health charity is selected. That's not to say that one type of charity is better, but simply that a donor's charitable choices can make noticeable differences.

This predicament isn't the donor's fault--it's impossible to help everyone--but it is reality. These donors certainly don't hurt people. And yet, just as donors deserve credit for the good deeds they do, the opportunities they decline should be subject to scrutiny. Some donors might avoid making these difficult decisions by splitting their gift among several different causes and organizations to help many people, but spreading resources around doesn't effectively tackle the broader issue: scarce resources prevent donors from helping everyone in need. Choices must be made.

How should donors make these decisions? As an example, most people would agree that both health care and education are important. If some health care charities are very effective and charities that focus on education have weaker track records, then you may have one preference. But if the reverse were true, you might have the opposite preference. Charitable choices aren't just philosophical; they're about evidence.

Unfortunately, a study from Hope Consulting found that only 35% of donors do any research before deciding which charities to give to, and only 9% spend more than two hours on research. Most people give to the charities they know and like: the university they attended, the health care charity that touched their lives, the arts organization they appreciate. Donors know these are good organizations by seeing their work firsthand. But donors rarely do a rigorous comparison to other charities. (It doesn't really count if the research is exclusively from charity rating agencies that focus on the overhead costs of the organization and don't actually evaluate the quality of the charity's programs.)

Suppose you give to a hospital that can cure one person of a disease for $10,000, but a health care charity you didn't give to can cure two people of equally horrible illnesses for the same cost. Have you really done a good deed? Yes, compared to the person who gave nothing. But you haven't done as much good as you could have. That may be fine with you if you think of charity as people giving away their own money--it's theirs to waste. But it isn't okay if you view it as a lost opportunity to save lives, reduce suffering, or enhance the human experience. Both perspectives have some truth.

So how do you actually identify the best charities? Most people have neither the time nor the expertise to research this on their own, so it makes sense for them to piggyback off someone else's research--the key is to choose that group wisely. You might want to look to large foundations with professional staff, but most are too specialized in niche areas to help with the most important questions for donors. For example, a foundation focused on supporting U.S. primary education typically doesn't have the expertise to help donors evaluate whether their philanthropy is best directed at U.S. education, malaria prevention, combating global warming, or some other areas. And even among those that do have this expertise, most foundations are too secretive about their evaluation processes and results to be very helpful for others. There are only a few publicly available resources that are genuinely willing to "go anywhere" in their recommendations. One of my favorite sources for information about charities is the charity evaluator GiveWell. It would consider any charity for any cause, and only gives its top recommendation to three charities--not because GiveWell thinks all other charities are bad, but because it wants to clearly communicate its view of the best-of-the-best.

Giving to your alma mater, favorite health care charity, or local cultural organization doesn't actually hurt people. But by choosing a charity for personal reasons instead of evidence-based prioritization, you're foregoing the opportunity to do all you can to make the biggest impact with the amount you give. And what's the value in charitable giving if the primary purpose isn't to help others?