Apply a Proactive Approach to Finding and Evaluating Charities

This is a transcript of unscripted speech, rather than written prose, and therefore should not be relied on for grammatical accuracy. This is not a verbatim transcript. Parts have been slightly modified to improve readability.

MICHAEL VOSS: Thank you for joining Stanford Social Innovation Review's webinar, Giving Wisely, How to Apply a Proactive Approach to Finding and Evaluating Charities. I'm Michael Voss, publisher of Stanford Social Innovation Review and the host and moderator of today's webinar.

In order for non-profits to have impact on large and intractable global challenges, they need several things, including effective management systems, competitively paid staff, robust infrastructure, and, perhaps most importantly, the funding to support these efforts. Donors certainly want to help make this happen. At the same time, like all other partners in the philanthropic ecosystem, members are looking to increase the efficiency and effectiveness of their efforts in creating impact. How can donors best identify and evaluate non-profits with whom to work, not just from an issue alignment perspective, but from an impact perspective? What are the indicators of an effectively managed non-profit versus ones that maybe less so, and what resources are available to help make these judgments? And what methods are available to donors to monitor and evaluate the impact of the work they're supporting in order to better gauge this impact?

These are several of the questions we plan to explore in this webinar, and we're extremely fortunate to have with us two speakers who have a great deal of knowledge and experience in this area.

Our first speaker is Fred Kaynor, Vice President of Business Development and Marketing at Schwab Charitable. Fred brings over 20 years of financial services experience to today's discussion. In addition to his role at Schwab Charitable, he has formerly held senior-level positions with MasterCard Worldwide and Visa.

Our second speaker is Jacob Harold, Executive Vice President at Candid. As many of you are no doubt aware, Candid was formed earlier this year from the merger of the Foundation Center and Guidestar, where Jacob served as CEO since 2012. Earlier in his career, Jacob worked at the Hewlett Foundation, the Bridgespan Group, the Packard Foundation, the Rainforest Action Network, Greenpeace, and Green Corps. Over the years, Jacob has written extensively on philanthropic strategy.

But before I hand it off to our speakers, I want to mention that this webinar is part of the Giving with Impact series, produced by SSIR and sponsored by Schwab Charitable, who helped with the selection of speakers and topics in the series. The series is designed to stimulate a discussion among the philanthropic sector around ways to maximize philanthropic impact.

Now, with that, let me turn things over to Fred to kick things off.

FRED KAYNOR: Michael, thank you very much. I appreciate you setting the stage for today's discussion. And before we get started, we came up with a quote that I think really prepares us for what we're going to talk about today, which is "To give money, give away money is an easy matter and in any man's power, but to decide to whom we give it and how large and when, and for what purpose and how is neither in every man's power nor an easy matter." It's funny that came from Aristotle and it's very much consistent today, hence, the reason for our great dialogue.

So it's such a pleasure to be here with you, Michael and Jacob, to review such an important component of the charitable giving process. As a leading national donor-advised fund, Schwab Charitable sees a number of donors who already have a rather clear and defined idea of exactly how they want to deploy their charitable giving in terms of their charities, such as their alma maters or places of worship, and we also see a growing number of donors, particularly younger individuals and families, who have identified a cause that they wish to support and are looking for charities that can help them achieve the greatest impact on those causes that are most meaningful to them.

That's why we're so excited about today's discussion. As part of our commitment to providing our donors with tools and guidance that they need to achieve their charitable giving goals, we partner with industry leaders to provide additional guidance in various areas of philanthropy so that our donors can take a truly thoughtful and strategic approach to their overall charitable giving and philanthropy.

Jacob, Candid is a true leader and innovator in connecting people who want to change the world through the resources that they need to do so, through research, collaboration, and training. Tell us a little bit about Candid's philosophy on how to help donors achieve maximum impact on the causes that are most meaningful to them.

JACOB HAROLD: Of course, Fred. Great to be here, and thanks to Schwab Charitable and SSIR for pulling this conversation together.

And I think it's important to just start with what may seem obvious, but is too often forgotten, which is that social change is difficult work. I mean, whether we are talking about the history-making struggles for equal rights, or, you know, the get-your-hands-dirty practical work of a Habitat for Humanity build, the work that non-profits do is fundamentally challenging, and if it were easy to solve a problem like poverty or climate change or racism, someone would have done it already.

And so the non-profits that we're talking about today are facing problems that are built into the structure of our society and our economy, and they've shown an ability to often solve those problems. But it's incredibly important, we believe, at Candid, for donors to be compassionate and humble and patient when looking at non-profits, when thinking about the work that they are doing to try and address a problem or an opportunity that that society faces.

And that doesn't mean that donors shouldn't hold non-profits accountable, that we shouldn't have high standards. And, in fact, we really should. There's an immense variety within non-profits across many different axes, and one is how effective they are, and we'll talk about that some today. But as donors take a look at non-profits, it is important to keep in mind the challenging contexts in which non-profits work, and the way that donor behavior can have an impact on non-profits.

And let me offer an example of that, which is what's called the Non-profit Starvation Cycle, and this term was quoted in Stanford Social Innovation Review just a bit under a decade ago, and it was talking about this vicious cycle that many non-profits face in their interactions with donors. And it goes something like this, that donors want to give to the highest-performing non-profits, but they don't really know what questions to ask, they don't really know what metrics to look at. And so they fall back on one metric that has been mentioned often in the field, and, that is, easy to find, which is the overhead ratio, the percent of a non-profit's expenses that go to administrative costs. There are a number of different ways to calculate that, but the same dynamic plays out in all of them. And so what will happen then is that a donor will ask a non-profit about that. A non-profit will start to think, 'All right, that's how I'm going to be judged. I better spend a lot of time paying attention to my overhead ratio,' which means that that non-profit then doesn't invest in the accounting systems or the strategic planning or the staff training or other forms of overhead that they may need to in order to do their work better. And that then means that the non-profit doesn't have as much time to effectively communicate the real impact of their work and to pay attention to that, which often then leaves the donors frustrated that they're not getting the data that they feel they need to make a good decision, so they just double-down on the overhead ratio the next time around, and it continues. And this cycle has fundamentally starved many non-profits, leading them to not invest in the things they need to invest in, in order to not just do good work, but to be able to share that story with the field.

And so that's just one example, I would say, of how there's really a dynamic interaction between non-profits and donors. And donors are doing more than just choose. They are helping to set the terms for how non-profits operate, and that's an incredible position of power. And so I hope that, you know, over the course of today's conversation, we can raise some of the ways that donors can engage in the question of, 'How do I put my money to best use?' in a way that's fundamentally supportive of non-profits and that leads them to get better, and leads the field to get better, instead of creating an unhealthy cycle that keeps us all from achieving the goals that we all would like to achieve.

And then we'll be talking about this over the course of today, but I will just say that within all of that, it is Candid's belief that information is critical for good decision-making, and good decision-making quite obviously, is critical for creating an impact, and that we as a field have a lot of work to do in organizing information to help make sure everybody can make good decisions. Today, we're focused on decisions made by donors, but there are decisions made by non-profits, or government policymakers, or researchers that also have an impact. And, you know, in the modern information economy, we see how information is important in so many parts of our lives, and that's certainly true in philanthropy.

FRED: Thanks, Jacob. And great insights and perspective with respect to the Non-Profit Starvation Cycle, and, you know, the risks of being potentially too narrow in how we choose to measure impact. And you're also so right, that information is so key in terms of everybody that is… from the donors prospective that are considering the charities that are, you know, most worthy of receiving their charitable support.

We talked a little bit earlier from a donor's perspective that there are people, as I say, who really have a clear and defined idea of how and where they want to deploy their charitable giving, and then there are those that have those causes that are important and meaningful to them, but they don't necessarily know or have an idea of those specific charities that are best equipped to deliver maximum impact on those causes. So we're going to provide details in a moment on how to consider and create a short list of charities, but before we do, we think it's important for everybody to consider three questions at the outset of the process for researching non-profits.

The first would be how much time would you really have to dedicate to the purpose of researching these charities? There are those individuals that have the wherewithal to delve deeply into the research independently and they have the time and the bandwidth to do so. And for those individuals, we offer access to a variety of tools and resources that will help them to achieve their goals. We also have suggestions for those who don't necessarily have that same level of resources or bandwidth to conduct the same in-depth research, but still want to be thoughtful and purposeful in terms of selecting the charities to receive their support. And we're going to go through a variety of those tools and resources today.

Number two, is we ask ourselves what exactly do you want to give philanthropically-speaking? Is it going to be just financial support? Is it going to be active volunteer hours? Is it going to be board service? Is it going to be a combination thereof? Those answers and that conviction can really help to inform and focus those research efforts with respect to the charities that donors choose to support.

And then, lastly, where do you want to give? Consider the scope of your philanthropy. Do you want to support a need and a cause that's global in scale, or do you want to focus your efforts regionally, be that within a particular state in the United States or within a particular country abroad where you had lived and where you had worked or participated in some activities, or do you want to really narrow it specifically to the local community in which you reside, in which case that, too, would impact the potential charities to receive support? Again, those answers really play a significant role in conducting your research.

So, Jacob, let me, if I may turn it back over to you so you might be able to share some finer details on the process and methods that you employ at Candid to help create that shortlist of charities. And, perhaps, you can use a little more… tell us a little bit more about Candid's philosophy about narrowing down that shortlist of charities that most effectively deliver the service and the support for the causes that are most meaningful to donors.

JACOB: Definitely, and we do think that it's a fundamental step to navigate the sheer scale of the non-profit sector to narrow it down a bit. You know, when we think about the non-profit sector, it's very easy for many donors to think about just, you know, the homeless shelter on the corner or, you know, the art museum, you know, on the other side of town, and both of those are central parts of the non-profit community. But the non-profit sector in the US is huge, and we're looking at more than a million-and-a-half non-profits in the US, alone, employing 13 million people and responsible for a trillion dollars of GDP. It's an immensely complex part of the economy and our society. And so we quickly just run into a question of how in the world does a donor sort through that, how do they find that which is relevant to them? And I'm going to walk through an example of that in just a moment.

Let me start, though, by saying two things. First, is that, in this, we are assuming that a donor at least sometimes has taken a proactive stance, that they are not simply responding to requests, but that at least every once in a while they're saying, 'You know what? I really care about X issue, and I want to find a good organization.' And one of the most important pieces of advice that we offer is that that proactive stance is really important, and it can be incredibly fulfilling, too. It can allow donors to feel like they're taking control of their giving and not simply responding to a lot of requests.

The second thing I'll note is that, in this, we assume that people know what issue they care about. We have a saying, 'To pick an issue with your heart and pick an organization with your head,' that philanthropy is both a head and a heart act, and that, typically, people have causes that they are passionate about, and that comes from deep inside their sense of self and their life experience. And then we encourage people to embrace that, but then to be proactive and a little bit more analytical when picking the right organization.

Now, I will say there are folks out there who are also analytical about what issue they're going to give to, and that's a whole different topic than what we're focused on today, but there's some really interesting work. I'd direct people to the work of GiveWell, givewell.org, in taking a look actually at issues and saying, 'You know, which one of these is the most important?'

But, today, let's focus on organizations, and let's imagine, we'll do an example, that you're a donor, you live in California, and you care about mental health, and, in particular, you're focused on people who are recovering from trauma. And there might be that you have some basic parameters. You want an organization that is big enough to make a difference, but not so big where your donation is going to get lost. You want an organization that's transparent and willing to share basic information, and, of course, you want to make sure that your donation is tax deductible and fully legal in the eyes of the IRS. I think all of those… you know, in this example, I think all of those assumptions are ones that we can relate to, that basic sense of, 'Here's kind of what I have in mind.'

Now, if we look at all non-profits in the US, we're looking at more than a million-and-a-half, but if we use here Guidestar's tool… so Guidestar is one of the flagship products of Candid and a tool used by 10 million people a year to find out information about non-profits… we can quickly zero in that there are 29,488 mental health non-profits in the United States that are eligible for a tax deductible donations. We're in California. Remember, this donor, this imaginary donor is in California. We can zero into California, 3,609 that are in the state of California. If we then put some parameters on size, because, again, we don't want a really tiny organization that we might not be confident is positioned to have the scale and impact that we're looking for, but we also don't want a big one where our donation will get kind of lost, can zero it in to say organizations between a $100,000 a year in budget and, say, 5 million. That takes us down to 599. And then, if we focus on those that work, in particular, on PTSD, again, that was an interest of ours, and that have shared information through Guidestar to achieve at least what we call a bronze transparency seal, it takes us down to six. And think about the work it takes to wrap your mind around a million-and-a-half non-profits. It's not really possible, not for the smartest person, but six is something that you could sit around the kitchen table with your family and talk about, 'Which one of these six organizations is the one that we want to give to as a family?'

And so what it is, is there's almost mechanical step that we can take that's really quite straightforward to come up with that short list that we can then analyze more deeply, because no one is capable of deeply analyzing a million-and-a-half non-profits, but any thoughtful family or any thoughtful donor can take a look at five or six or seven and make a really smart choice if they're thoughtful about it. So then… so here we are, so that's the next step, which is… which is creating a short list.

Moving on from there, let's think about, 'Okay, how are we going to analyze these six organizations?' And I'd to propose a… what we're calling a non-profit results pyramid, which is, like any other activity, there are sort of basic components that must be in place in order to achieve social good. There are basic things that you as a donor want to check on to make sure that they're in place. And, you know, that first layer is just legal legitimacy and compliance. You want to make sure that the organization is legit and that a donation is tax deductible.

That is just table stakes to then move on to the next layer, which is the operational layer, the governance of the organization, its finances and its operational systems. You know, none of those are a guarantee of impact, but organizations that have high-performing board, that have well-structured finances, that have efficient operations are more likely to be effective because that just helps an organization run better. But all of that is only a means to the end of programs that try to create impact.

So then that next layer are the actual things that an organization does to create good in the world. It's logic, a logic that helps to create a set of activities that that organization believes will create results. And then, ultimately, what we really care about are the results that that non-profit leaves behind in the world as a whole.

The challenge, of course, is that measuring results is incredibly difficult, and it varies profoundly across different types of non-profit organizations. In some cases, we're able to have what some people might call a gold standard of a randomized controlled trial. So just like in pharmaceutical research, you can divide people into two groups, people who are receiving a treatment, an intervention offered by a non-profit, say, a job training program, and those who are a controlled group, you can randomize them and test that over time. So there are certain interventions that lend themselves to that kind of analysis that can give what social scientists might say is a high standard of evidence, and that's incredibly valuable.

But it's also very important to recognize that not all non-profit interventions lend themselves to a randomized controlled trial. If you are an advocacy group, you can't have an alternate universe where you don't do the advocacy, and you can't randomize yourself if you are trying to influence the behavior of, say, a government official. And there are times when it's simply unethical to randomize the those who are going to receive, say, a medicine and those who won't. So we can't expect from every non-profit that they're going to be able to provide a randomized control trial level of evidence that they created the results that we have here at the top of the pyramid. Sometimes that's possible, and in those cases, that offers a great kind of evidence for donors to look at. But, again, it's also important to recognize that that simply is not always going to be an option for a non-profit, depending on the time horizon they're working on, the nature of their intervention.

And so that then leads us on to what we call the proxies for effectiveness, that if it is not always possible to get that gold standard research, what are other ways that we can identify the quality of a non-profit's work and the likelihood that that organization is going to achieve lasting results? I will mention five here, five proxies for effectiveness, things that a donor can look for, which give a clue as to the ability of that organization to achieve lasting change.

So the first one is clarity. And if there were one word I would focus on, it would be clarity, because those organizations that are clear about their goal, clear about their strategy, clear about what they measure that they think is an appropriate metric or indicator of their progress, maybe not of final results, but still of progress towards those results. And so clarity is a great place to begin.

A second one is openness. A non-profit's willingness to share its thinking, to share its strategy, to share its failures and how it's learned from those failures, to me, is an indication of an organization that is not closed off from the field, but, instead, is in a constant cycle of learning and a willingness to engage with others who are trying to achieve the same goals, and not simply a black box. I will note that there are a few exceptions on openness. There are a few cases where non-profits are really quite justified in not being open. If you're working with undocumented immigrants, or you're working on gay rights in Uganda, there may be real safety concerns that have to be put… have to be considered when thinking about what information to share. So we need to respect those cases where non-profits are thoughtfully not transparent. But we still can ask for openness to be the default and look for organizations that are, as much as it's feasible and appropriate given their context, are open and engaged with the world around them.

The third proxy is people. This one is quite straightforward. You can ask any donor who sat down with a really compelling leader that that sort of charisma is an incredible motivator for donations. And it's not a guarantee of effectiveness. You can have a charismatic leader who is not an effective manager, but having a leader who clearly has a rich sense of the nature of the problem, compelling vision for a way to actually address that problem, and a mastery of the specific activities that can actually get to a solution, that is… that's relevant and that is a proxy for the potential of a given organization. And then you have versions of that throughout the organization, beyond the leader, to the operators and the frontline leaders who are actually executing the work of an organization. So people are a proxy for excellence. And if you go into an organization, and you're incredibly impressed by the people, that's a really good sign.

The fourth proxy I'll mention is stakeholder views. Now this plays out in a couple of ways. So one is just is the non-profit actually even asking their stakeholders for their input into their processes? If you have a homeless shelter that is not regularly asking the homeless people what they need, what's working and what isn't, then you have an institution that doesn't have a feedback loop with its primary constituency. That's a pretty concerning sign. What's even better is if you actually are able to hear what those views are, hear what the opinions of the homeless folks are about this organization or the volunteers at a volunteer-led organization talking about how their time is well used. Or there might be other stakeholders that are relevant. If it's an advocacy group that works on forest protection, it's pretty hard to ask the trees if that group is doing a good job. But you can hear from journalists, and policymakers, and researchers, who might have a good perspective, good line of sight to the effectiveness of that organization.

And then a final proxy that I will offer are the choices of other funders. It's no guarantee that an organization is high quality if other funders are funding it, but there is something to be said for the wisdom of the crowd. And I think this plays out in particular ways with institutional funders. If a large foundation that has a staff full of experts has supported an organization, you can at least trust that they have done standard due diligence on that organization. Now, there might be other reasons why they've made a poor decision, but there are institutional incentives for foundations to weed out the bad actors. And, you know, that is information that matters. If you have experts who are fulltime devoted to trying to give away money to the highest impact, that is a pretty powerful indicator that that organization has been through the ringer and has come out… it's come out clean.

So, again, none of these are… these five proxies are a perfect guarantee of lasting results. But in the complexity and nuance of social change, we're often never going to get that perfect metric. And so we have to be, as donors, willing to do the best we can, and I would argue that these sort of proxies get us a long way towards confidence that our money is really being put to really good use.

With that, let me hand it over to Fred. We've been talking about all the good things to look for, but we also want to take a bit of time to talk about some things that we need to watch out for. And so, with that, Fred, you want to talk a bit about red flags?

FRED: I do. Thank you, Jacob. And I want to thank you for those great insights. And, again, it just sort of reinforces what we talked about early on in the session, which was, you know, a broader, more flexible view into, you know, practices and all activities with respect to how these charities operate. Your insights were very interesting about, you know, it's easy for us to say that, 'Well, they're not transparent enough so that's a, big red flag.' But then when you cite those organizations that are intentionally and appropriately, perhaps, not as transparent as others, like those that support undocumented workers and so forth, that's a really important consideration. So it really is critically important in the process of researching these charities to do so with a much wider and broader perspective.

But, yes, much like the proxies that you just talked about, there are also red flags that we can and should look for in the process of researching the charities to receive philanthropic support. You mentioned many of them in the proxies.

Transparency. If for whatever reason basic fundamental information about that organization isn't publicly or readily available, that could potentially be a red flag under certain circumstances.

Likewise, legal status. An organization that is not legally registered, or their legal status, their 501c3 status, for example, has been suspended by virtue of an investigation or something, that, too, is a potential red flag.

Press and PR. We know that the press and PR we see out there can be factually accurate, and it can also be somewhat subjective. So it's important that when you're conducting the research on these charities that you do a thorough search for information that may or may not be accessible in the press to determine if there are things that are highlighted which would suggest that the organization doesn't necessarily operate in the most appropriate manner or there's potential impropriety of use of funds and so forth.

Strategy. It's very, very important just to reinforce what Jacob said, that non-profits have a very clear and specific strategy on how to operate and deliver, with maximum impact the services to the causes that they are supporting. And if there is an unclear or somewhat convoluted strategy with respect to how they operate and how they deploy the resources, that is a very big consideration when you're researching these organizations.

Financials. It's very, very important to have transparency into the financial well-being of these organizations. If the organizations have some instability or growing deficits with respect to their solvency and how they operate from a financial perspective, that would be a very important thing to consider in the course of this research.

Again, highlighted by Jacob in the proxies list, governance and management. It's also very important to see the health and stability of the leadership in each of these organizations. And if it's clear that there has been a series of changes at the senior level within those organizations, that might suggest a little bit of stability challenges, with respect to how they operate.

And then programs and services. Programs and services are should very much come from a very clear and defined strategy, and it should be very specific in terms of what the objectives are, what the approach is going to be, and, most importantly, how they're going to measure the success of each and every one of those services, be it qualitative or quantitative.

And, Jacob, maybe I could turn it over to you to give a little more perspective on how Candid sort of might have potentially identified programmatic red flags, if I may.

JACOB: Sure. You know, I'll mention a few that I certainly look out for.

So, you know, one, is an organization that has created its strategy in such a top down manner that they haven't done it in consultation and engagement with their stakeholders, and, most importantly, their end and beneficiaries. And I would argue this plays out both for individual non-profits, as well as foundations. That doesn't mean that an organization shouldn't take a bet and have a proactive strategy, but it's certainly concerning for me if that is developed in isolation.

You know, a second is those organizations that are clearly very fragmented across many different strategies. There's a concept called mission creep that most all of our audience will have heard of, and the truth is that there are profound incentives towards mission creep in the way that most non-profits are funded. Non-profits are desperately trying to pay the bills and looking for revenue wherever they can find it, even if that revenue requires them to do something that's outside of their core strategy. And so I think it's important for us to have a lot of compassion for non-profits that have been subjected to the pressures of mission creep. But at the same time, if an organization feels so fragmented that it is not focused on, you know, a clear approach to creating good, you know, or approaches, plural, but those approaches, plural, need to be clear, then that, to me, is something that I find, you know, certainly, quite worrisome. And, in part, just because one of the most valuable resources that all of us have in the modern information economy is our attention. And when non-profit leaders are able to focus their attention on one or a few strategies and programs, they're just much more likely to really give that the energy, and the thinking, and the passion that it needs to succeed.

And then, you know, a final red flag I will mention are those non-profits that only communicate in stories or only communicate in numbers. We have a saying around here that there are two laws of non-profit communications—one, is no numbers without stories; the other is no stories without numbers. That by the very nature of creating social good, we need to, both, be capturing the narrative, the actual experiences of end beneficiaries and how their lives are transformed by the work of non-profits, while also having some sense of scale and rigor that comes from having numbers. And so when I see an organization that's able to both show stories and numbers, I immediately have far more confidence in them, but if I only see one of those, I tend to get a little bit concerned.

And then I will add one more, and this is also on the sort of communication side, is if all of the communication that the non-profit is putting out is about the problem, as opposed to about the work that they are doing to address it, then, to me, that's an indication that, you know, someone is really passionate, but doesn't actually know what to do to address, you know, what may be a very, very real issue. So I look for non-profits that are communicating about both what's wrong, but, also, how they're making it right.

FRED: That's a great point, focusing on the problem versus focusing on how they're working to address it with their solutions. I think it's just spot on. Thank you.

So we've talked a lot today about, you know, an approach, resources, a process of thinking around, you know, how to do thorough, broad, and comprehensive research to identify… for donors to identify those charities that they feel are worthy of receiving their financial support. There are a wealth of resources available to donors. Obviously, thanks so much to you, Jacob, for providing us with guidance and the framework that Guidestar by Candid employs to really inform these donors and provide them with, you know, the necessary tools and structure and rigor to really conduct this research in an appropriate manner, and what to look for to really identify those charities and be informed in the process.

In addition to Guidestar, there are a variety of different types of resources available. I've listed some of them here. Obviously, Schwab Charitable, as a one-stop shop, a portal that provides, not only access to the donor-advised funds solution, but it also offers a variety of different kinds of resources, tools, content, and so forth, in partnership with other leaders in the philanthropic sector, to try and help these donors to be as informed and impactful as possible with their philanthropy.

Jacob, you mentioned GiveWell, as well. There are issue funds that's focused specifically on portfolios of non-profits that are curated by experts, and support particular issues or causes. Large foundations frequently publish… such as the Gates Foundation… frequently publish their grantee lists, and they share their approach to giving, and how and why they have selected those organizations to receive support. There are a curated lists, collective giving, like Giving Circles. And, of course, there are philanthropic advisors. These are organizations and individuals whose charge is entirely focused on helping philanthropically-minded donors to really achieve truly maximum impact with their philanthropy in every aspect.

So there really are a wealth of terrific and very, very informative resources out there that are at the disposal of donors to really take the most thorough and the most informed approach to maximizing the impact with which they give.

So if I can just, in closing, I think it's important for us to talk about key takeaways. So donors… if you're looking at a donor who is really embracing this process of researching the best charities to receive their support, once they identify the issue area that they want to work on, they then create the short list of charities working in that space. And, again, there are tools and third parties who are very well-equipped to be able to help to refine that list. Again, do the due diligence. Make sure that the organizations that you're considering, have the necessary foundations for programs to be as effective and powerful as possible, and potentially look for red flags in the areas that we just talked about that might potentially impact your decision. Jacob's point is extremely well taken. There really is no perfect metric for impact, but look to see if a charity is able to clearly articulate its goals and strategies, is open to proactively sharing data about its work, and if its people have the necessary quality, experience, knowledge, and every other type of resources to really just deliver maximum impact through their charitable mission.

And then, lastly, there are a wealth of organizations and resources, as I mentioned before, to help donors make the most informed decision about how and where to deploy their philanthropy. We named a few of them in the previous slide but there are many, many others that all have a particular focus and offer tremendous value in the process, researching those charities.

So, with that, I will turn it over to Michael, if I may.

MICHAEL: Well, Fred, Jacob, I want to thank you both for a very focused and engaging, and certainly highly informative presentation.

The next 15 to 20 minutes is for you, our audience, to ask questions of our presenters. And many of you have already been doing so as we've gone through the presentations. We have quite a bit to share. If you have a question, please submit it by keying the question into the box on the bottom-left corner of your screen. We won't have time to field everyone's questions, but we will get to as many as we can. And then we will try to answer some additional questions back on the comments box on the page in which you initially registered for this webinar.

So, with that, I'm going to address the questions to each of you individually, Fred and Jacob, but just because I addressed it to one of you, if the other one wants to jump in, please feel free to do so.

So let's kick off, Jacob, with a question for you. How can organizations, non-profit organizations, balance the need for experimentation and innovation, and, of course, the associated possibility of failure, with the desire to show responsible use of funding when working with donors?

JACOB: Yeah, it's a great question, and there's no simple answer. But what I can say is that it's going to depend on the problem that an organization is addressing. The problem or… I should say, or opportunity. Not all non-profits are addressing problems. Some are seeing an opportunity to simply add joy or beauty to the world. You know, think about a museum or the opera. But for some organizations there is an established intervention that we know works. There's evidence that researchers have found that, you know, for example, having nurses visit young mothers whose kids might otherwise be at risk of, you know, negative outcomes down the road helps to totally transform their lives if you come visit those young mothers before the kids are born. And there are interventions like that, you know, throughout the sector where we already know they work. And in cases like that, you still are going to want to experiment but the bulk of your attention should probably just be on reaching as many people as you can with the intervention that you know works.

There are other cases, where it's really not clear how to address a problem. And if it's not yet clear, then what we need is experimentation. And I think what the responsibility of the non-profit is to demonstrate to donors, not necessarily immediate impact, but a way to learn and share that gets us closer to understanding how we can effectively address that question. And I believe that you can explain that to donors and donors will get it. If we don't yet know how to solve the problem, then let's try and figure out how, but if we're going to do that, let's do that systematically, and as transparently as possible and as rigorously as possible. And so it becomes the non-profit's job more to tell the story of their process than to tell the story of their results, at least until you get to a point where you've figured out what really works.

MICHAEL: That's great. I like that. Let me give you another question, Jacob. We spoke a lot about funders doing their… donors doing their due diligence. Would you recommend that donors periodically refresh their due diligence? So other than monitoring for impact, should donors reexamine the fundamentals of the organizations to whom they're giving every few years or…?

JACOB: I mean, so the short answer is, you know, yes, if it's worth your time. And let's actually talk a bit about time, and this is something that Fred talked about. You know, if you are a donor and you're writing a $100 check, that might be a lot of money for you, and, you know, maybe for you, that's really worth a lot of investment. For some donors, it wouldn't be. I think, you know, if you are giving the bulk of your charitable budget… and I say charitable budget because everyone should have one. No matter how small it is, everyone should have a guess as to how much they want to contribute to non-profits each year, and actually know what that number is. But that if you're giving the bulk of your charitable budget to a given organization, then, you know, you're putting a lot of eggs in one basket, and that may be exactly the right choice but that would, I would argue, make it incumbent on you to check in on them a bit more often. Most likely, you would be.

But I think it's important that we're not expecting that every donor is doing this level of research for every single donation that they're making. Instead, that, you know, we, as donors, at whatever scale, at $10 or $10 million, can have a handful of places where we're really proactive, and we really pay attention, and we go deep. And then give ourselves permission that it's fine to make the donation to your cousin's cancer race, and not do any research and just do it because you trust your cousin. And so I think it's going to vary across, you know, an individual's giving portfolio. But let's all pick at least a couple where we really do pay a lot of attention.

FRED: And that also…

MICHAEL: And, Jacob… oh, sorry. Go ahead, Fred.

FRED: I just wanted to interject to your earlier point about the timing. I do think it's important that we be mindful of the timing of the gifts, as well. You touched upon it briefly. And, for example, what comes to my mind is that, you know, many of us, most of us, probably, embrace our charitable giving at the end of the year, at a time when it coincides with the holidays and people are philanthropically-minded and, you know, more inclined to give. But there are also other times during the year, I think, that as informed philanthropists it's important that people consider. For example, many, many non-profits operate on a fiscal year. We do ourselves, and that fiscal year ends in the summer, at the end of June, frequently. And in order to be helpful as a philanthropist and a supporter of these charities in delivering on their missions on an annual basis, frequently, it's important for them to give prior to the end of that fiscal year so that they're successful at doing so. And I just wanted to throw that out there. I think that is an important consideration.

MICHAEL: That's an excellent addition, Fred, to the question… or to answering the question. Actually, let me turn to you for a moment. So, Fred, you probably wouldn't be surprised that a significant portion of the attendees for today's webinar are coming from non-profit organizations, themselves. And we've received quite a few questions about the best ways for these organizations to engage with DAFs and the companies that manage them. Could you speak to that for us?

FRED: Absolutely. We are thoroughly committed to engaging with the non-profit community in a way that is additive and helpful and supportive to all of their efforts and help them operate with maximum efficiency. I think probably the best way to answer it… there's a sort of a two-fold answer I'd like to give.

From a fundraising perspective, in terms of what we can do to help them in their development efforts, we engage, as I say, with regularity to try and discuss and review meaningful, actionable ways that non-profits, service-providing non-profits, can promote donor-advised funds, like Schwab Charitable, as a way to augment their existing development efforts. And I could go into an entire session just about that, but there are many, many ways that non-profits have and can leverage our platform and promote it in a way that informs their donors that we accept gifts through donor-advised funds, and use it as a way ultimately to expand upon their development efforts beyond what they do today.

And then there's another perspective, which is more sort of from the administrative side, whereby, you know, we… in our structure, our very efficient structure, of accepting a variety of different kinds of contributions—cash, you know, publicly-traded stock, restricted stock, private business interests, real estate, and so forth—we handle that process with tremendous efficiency. And that is a process which can be potentially onerous to the non-profit community, depending upon their structure and the resources that they have to accept those types of gifts. So if you consider what we would do… so they don't have to worry about accepting these rather complex assets, liquidating them, and ultimately deploying the assets to their programmatic services, we would handle the process of accepting that asset. We, as a non-profit, we accept it, and then the donor receives potentially a same-year tax deduction once the gift is made. We liquidate those assets, if they're not cash assets, and the donor doesn't, which means that they potentially eliminate capital gains, which means that much more available to go to the charity. And then we grant it out. We've accepted the contribution. We then invest the assets for growth in the account and grant it out on behalf of the donor to whatever charity they choose to support. So, if you will, from an administrative perspective, and a second perspective, we streamline that process for many non-profits, which don't otherwise have the capacity or the resources to do it effectively themselves.

MICHAEL: That's terrific, Fred. Thank you for sharing that. I'm sure that a lot of those organizations are glad to hear how a DAF could be helpful to them.

Jacob, let me move back to you for a second. We've actually gotten quite a few questions about the international landscape. What are the vetting considerations when giving internationally?

JACOB: Yeah, so, you know, that is a question that I wish I had an easy answer to. It is very much an aspiration of Candid's that we be able to help serve donors, individual donors, foundations and others with a better understanding of the full landscape of non-profits around the world. Because let me tell you, it's not just that there are good non-profits happening, you know, doing work around the world, but we in the US have a ton to learn from them. But the mere concept of non-profit plays out differently in different countries. As a general rule, you can't get a tax deduction in the US when you give to a non-profit in another country without going through some additional hoops. Now, a number of those hoops are addressable but I would often recommend that donors work with some sort of intermediary that is better structured to handle some of those challenges, organizations like GlobalGiving, which I'd certainly highly recommend. Many donor-advised funds also have services to help donors identify, you know, promising opportunities around the world, and then help to actually make sure that that donation is actually legal. So there's not an easy answer.

Now, if donors are willing to give up on the tax deduction, which many are, it can become a whole lot easier. You can apply a lot of the same frameworks that we've been talking about today. You know, the information may not always be quite as trustworthy, depending on its source, but I will say there's often I think a myth of non-profits outside of the US being, you know, less effective than US-based non-profits, and I really don't think that that's fair at all. But I do think that we, in the field, have, you know, at least a decade's worth of work to begin gathering systematically the stories of non-profit organizations around the world and sharing that common story in a way that is actually accessible to donors, and that can allow them to easily, you know, make a gift that they feel really confident in.

So, in the meantime, I would direct people to entities like GlobalGiving.

MICHAEL: And just to follow up, would you think that GlobalGiving is also a good platform for foreign non-profits to get on the radar of US donors?

JACOB: Yes. I would say that, yes.

MICHAEL: Here's a question that came up and was very interesting. And, obviously, Jacob, it came from the fact that you referenced the article on the non-profit starvation cycle that we published in SSIR about 10 years ago. And the question is why are we still talking about the non-profit starvation cycle if this concept has been around for over 10 years? What information, what insights are we not giving funders to perhaps better understand the challenge inherent in funding for a non-profit and that leads to the non-profit starvation cycle? And I leave that open to either of you to answer.

JACOB: Yeah, I mean, you know, part of it is that behavior changes slowly until it doesn't, you know, until we hit some kind of a threshold, but we haven't hit that threshold yet. I will say, it seems clear to me that the conversation among sort of sophisticated observers of the non-profit sector has changed quite profoundly in the last 10 years. It has changed somewhat among individual donors and somewhat among non-profits. But, right now, I think the best hope for change actually rests with non-profits, themselves.

So if non-profits are prominently displaying their overhead ratio in their annual report, which many, many still are, they're continuing to keep this zombie myth alive. And if they aren't proactively sharing programmatic metrics that they think are appropriate to their organization, they aren't offering donors an alternative so donors can feel like they've done their due diligence.

This is not to absolve donors at all, and, you know, I think very often donors have been quite lazy in applying the overhead ratio. But I think the solution mostly rests with non-profits proactively telling donors, 'Look, I want to be held accountable but here is the way that you can hold me accountable that actually relates to my mission, that actually relates to the people or the ecosystems that we're trying to serve.' So that, you know, they're able to basically scratch that itch, which is what this webinar has all been about, is the itch that people have to put their money to use effectively. And if, in the absence of an alternative, donors are going to fall back on something like the overhead ratio, which does not inspect the complexity and dynamism and difficulty and potential of the non-profit sector.

MICHAEL: Fred, anything to add on that, or…?

FRED: Nothing to add on that one, although I did want to add, if I might, just go back earlier, to the question about international charities and international giving. Jacob mentioned, you know, that many donor-advised funds offer resources to help donors, you know, become educated with respect to, you know, supporting a global cause outside the US that may… that they would like to support and that they need help in identifying the service-providing charities for them. And we partner… as I mentioned before, we partner with a variety of different leaders in philanthropy for a variety of different reasons. And in this particular case, we have partnerships with key intermediaries, such as Give2Asia, and CAP America, and so forth, who really have a expertise and knowledge and perspective and the structure to be able to help those donors to identify needs on a global scale, identify organizations to best deliver the support for them, and then provide guidance and insights on how to do so. That was not directly related to that question but I did want to interject on the former question related to international giving.

MICHAEL: Great. Thank you, Fred. Well, Fred, let me direct another question to you. And you mentioned in your presentation non… non-monetary… excuse me… donor support. How do you advise a donor on ways to do more than just write a check, whether that's joining a board, volunteering their skills or what have you?

FRED: Right. It's a great question. Thank you. So, you know, as I mentioned, our solution provides a highly efficient platform for donors to maximize the impact of their financial giving, whether that be, you know, cash, appreciated stock, or other appreciated non-cash assets.

In terms of the advice, we don't so much give advice or advice per se beyond that solution, as much as we offer access to these additional resources, content, tools, and so forth, that that we provide to donors so that they can define for themselves their broader philanthropic goals beyond just the financial. So it can be content through an API with Giving Compass. It can be a tool to, you know, really calculate thoughtfully and deliberately how they want to deploy their philanthropy, both in terms of their financial support, as well as their volunteer. What we do is we provide them… beyond our solution, itself, we provide them with the tools and the resources like that to embrace a more thoughtful and broader approach to what they want to achieve philanthropically.

MICHAEL: Thank you for that, Fred. Well, I'm sure we could keep going on, and we certainly have plenty of questions to do so, for hours, but we've gotten to the top of the hour and this is all the time we have for questions.

I'd like to thank all of you, certainly, in the audience for joining us. I think… I hope you would all agree that this has been a really terrific session. I want to also, again, thank Fred and Jacob for leading this discussion around strategic giving.