JustNotVeryInformed (BBC's coverage on charity giving websites) & why charity should be more commercial
I came by this report by the BBC yesterday on why it's not okay for JustGiving to charge fees for its service.
This prompted me to post a link to a book I came across during the summer by Dan Pallotta, called 'Uncharitable', that explores the inequalities between the ways business and charity are viewed and evaluated, including attitudes towards investment and profit. Pallotta believes this stymies charities' ability to have the greatest possible impact:
At a tactical level, Uncharitable also shows how the question we've all been trained to ask to evaluate a charity - "What percentage of my donation goes to the cause?" - is deeply flawed, gives dangerously misleading information, and can reward charities that provide poor service and hurt those that are doing the most good. It also shows how these measures force charities into a fearful and perpetually cautious posture, and prohibits them for pursuing their boldest dreams of a better world.
In the book (which I immediately ordered from Amazon, the moment I heard about it), there's a case study about how Pallotta's company was vilified for inventing and running the AIDS Rides and Breast Cancer 3-Day events, which he says netted charities $305 million in nine years, because his company charged for its time to cover the salaries of 350 employees required to make the events possible and made a profit. This excerpt from a piece in the New York Times explains:
Critics railed at his $394,500 salary - low for a corporate chief executive, but stratospheric in the aid world - and the millions of dollars spend on advertising and marketing and other expenses.
"Shame on Pallotta," declared one critic at the time, accusing him of "greed and unabashed profiteering." In the aftermath of a wave of criticism, his company collapsed.
One breast cancer charity that parted ways with Mr. Pallotta begain producing its own fund-raising walks, but the net sum raised by those walks for breast cancer research plummeted from $71 million to $11 million, he says.
Pallotta challenges the system of beliefs that say that it's not okay to make a profit if it generates new income for charities and that charities should not invest in fundraising (just one of the perfectly sound reasons that some of the money you donate to charities goes on what is so often, and misleadingly, referred to as 'administration fees').
I can see both sides of the argument, and there's always a lot of grey in between but, fundamentally, I agree with Pallotta and I also think the points he makes are highly relevant to the overly-simplistic criticism being levelled at JustGiving in this piece by the BBC.
I remember, raising an eyebrow at the news, in October last year, that Bmycharity was removing all of its fees in favour of a advertising revenue-driven model. Anyone sitting in the office that day will tell you that I commented that I hoped they'd done their maths and were sure their revenue model was going to stack up, otherwise any short-term additional value they'd be offering to charities might end up being just that if they ended up going bust as a result. It was certainly an audacious move which, I was guessing at the time, was based on grabbing a huge amount of market share away from competitors very quickly in order to provide an attractive proposition for advertisers - large numbers of lovely fundraisers to market to. I could see the thinking behind it, but it still sounded a bit risky, and I hoped for their sake that they'd planned the various scenarios through and were protected if things didn't happen quite as quickly as they hoped.
A few months later, on 12 March, UK Fundraising reported that Bmycharity was to close, following the, 'failure of a proposed deal that would have brought them investment to help support their expansion'. Luckily, just four days afterwards, followed the news that, the platform would, 'continue by merging with services charity Help for Heroes'. What's interesting about this is it seems to prove that you have to have some funding being injected from somewhere to keep a sizeable service, handling hundreds of thousands of pounds of donations, afloat. In this case, you have to respect Help for Heroes for their entrepreneurial approach in deciding to invest some of their funds in return for, presumably, a longer-term, sustainable gain that will become their beneficiaries' gain.
A long time ago, there were no online donation portholes, and no online donations, and the founders and original investors in JustGiving invested hugely, and at some risk to create the first. At the same time, Virgin were busy making vast profits in a variety of ways (some of them surely quite incompatitible with the work of a great many of the charities they now seek to help through VirginMoneyGiving?). This now enables them to (green)wash their hands of some of that guilt, whilst simultaneously market their financial services to new markets, by using some of those profits and resulting infrastructure to offer lower fees than JustGiving. In writing this, it makes me wonder whether supporters of the many charities seeking to address the causes and effects of climate change are recommending VirginMoneyGiving to their donors?
I'm not saying there shouldn't be choice - it keeps everyone on their toes and no one likes a monopoly - but I do think we should promote informed choice, because there is always more to things than first meets the eye. To me this decision is not dissimilar to buying clothes. I know if I want to I can get t-shirt for £2.99, instead of paying £20 for a better quality one, but I don't because the chances are it will fall apart after one wash and might have been made in a sweatshop. I choose to invest in something more sustainable.
I found this considerably more balanced article on JustGiving that I thought I would share to add some intelligent perpective, which it seems the BBC isn't interested in investing the time exploring (perhaps it thinks we're all too dumb?). It's also worth watching this video produced by the RSA on the occasion of awarding Zarine Kharas, Founder and CEO of JustGiving the Albert Medal for 'democrastising fundraising', where she echoes Dan Pallotta's views by imploring charities:
to stop seeking the lowest price, rather than the best value, without any regard to long-term impact.