How to be an effective donor

You want to make the world better. Where do you start?

Let’s look at what donors with the most resources choose to do. Major donors – those giving over say, $100 million per year – generally follow these three steps:

  1. Build a framework for their goals and mission
  2. Determine what actions and interventions will help them achieve those goals
  3. Find top nonprofits that can achieve these actions at a reasonable cost and with a reasonable degree of effectiveness (or pay groups to set up new programs if nothing currently exists).

This is called developing a Theory of Change.  

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How do you choose where to give?

One of the most challenging things facing a donor is that the quality of a nonprofit’s website or annual gala often has nothing to do with the actual impact they are having on the ground. We’re used to consumer markets, where if you see a nice storefront or website you expect the quality of the product you purchase to be high. But in those markets, the payer is the same as the end recipient of the product, so companies have to invest in ensuring their output matches their marketing materials. The nonprofit sector is much harder to navigate, because the payer (donor) is not the person who receives the end product.

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