Often, as donors, we make a donation and then don't think about a charity - and what it does with our money - until we hear from it again. Donors should care about what happens after we donate, and Stern ably shows why. We should care
because if we don’t care, then charities won’t care. They’ll continue to raise
money, but may become bloated and unresponsive, like the Red Cross after
Hurricane Katrina. Or they’ll keep on doing the same thing. What Stern could
have addressed better is the reasons for the inertia. One reason is structural:
restricted funding streams make it very difficult for charities to function
differently, or respond to emerging needs. Our system is extremely inefficient,
and Stern reminds us that it results in economic costs (for all our generosity a
lot of people in the US live in poverty), increased competition for charitable
dollars and confusion on the part of the public. But it’s also because
charities are often ineffective at measurement.
Measurement, if done well, is exacting, difficult,
time-consuming, and expensive. It may tell the managers of a charity something
they do not want to know, as in the DARE example. Success means different
things in different contexts, and coming up with a definition forces managers to
grapple with existential questions: what does it mean to say that a charity,
NPR for example, is successful? What about the Metropolitan Opera?
Most of all, though, measurement is expensive. Studies that
follow many people for many years, like the High Scope Perry Preschool Studies
of the long-term effects of early childhood education, are labor-intensive. It
takes staff long hours to track down individuals, collect and analyze
information, and explain to managers, boards and funders what a study means. And
once it’s done, the analysis is not static. If you reach your goals, you have
to reset them. If you don’t, you have to figure out why you did not, and
whether you have set the correct goals in the first place.
Not many charities can afford the investment in staff,
follow-up, and data analysis a good study requires, but a few do. Moreover,
though Stern does not discuss it, many foundation and government funders have
been demanding outcome measures as part of their contracting process over the
last decade. Unfortunately, because a funder can require outcome measures only
for the program – or part of a program – it is funding, the result can be
fragmentation, of efforts, and of understanding. And when a charity is
providing similar but not identical information to another funder opportunities
for manipulating the reports may be irresistible. Better accountability efforts
by funders and board members are also necessary.
Stern, as befits the former CEO of NPR, tells a good story. He
reveals a series of structural issues around the charitable sector: low
barriers to entry into the charitable field mean that almost any cause or event,
like a college town beer festival, can become a charity. Often executive
salaries are high, though they are usually lower than those of executives
managing comparably-sized private businesses. And “crooks gravitate to crises,”
Stern says. After the Haiti earthquake, scam artists sent out hundreds of fake
appeals on Facebook, Twitter, and by e-mail. Stern reports that the FBI
estimated that more than 2300 fake charity sites solicited donations after
Hurricane Katrina. Lately a disturbing trend that Stern calls celanthropy –
celebrities setting up charities – has arisen.
Stern doesn’t really distinguish between charities that
provide social services from charities, like colleges, that can be said to
serve donors. Their operations are very different, even if their tax status is
similar. Stern doesn’t fully piece his arguments together. If charities had
some kind of normal life cycle the way private businesses do, for example, government
agencies might have the time to focus on the egregious cases. While Stern
describes failed efforts to write sunset provisions into the charities laws in
the 1970s, he never fully circles back to make the point.
Instead, Stern concludes that as governments retreat from supporting
arts and social services donors have to be willing to invest more in charities,
not less, and to invest differently. He identifies several private (and
charitable) programs that create and enlarge effective charities by providing
multi-year grants and consulting services, urges that their work be expanded.
This kind of social entrepreneurship very rare in US, and by itself is probably
not enough.
Stern’s point would be considerably stronger if he had addressed
the many new ways government is providing and funding social services, and
recognized the promise these developments hold for the charitable sector. To
give just one example, last year the federal
Center for Medicare and Medicaid Innovation offered a competitive grant seeking innovative service and payment
models for health care. Huge amounts of data are now being collected about
social services (even the foster care system in New York City has automated,
on-line records). Jim Manzi, in his book “Uncontrolled,” (Basic Books 2012) (my review is
here) suggests
establishing
an agency, akin to the NIH, that can oversee and fund the
design and interpretation of randomized social policy experiments, harnessing
the power of big data for social services.
Stern also could have engaged usefully with the new funding
models social entrepreneurs have developed. Social impact bonds, in which a
government contracts with a private bond issuer to pay for services based on
outcomes or achieving performance targets, have been used in the UK and are
starting to be used in the US. The bonds raise enough money for a rigorous program
evaluation – and payment depends on success. Once results become available, effective
programs can be ramped up quickly, while ineffective ones can be stopped.
Health impact bonds function similarly, by providing preventive health care
services. In his book “The Non Nonprofit” (Jossey-Bass Books, 2012) (my review is
here) Steve
Rothschild describes how his Minnesota charity used data to show a return on
government and foundation investments, creating economic value from social
benefit.
Rothschild has now expanded the concept into something he
calls Human Capital Performance Bonds, which operate like social impact bonds
except that a government entity issues the bonds.
We have different kinds of charities in the US –
large arts organizations, family foundations, tiny programs run out of church
basements. They enjoy different funding mixes, ranging from almost entirely
government funding to entirely private funding. “With Charity for All” raises
some important issues about charities, their effectiveness, and our unique
blend of public and private funding. It also includes some useful suggestions.
But without a more analytical look at how different kinds of charities operate we,
like the charities Stern describes, are going to continue doing what we’ve
always done.
This is the second part of a two-part review. You can read the first part here. Yesterday, I briefly posted an incorrect version of Stern's name. I regret the error and have corrected it.
