How To Evaluate a Charity II

Credit scoring charities gets away from all this subjectivity.

One can criticize the criteria used, one can question if the number of variables should be 50 or 55, but one cannot question that the outcome was subjective.

We criticize our criteria every year, and drop some, and include others if the statistics demand it.

The Best Run Companies and The Best Run Charities, the two selection process I conducted for 30 years, never received an accusation of favoritism, or cronyism.

One of the common types of criticism was that we did not develop sector specific criteria, for health and education for example.

This is tougher to contest but basically we were trying to classify different charities, in different fields, and that requires common denominators.

Nor are sector specific evaluation criteria easy to determine objectively. Education may require a 30-year span of evaluation, for one to be able to evaluate if it was indeed effective.

The gist of our evaluation is management, transparency, information flow, and the premise that well managed charities will be carrying out what donors expect them to do, whatever the mission is or specific field the charity is in.

By the way, stock analysis follows the same basic rule.

No Wall Street research house or broker test drives GM cars, or Procter and Gamble diapers, before issuing a BUY recommendation.

They basically analyze management and the financial structure of these companies.

Another issue is refinement of existing measurements or introduction of new ones, non sector specific ones.

Over the last 10 years we have perfected the evaluation process and refinements were introduced as new measurements.

What we always wonder is whether the new refinement or variable really adds value to the process?

More often than not, the new classification or list of charities comes out practically the same, identifying say 49 out of the original 50 charities.

When you already have 42 variables, the next one usually contributes very little, for two reasons.

We could actually give the award using only 17 variables, with practically the same degree of confidence as using 42.

But we like the redundancy put because we are treading on new ground.

Secondly, well run charities usually maintain a standard of excellence in everything they do.

If we were to create a totally new evaluation criteria, chances are we would find a similar degree of efficiency as in all the rest.

If rooms are clean, chances are bathrooms and kitchens also are.

The best part of the Award is the Award giving itself.

It has a very emotional ceremony, devoted volunteers and managers break up in tears and for many this is the first public recognition in years, many for the first time in their lives.

For Profit companies have the annual distribution of dividends as their reward, charities have nothing. The “Premio Bem Eficiente” is a coveted and well deserved award for those that receive it and a landmark in the history of philanthropy.

May I add, this may be the most cost effective project in the world, It costs US 300.000 a year, and has returned US$ 1.000.000.000 in additional donations over the ten years.