obvious-mathAt the end of October ProPublica and NPR released a joint investigation titled “The Red Cross’ Secret Disaster”, looking into the gulf between the American Red Cross’s fundraising prowess in the aftermath of Hurricane Sandy and the realities of its numerous stumbles in providing the relief the organization so publicly fundraised against. Indeed, to many the Red Cross seemed far better prepared to raise funds in the wake of Sandy than to deploy them effectively toward disaster relief.

The most shocking thing to me in all of these allegations against the Red Cross is that the general donor public is actually surprised that the Red Cross (or pretty much any nonprofit for that matter) prioritizes how it’s perceived over all else. A central driving tenant of every entity, be it a nonprofit, for-profit, or bunny rabbit, is to do what you can today to survive until tomorrow.

Although ProPublica and NPR have positioned their piece as an exposé on the American Red Cross’ failures during Hurricane Sandy, I read the piece more as a statement on how the market realities of running a nonprofit creates adverse incentives, driving organizations to raise funds at the expense of what their stated core missions are.

Funders of change

Most for-profit organizations create a product that they sell directly to consumers. In the nonprofit sector, the funders of a program’s interventions are typically not the recipients of those services. Since the recipients of aid are not the funders, they can’t logically be the focal points of self sustaining organizations.

ProPublica and NPR rake the American Red Cross over the coals for diverting disaster equipment toward a photo-op with model Heidi Klum, an example used in the article to demonstrate executives’ backwards priorities. While those suffering in a disaster probably have no interest in Heidi Klum slowly strolling down a street handing out bottled water as cameras roll, the reality is that those images help the Red Cross raise money.

And however bad some might argue the Red Cross is at providing disaster relief, it’s obviously damn good at raising funds. Like any well run self serving organization (and what organization isn’t at least somewhat self serving?), the Red Cross finely tunes its fundraising strategy. If the monetization opportunity was in providing top notch disaster relief, I can assure you Sandy outcomes would have been different.

But the reality is that most nonprofits’ monetization strategies have very little to do with their programs’ missions. Instead, nonprofits raise funds by and large on their abilities to get donors to exchange their money for the warm-glow of giving.

Smarter giving

For the donors who are outraged at the Red Cross’ alleged ineptitude and emphasis on media exposure over outcomes, I’m hopeful they become aware of their unwitting complicitness in this so called secrete disaster.

For all the arguments about how we need more money in the social sector, I’m more persuaded by those who call for smarter giving. To me, smart giving is giving that is driven by a donor’s best guess of the value created by an organization, optimally influenced by evidence instead of celebrity.

Organizations like GiveWell have carved out narrow niches to better inform donors with specific preferences, although I suspect donors seeking advice from the likes of GiveWell are likely to be unimpressed by Heidi Klum in a disaster response vehicle in the first place.

The big money, and the big challenge, is in the general donor public. The fact is that the Red Cross knows the donor public very, very well.

So long as donors show a preference for media hype over results, shrewdly optimized organizations like the Red Cross will deliver the product their (paying) customers demand.