Bang For Your Buck: The Nonprofit Rating Charities by Impact

GiveWell has promoted donations for anti-malaria bednets, among other causes. photo:  punghi/shutterstock

GiveWell has promoted donations for anti-malaria bednets, among other causes. photo:  punghi/shutterstock

As we head into the season of giving, those who want to donate to charity may be wondering where their dollars will have the biggest impact.

That was the question that led Elie Hassenfeld and Holden Karnofsky to start GiveWell, a nonprofit that recommends charities based on effectiveness. The two were working in finance and trying to figure out where to donate at the end of the year. Since GiveWell started in 2007, the nonprofit has had a say in the destination of millions of charitable dollars and gained a major benefactor in Good Ventures, the foundation created by the Facebook co-founder Dustin Moskovitz and his wife Cari Tuna. 

GiveWell came out of Hassenfeld’s and Karnofsky’s search for the most cost-effective charity, the one where their money would go the furthest. “They found that the information wasn’t available. Charities either didn’t have it or wouldn’t share it,” said Catherine Hollander, a research analyst at the organization. “GiveWell grew out of that process they were doing themselves as individuals who were interested in giving to charity and found that the resources they were looking for didn’t exist."

While other charity evaluators offer ratings on myriad nonprofits, GiveWell takes a more boutique approach. It maintains a relatively short list of recommended charities, based on deep research of their effectiveness. Charities that make the cut—and not many do—must have an evidence-based track record of impact and a commitment to transparency. That kind of track record can be hard to produce for newer charities with good ideas but short resumes. Which is why one of GiveWell's newest initiatives provides Incubation Grants aimed at helping organizations become "top charities." In just the past year or so, GiveWell has quietly become an important funder its own right. 

Effective Altruism in Action

The idea behind GiveWell is that individual donors make up 70 percent of charitable giving in the U.S., but lack the expertise and time to figure out the most strategic way to donate their money. In 2016, individuals gave $282 billion to charity compared to $59 billion from foundations and $18 billion from corporations.

GiveWell is built on the hope that if you could reach even a small portion of those individuals, you could have a meaningful impact on how effectively dollars from individual donors are spent. The organization channels the steely logic of "effective altruism," which holds that charitable giving should be guided by an unrelenting focus on doing the greatest possible good. All of GiveWell's top-rated charities, as well as its "stand-out charities," are focused on global health and development—with two working on malaria, a preventable disease that kills nearly a half million people annually. You won't find this outfit recommending gifts to local symphonies—or, for that matter, any organizations in the United States or other wealthy countries. 

Beyond pushing donors to embrace its brand of high-impact giving, GiveWell has another message for philanthropists, one with an edge: stop wasting your money. "Conventionally, most people expect that charities are probably accomplishing good unless there's proof that money is being misappropriated," its website says. "We disagree. We think that charities can easily fail to have impact, even when they're doing exactly what they say they are... It's common for charities to make big promises, and in most cases, they can't deliver." This is especially true, argues GiveWell, of nonprofits working on social challenges in America. "Helping people in the United States usually involves tackling extremely complex, poorly understood problems. Many popular approaches simply don't work."

That's quite an indictment of modern American philanthropy, given that under 6 percent of the $390 billion in charitable donations made in 2016 funded work overseas. But despite its small staff of around 20 people, including just 10 or so research analysts, GiveWell doesn't pull any punches in telling the rest of the charitable world that they're (mostly) spinning their wheels. 

Not surprisingly, GiveWell's stance has drawn fire since its founding. Two critics of effective altruism, writing in the Stanford Social Innovation Review in 2013, said that taken to its logical extreme, GiveWell's "bizarre approach" and "fixation" with global health would lead to the defunding of a vast swath of important nonprofit work in the United States, such as arts and culture. 

Others see GiveWell as super-valuable, but with a model that's limited in its application and potential to scale. "GiveWell has raised the bar on the public analysis of nonprofit performance. It has done so with admirable clarity, transparency and self-reflection," said Jacob Harold, president and CEO of Guidestar. But he added this: 

It is essential to remember that GiveWell’s approach to nonprofit analysis is appropriate for certain social change strategies, but not others. GiveWell continues to rely on randomized controlled trials (RCTs) as its primary source of evidence. RCTs are immensely valuable, but not universal. They are generally inappropriate for measuring the impact of strategies such as policy advocacy or capacity building. To GiveWell’s credit, they have recognized this gap. But neither they nor anyone else has cracked the code on the evaluation of every kind of social change strategy.

Along similar lines, former Hewlett Foundation president Paul Brest said, "GiveWell is unique and extraordinarily valuable in providing accurate information about an organization's impact. But its analysis is so costly to do as to make one wonder whether it is scalable beyond a handful of organizations or a model for other charitable evaluation efforts."

Searching for High-Impact Organizations

Once a year, GiveWell publishes a list of the top nine charities it recommends. It also maintains a longer list of charities that fit its general criteria for cost-effectiveness and impact. The lists and the research GiveWell conducts to determine which charities to include are free and available online.

To find charities to recommend, GiveWell starts with academic research on the most effective projects and interventions, Hollander said. GiveWell looks for evidence that an intervention is effective and cost-efficient, meaning how far a dollar goes toward saving or improving someone’s life, Hollander said.

A lot of the charities GiveWell recommends tend to focus on solutions to global problems because of its cost-effectiveness criteria. The nonprofit makes the case that people in the developing world face a very different set of problems, many of which have clear, inexpensive solutions. A $5 mosquito net could save a child from dying of malaria, but it takes $100,000 to educate a kid in New York City, according to Givewell—assuming you can crack the code for fixing urban schools in the first place. 

After GiveWell settles on the type of program it wants to spotlight, for example, distributing insecticide-treated mosquito nets to prevent malaria, it invites charities working in the space to demonstrate their effectiveness. Mostly, GiveWell is looking for monitoring information, Hollander said. In the case of the Against Malaria Foundation, one of the nonprofits on GiveWell’s shortlist, that meant showing that its mosquito nets were reaching people, and that people were actually hanging them up and using them.

The next thing GiveWell looks for in a charity is transparency. “Because we are a resource for anyone who wants to come to our website and use our research, it’s really important to us that we can publish the full details backing up why we recommend what we recommend,” Hollander said. “Also, it’s really important to us that charities are transparent with us so that we can thoroughly, thoroughly vet their work.”

The last quality GiveWell assesses is the difference more funding would make. “We’re not just interested in what they’ve done in the past, but rather, will additional donations enable them to do more of the good work that they’re doing?” Hollander said. In the past, that’s meant taking a charity off the list for a year when GiveWell felt it had reached capacity, and returning it to its place the following year, she said.

Wanted: More "Top" Charities

How hard has it been for GiveWell to find a large number of top charities to recommend? Pretty hard, or so it says. After seven or so years of beating the bushes for such groups, GiveWell was coming up short. Writing last year on the organization's blog, Senior Research Analyst Natalie Crispin said, "In past years—and at the beginning of this year—we hoped that these investigations would lead relatively quickly to new top charities. Now, we believe that we’ve already (previously) identified most of the strongest charities by our criteria, and there aren’t many strong candidates left... With that in mind, we have begun seeing more potential in other research priorities, such as supporting the development of new organizations and new evidence bases."

The result of this shift was a new initiative to offer Incubation Grants that are open to charities at any stage of development. The goal of the grants is to make the charity competitive for inclusion on GiveWell’s Top Charities list.

Grants can back academic research to build the evidence that a program or approach to a problem is effective. They can also serve as early funding for a promising organization or for the monitoring or evaluation of an existing organization. Last year, GiveWell provided $13.3 million in Incubation Grants. 

Redirecting Dollars

So how much impact has GiveWell itself had?

The nonprofit tracks the money that ends up at charities based on its recommendations. Donors can give through the nonprofit’s website—GiveWell does not take a cut—or directly to charities. GiveWell follows up with the charities to track those donations.

So far, the nonprofit has moved some serious money. A full report is not yet available for 2016, but GiveWell tracked a total of $91.6 million that went to its recommended charities based on its research. Of that, $10 million came from donors who gave at least $1 million and nearly $32 million came from individuals donating less than that.  

The rest, $50 million, came from Good Ventures, the foundation that has made it possible for GiveWell to greatly expand its work over recent years, and also to engage in grantmaking of its own. Cari Tuna, who also embraces effective altruism, has been a tremendous ally of GiveWell since first connecting with the organization. In turn, GiveWell has helped to shape Good Venture's work and, together, they created the Open Philanthropy Project, through which Good Ventures does most of its giving. Without question, one of GiveWell's greatest accomplishments, in terms of impact, has been to guide how one of the larger tech fortunes in Silicon Valley is used for philanthropy (Dustin Moskovitz is worth $14 billion). 

GiveWell’s influence over Good Ventures has been especially evident in the foundation’s focus on global health and poverty. Although GiveWell was set up as a resource for individuals, its relationship with Good Ventures is a template for new foundations that are reluctant to staff up, but want to spend their money on cost-effective and impactful projects.