Why Giving Money is Not Enough


Family enterprises have a strong track record in philanthropic spheres, yet tides are turning towards evidence-based altruism. Scott McCulloch considers the implications.

Giving back is not what it was.

Give too little and your donation could be minimized by processing costs. Misguide your donation and your cancer-fighting dollars might be funding research rather than treatment for people who cannot afford it.

Why do we give money away? Because we value the social good done by the charity, say behavioral scientists. We give because we value knowing we’re contributing. Or we do it for the ego trip – to show power.

But is giving money enough? Donors are more discerning than a decade ago. Many want to know how their charitable projects differ in terms of impact.

This thinking is part of the effective altruism movement, which encourages donors to give in measurable, evidence-based ways in order to make the greatest possible impact.

Toby Ord, a researcher in moral philosophy at Oxford University, has studied this for more than a decade.

In his research, Ord applied World Health Organization models to determine how much a specific pot of money could buy in terms of extending the lifespans of ill people.

He discovered that medical interventions in developing countries can be 10,000 times more cost-effective than those in the UK.  

For example, it costs about $50,000 to train a guide dog to help a blind person. A donor could give that sum towards surgeries for people who suffer from trachoma, an eye disease common in developing nations.

Surgery costs as little as $10, according to the World Health Organization, so you could theoretically restore the sight of 5,000 people with that $50,000.

Critics of the effective altruism movement argue that giving can indeed be ultra-targeted, for measurable results on people in need, but it should not automatically rule out our choice to give to other causes, for instance, protecting wetlands.

“It’s shortsighted to suggest donating to causes other than poverty reduction is immoral.”

One such critic is Karl Zinsmeister, author of the Almanac of American Philanthropy, a reference book on the purpose and effects of private philanthropy in the US.

“It’s shortsighted and often inhumane to suggest that donating to causes other than poverty reduction is somehow immoral,” Zinsmeister argues in Stanford Social Innovation Review.

Where does that leave family enterprises? Family firms have long engaged in philanthropy as part of strategies to align core family values to those of the enterprise.

Philanthropic initiatives are highly beneficial to business goals such as attracting and retaining great employees and improving the company’s reputation as a good corporate citizen.

The benefits for family businesses active in philanthropy can be tremendous. It creates a stronger and diversified connection between the family ownership group and operations.

It creates a connection to the company for employees, customers and the supply chain not only through what the company makes or sells, but through what it does by improving quality of life.

Giving money will not resolve poverty nor save the rainforest overnight. Yet it can rally a family to think of how to make an impact and clarify its purpose.

One way for philanthropic families to get more bang to their buck is through GiveWell, a New York-based organization that researches charities to see which ones are the most effective.

Founded in 2007 by two hedge fund managers, GiveWell scours published academic papers to discover and then verify which charitable programs work. It has analyzed some 800 organizations working internationally.

GiveWell currently recommends three top-rated charities, which were chosen for being cost-effective, underfunded, exceptionally effective and transparent with donors.

It’s easy to write a cheque, but there are countless other ways to make an impact. Give blood, for instance. The Red Cross is always looking for donations at their offices and during blood drives.

Volunteer and encourage other family members to do so. Handy with tools? Volunteer for Habitat for Humanity.

Help a non-profit organization. There are literally thousands and many would eagerly welcome the expertise and compassion that only a family business can deliver.


Related Links:  

Engaged Philanthropy and Impact Investing

Compass for Entrepreneurial Families

Improving Impact

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