By Yoshi Nagase, Impact Analyst and Investor

As someone who has spent most of my career performing business, financial and technical analysis at large corporations, when I made the decision to retire from corporate life and explore philanthropy, I felt like I was entering an alien world.

To start, this new chapter of my life was marked by sheer excitement and anticipation. Finally, I could strategize, number-crunch, and use my business know-how to give back. But quickly, I was met with roadblocks. Deciding who to give my money to was a lot harder than I thought. The data and information I wanted from organizations was often not there, or not accessible. The nuances of the sector are also vast and other kinds of purpose-driven entities emerged, like B Corps and social enterprises. Quickly, I saw that there was more than just passive funding, and I began to approach my quest through a more collaborative lense.

And so, over the last five years, I’ve traversed the social impact sector, evolving a four point criteria through which I determine how to pick organizations to collaborate with and to achieve maximum efficiency and effectiveness.

1. Conduct a thorough, initial online screening

In this age, what information organizations put online tells us a lot about them.  Just as virtual tours on real estate websites give us a better feel for apartments and houses, a social impact organization's online presence can help us to understand who they are and how they work.  

For instance, I like organizations that:

  • Introduce all their staff rather than just board and executives
  • Show in detail goods/services beneficiaries can receive and how to receive them
  • Explain current projects, challenges and progresses with frequent updates
  • Publish some minutes of meetings they have with partners

While not all internal content can be shared, in this age of transparency, I love organizations that operate in such a way as to reduce the gap between what insiders access and what the public can see.

2. Do financial due diligence

When I try to increase social impact through the use of capital, I need to be able to conduct analysis.  Ultimately, I need to understand the outcomes/impact of my contributions, how exactly have they helped low-income individuals and families.  Without detailed and timely information, I cannot do any preliminary analysis. So, I quickly filter out organizations that do not publish audited financials, organizations that lag more than two years in publishing information, and organizations that provide only minimal information.  

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One quick check I perform is to look at organizational revenue vs. expenses over time.  If the revenue of the organization is always much bigger than the expenses, or if the revenue is increasing much faster than expenses, it is not clear if the organization will be using additional money anytime soon.  

Charity Navigator and other charity watchdogs are useful to detect unusual organizations where they spend most of their revenue on fundraising and/or executive compensation. Charity Navigator also provides accountability and transparency information such as whether organizations make it easy to access information such as their donor privacy policy, whistleblower policy, etc.

3. Understand outcomes and Impact

 Source: RNIB - Supporting Blind & Partially Sighted People

Source: RNIB - Supporting Blind & Partially Sighted People

In order to make a difference and/or make impact, we need to understand what that really means. While many use the terms in similar ways, there are some differences and it is a good idea to keep that in mind.  This article by the Stanford Social Innovation Review lays out the clear differences.

 

Lack of Meaningful Output at the Individual/Family Level

While I am after outcomes and impact, there is some filtering I can do at the output level. I am very wary of organizations that only publish gross numbers such as the total number of people served, total goods provided, etc.  This is because gross numbers often mask a lack of meaningful provision at the individual/family level. If a food program provides food or vouchers worth $50 on the market for a family in the U.S. and restricts the frequency of provisions to 3 times a year, for instance, whatever outcome (better nutritional state, less experience of hunger, etc.) is likely to be pretty small.  If output at the individual/family level is small, there is unlikely to be any real outcome. I pay attention to quantity, quality, frequency and duration of provision of goods/services at the individual/family level.

Measurable Outcomes and Impact

GiveWell does excellent work conducting research and identifying top charities where we can understand the outcomes. Measuring and evaluating outcomes and impact require different types of knowledge and skills and many non-profits lack resources for proper R&D in this regard.  I don’t filter out organizations that currently lack crystal-clear evidence and data for outcomes. However, if the organization does not have any orientation to measure/evaluate outcomes and impact, such an organization is not a good fit.

4.Establish a mutual fit

Transparency and Openness to Substantive Discussion & Dialogues

In order for me to do what I do as work, I typically need a lot of information beyond preliminary online research. Getting substantive information from organizations is often very tough. GiveWell got started because of their founders struggle to get substantive information from non-profits: GiveWell Our Story. If I cannot have candid and in-depth conversations with people from an organization on topics such as the details of their organizations operations, processes, what data they have or do not have, what constraints and challenges they have, etc., such an organization is not a good fit for me to engage.

 Source: 80,000 Hours

Source: 80,000 Hours

Openness for R&D and Technology

I value evidence and data-driven improvements to programs. Organizations that find R&D desirable are the ones I prefer, as I may be able to work with them.  Since I come from IT and a lot of the most disruptive innovations involve some elements of technology and IT, I also prefer organizations that are at least open to and interested in exploring & adopting new cutting-edge technologies.

Ultimately, selecting organizations and programs for possible funding and engagement is somewhere between an art and a science.  I have learned various frameworks and methodologies, which I now use as I see fit. I recommend people to consciously seek out different and opposing perspectives to get a balanced view and then customize them to build their own approach. I believe this is a challenging but exciting time to attempt social impact.