{"id":260,"date":"2019-12-27T05:56:39","date_gmt":"2019-12-27T05:56:39","guid":{"rendered":"http:\/\/www.changepath.com.au\/blog\/?p=260"},"modified":"2020-01-06T01:07:39","modified_gmt":"2020-01-06T01:07:39","slug":"practical-donating-part-4-bad-metrics-to-choose-a-charity-by-or-why-the-admin-ratio-is-bunk","status":"publish","type":"post","link":"https:\/\/www.changepath.com.au\/blog\/2019\/12\/practical-donating-part-4-bad-metrics-to-choose-a-charity-by-or-why-the-admin-ratio-is-bunk\/","title":{"rendered":"Practical donating part 4 \u2013 Bad metrics to choose a charity by (or: Why the admin ratio is bunk)"},"content":{"rendered":"\n

Welcome to our five-part series on how to\ndecide where to donate effectively. We\u2019re going to go on an in-depth journey\nthrough the psychology of donations, the best ways to tell whether a charity is\ngood at what they do, and how to actually give most effectively. <\/em><\/p>\n\n\n\n

  1. What drives donations<\/a><\/em><\/li>
  2. Choosing a cause to support<\/a><\/em><\/li>
  3. Good ways to choose a charity<\/em><\/a><\/li>
  4. Bad ways to assess charities<\/strong><\/li>
  5. The best ways to give<\/em><\/li><\/ol>\n\n\n\n

    In our last\npost, we talked about some key metrics you can use to find a charity that is\nlikely to make a strong impact with your donation.<\/p>\n\n\n\n

    But there\nare other ways that people use to decide which charity to donate to. These are\nthe metrics that we don\u2019t recommend, and why.<\/p>\n\n\n\n

    What is a charity?<\/h1>\n\n\n\n

    Many of the\nworst offenders for charity metrics are based off a fundamentally poor\nunderstanding of what charities do and are. <\/p>\n\n\n\n

    Charities\nexist to make change to the world. What this looks like depends on the cause\nthey are attempting to solve, but in general they take in money (from\ndonations, government grants, or delivering services) and spend that money in\nthe way they think will best improve the cause. Any money not spent is saved\nfor the future. This all seems rather obvious, but it\u2019s important to start with\nthis fundamental premise.<\/p>\n\n\n\n

    The overhead ratio<\/h1>\n\n\n\n

    You\u2019ve\nprobably heard of the idea that charities that spend less on overheads are\n\u2018better\u2019. It\u2019s one of those pernicious ideas that\u2019s wormed its way into the\ncollective wisdom and is very hard to kill. <\/p>\n\n\n\n

    The basic\nargument goes like this: I want as much of the money I donate to be spent on\nthe cause. Overheads are money that charities don\u2019t spend directly on the\ncause. Therefore, charities that have the lowest overheads are the best to give\nto.<\/p>\n\n\n\n

    \"\"
    The funnel fallacy – the concept that charities exist purely as a funnel to get donor money to “the cause”, and the widest funnel is the best one.<\/em><\/figcaption><\/figure>\n\n\n\n

    The\nintention is the right one, but the problem is that it\u2019s wrong. Entirely,\ncompletely wrong.<\/p>\n\n\n\n

    What is an\noverhead? It\u2019s easy to think of overheads as \u2018waste\u2019 but they\u2019re not even\nremotely equivalent. Overheads are things like:<\/p>\n\n\n\n