What Makes a Charity Effective?

When we give money to a charity, we assume the money will be used to do good. But that’s not always the case. Some charities accomplish very little; a few may even unintentionally cause harm. Most charities probably have some positive impact, but the amount of good they achieve varies widely. By ensuring that you give to effective charities, you can be confident that your donations will make a significant difference.

What makes a charity effective, how do we know whether it’s effective, and how can we use this information to guide our giving?

Myths about Charity “Overhead”

People often assume that low over-head costs—or administrative expenses—are a good indicator of charity effectiveness. After all, the less money a charity spends on operations and marketing, the more direct good it can accomplish in the field, right? Not necessarily.

Some very effective charities have relatively high overhead costs, while some charities with very low overhead accomplish almost nothing. Overhead costs can include investments that increase a charity’s impact, such as training, planning, and evaluation, along with fundraising to help the organization accomplish more and sustain its progress. Overhead rates by themselves reveal very little about a charity’s effectiveness.

Measures of Effectiveness

Are initiatives proven to work?
One of the most important steps in determining effectiveness involves establishing a cause and effect relationship. Can the charity’s reported results be attributed entirely to its actions? Would some outcomes have happened anyway, even without the charity’s involvement? The ideal way to answer those questions is through randomized controlled trials (RCTs), in which one group of randomly selected people receives an intervention while another group does not. Not all types of interventions lend themselves to RCTs, but charities whose projects are supported by evidence from RCTs can usually claim a high degree of confidence in their effectiveness.

Are interventions cost-effective?
Another important factor in determining effectiveness involves cost. Consider two charities, both of which have a goal to save at least 1,000 lives annually. At the end of the year they evaluate their results, and both charities met their goal. But now consider this: Charity A spent $30 million to save those 1,000 lives, while Charity B spent $3 million. That makes Charity B 10 times more cost-effective than Charity A: it achieved the same results at one-tenth of the cost. To put it an-other way, a donation to Charity B would likely help more people than the same donation to Charity A. Cost effectiveness is a key component of overall effectiveness, and plays an important role in making comparisons between charities. The Life You Can Save uses data on cost effectiveness, backed by research, independent verification, and other evidence, to identify its recommended charities.

Beyond the Numbers

If we consider only cost effectiveness, charities that use proven, efficient, high-impact interventions, whose impacts can be measured and directly attributed, will rise to the top. They’ll look better than charities that test experimental approaches or have impacts that are harder to measure and attribute, such as outreach and education. Charities working on longer-term issues, whose efforts may not deliver significant benefits for many years, also suffer in comparison when only cost and near-term impact are considered. What else can we use to tell whether a charity is effective?

While RCTs and cost effectiveness are key to identifying charities that deliver the most “bang for the buck,” there are plenty of other indicators of effectiveness. Factors such as a proven track record, transparency, sustainability, rigorous monitoring and evaluation, skill and experience in leveraging funding and strategic partnerships, broad reach and potential for scale, and the ability to generate a wide range of benefits (e.g., job creation, local economic growth, social benefits, environmental improvements) can also be used to identify effective charities.

These indicators may be more difficult to measure, but they are important factors to consider in evaluating effectiveness. The Life You Can Save’s advisers take into account these factors in identifying highly effective charities.

Finding Effective Charities

Evaluating charities and identifying the most effective among them involves a lot of research and time. Fortunately, organizations like The Life You Can Save help donors identify effective charities, making it easier to find high-impact giving opportunities.

The Life You Can Save recommends charities working in intervention areas spanning health care, hunger and nutrition, and economic empowerment. Each of our charities has been rigorously vetted, so you can be confident that your gift will make a real difference in the lives of people who most need help.