A helpful way of valuing and comparing giving opportunities
As serious philanthropists know, the results of philanthropic giving are often significantly less than anticipated. Philanthropic organisations have to decide whether it is more important to make donors feel good about themselves (in which case “results” are reported merely in terms of inputs such as amounts disbursed and number of people “helped”) or to maximise the achievement of their mission (in which case it is necessary to do the hard work of measuring and evaluating the actual outcomes such as the net benefit or detriment of a program to a poor community). The book The Robin Hood Rules for Smart Giving by Michael Weinstein and Ralph Bradburd describes one technique for valuing and comparing the relative effectiveness of different types of philanthropic endeavours.
The authors’ technique, “Relentless Monetization”, requires a philanthropic organisation to:
- Translate the organisation’s mission statement into well-defined goals
- Identify a specific intervention to analyse
- Identify every mission-relevant outcome resulting from the intervention (while disregarding outcomes which are not relevant to the mission)
- Assign a dollar value to each identified mission-relevant outcome
- Estimate the benefit/cost ratio of the intervention
- Compare the benefit/cost ratios of different interventions to identify and support the ones with the highest ratios.
The book provides a very helpful technique for making very difficult evaluations and comparisons. However, it does in my opinion contain some weaknesses:
1. Although the authors discuss counterfactuals and briefly acknowledge that a benefit provided to one person can adversely affect another person, they do not seem to anticipate the full effect of all externalities of an intervention. For example, the Millennium Village Project provides substantial aid to selected villages; this could have no effect on surrounding villages, or it could make surrounding villages richer or poorer, but either way the total effect needs to be measured, rather than just the effect on the selected recipients. A full analysis of the effect of a particular intervention on a community might require measurements to be made several years after the intervention.
2. Use of Relentless Monetization may give the mistaken impression that the donor is in control. The reality is that there are numerous influences on beneficiaries which the donor is unable to control (family pressures, culture, bureaucracy, corruption, natural disasters, lack of personal skills, etc.), and the best that the donor can do is to offer beneficiaries another option.
3. Although the authors acknowledge that a particular sum of money may have differing marginal utility for different beneficiaries, Relentless Monetization seems to lump all financial outcomes together. As an absurd example, a recipient of a benefit from an organisation dedicated to alleviating poverty might experience a $1 million increase in wealth. It seems that the authors would count this as a $1 million outcome, when in fact perhaps only $10,000 was required to lift the recipient out of poverty, so that only $10,000 should be regarded as a mission-relevant outcome.
Notwithstanding these minor objections, I believe that this book will be very useful to donors and philanthropic organisations for whom mission effectiveness is the key consideration, and I highly recommend it.