The charities selected by PocketChange generally spend 85% or more of their budget on programs and stand out in all five of PocketChange’s guiding principles.
Our Guiding Principles
We select charities that excel at many different approaches to tackling an issue, creating real change in all areas. We do this because enduring impact comes from a web of approaches, not a singular program or technology.
What does it mean?
“Approach Diversity” is the approaches that a charity uses in order to tackle a specific problem. The word “Diversity” speaks to a diversity of angles tackled in the programs a charity operates, rather than simply the existence of multiple programs. A diversity of approaches means that an organization has a web of programs tackling a problem holistically, rather than just attempting to address one piece. To use a real example, our selected charity for the cause of “Homelessness” – BuildOn, has a whole web of approaches. They address crime & poverty, educate the public about homelessness, build needed infrastructure, create job opportunities that are self-sustaining & help communities, tackle the problem upstream through sustainable education creation, influence policy, & work with local stakeholders to empower community change.
Why do we do it?
We have an intense belief that the right organization, with the right resources and the right programs, mixed together with the right amount of time can actually solve any major world problem. Yes, we’re serious, and no we’re not crazy (well, maybe we’re a little crazy but hey).
Our belief in change isn’t abstract – it’s based off of research from a lot of really smart of people. These people – scientists, business leaders, politicians, researchers, universities, philosophers – were all researching one really hard thing: Wicked Problems. Wicked Problems can be pretty much anything – Climate Change, Racism, Gender Equality, Famine, Political Accountability, Freedom of Press, even traffic safety. They’re the problems you’re tackling when you use PocketChange.
One of the most interesting characteristics of wicked problems that makes them so hard to address is that they are often interconnected. To solve poverty, a huge wicked problem, one must also address climate change, food shortages, unstable governments, natural disasters, and more. They are all linked together in a complex web of issues. To use another real world example – our charity for the cause of Reef Conservation, The Coral Reef Alliance, doesn’t just address policy. They address policy, waste management, consumer understanding, big business, working with real estate owners, and empowering local communities towards change. They understand that there’s no one approach you can take – you have to do a bunch, all at the same time. That’s why approach diversity is so crucial, because change with wicked problems happens only where unity of action and diversity of approach exist.
The charities that really make a difference understand, and tackle seemingly unrelated issues because they understand how the issues are actually deeply connected. All PocketChange charities adopt this core belief, and execute on it in everything they do.
A note on the word “Solve”
Another interesting topic of Wicked Problems is stopping point. According to Rittel and Webber, the ones who coined the term ‘Wicked Problems’, they are so socially complex that “…they have no determinable stopping point.” – aka no ending.
So how can we say that we’re looking for organizations solving major world problems if there’s no stopping point? Well, it’s because when we say “solve” we don’t mean zero instances ever for all of history – we mean intense, world-shifting progress. We mean we can reduce the problem so much, to the point where it is so close to gone that it’s no longer an issue that needs to be focused on. We’re looking for organizations that are essentially trying to put themselves out of business. Pretty much all the science and research agrees that that is possible, and that the way to address problems is through approach diversity.
For more about Wicked Problems, here are a few good resources to dig into:
Traditionally, charities are evaluated on numerical, short term aid. We evaluate short term aid, combined with analyzing the lasting impacts focused at the core of the problem, that are actually bringing us towards solving it.
What this means:
At the end of the day, the metric we care most about is what the individual charity has actually done – what impact have they had. Impact looks different for every single cause, which makes it tricky to evaluate. For example, for gun safety, often the focus is on policy and education, whereas for clean water perhaps its more on infrastructure building and awareness. However, the way we look at and evaluate impact allows us to step back from that approach, and is a little bit different compared to other evaluation organizations.
Outputs & Outcomes: What does this mean?
As a solutions-focused, rather than an activity-focused, organization, when we evaluate impact, we look at both outcomes and outputs. There’s a great video that explains the difference here, but the basic premise is this: outputs are the activities that the organization does in the short term. Outputs are things like bowls of soup served, beds provided, water filtration systems donated, or gun safety documents distributed.
Outcomes are the often less numeric, more growth oriented measures of progress – things like measuring how many people are actually escaping the cycle of homelessness because of the charity? Are the policies around gun safety actually being changed, as well the consumer perception and understanding of the complexity of the issues? Are the communities receiving the water filtration systems actually using them, and are they creating their own processes and activities to effectively harness the new technology? Those are all outcomes, and are often a better indicator of progress than a purely output-focused approach.
Both Outputs & Outcomes: Why?
We care about sustainable impact, because we want to do things that actually move the needle – we’re a solutions-focused company. We don’t just want to help, we want to also change. We evaluate both outputs and outcomes, because outputs show scale and activity, and outcomes show progress. We dream of a world where people no longer need to be helped, because the problem is no longer prevalent, not just a world where a lot of people are repetitively receiving assistance. Both outputs and outcomes are important, and you can’t do one without the other.
While tracking outputs (activity) is a valuable pursuit, only tracking outputs can actually be very deceptive and dangerous. There are many examples of this, but one of the most prevalent ones is the D.A.R.E Program implemented in schools and communities all across the world. Because of D.A.R.E, over 36 million children have received substance abuse education, and D.A.R.E itself operate in 75% of the U.S.’s school districts and in 43 countries around the world – those stats are outputs. (SOURCE). While it is incredible that 36 million people have gone through the program, our understanding of the program falls short if we stop digging there.
Outcomes, aka progress, would be an actual decline in substance abuse rates with children, clearly an incredibly important metric to track. However, when organizations did track it, they were alarmed at the findings. According to research by the American Journal of Public Health and many others, it was discovered that D.A.R.E was an overall entirely “ineffective” program. In some cases they even found “…that D.A.R.E. was less effective than the control condition” meaning you were more likely to struggle with substance abuse if you went through D.A.R.E. programs. That seems like a major fail if the goal and mission of the organization is to reduce substance abuse. If we had stopped searching at outputs, we would have missed the fact that progress was not actually being made. Our understanding of the organization would be shallow, simple, and incomplete.
For some, this would convince them that we should only pay attention to outcomes. However, if we did that just measure outcomes, we could not understand the scale of that progress that was actually happening. It’s very easy to make lasting progress with one person or in a small group, and very hard to roll that out on a massive scale. We measure outputs to make sure that the outcomes we’re seeing are happening to an inclusive audience, not just a select few.
So do we only focus on outcomes, and progress-oriented activity? No – people and causes do drastically need short term aid, and we understand that it is often a crucial piece of a problem. But we mix it with also focusing on outcomes, making sure long term, systemic issues are still being addressed.
At PocketChange, we look at both outputs and outcomes, and do a deep analysis of every charity to understand exactly what goes on, allowing us to make the best decisions possible.
Another important point is that we’re not experts in the causes we’re selecting charities for. We’re experts in the charity selection process, and evaluating good organizations. We never claim to have deep knowledge of every problem we select a charity for, nor do we have any intention of bringing in cause-specific experts to help.
That decision around cause-specific expertise was done very intentionally, because of one very simple reason: experts disagree. We never, ever, ever make approach or program-based decisions. If we did, charity selection would never work, because people disagree on what approach should be taken for each cause. We focus on making sure that a charity is effectively tackling a problem, and tackling it in all the right ways, and we leave the details for the experts at the organization to figure out. After all, that’s their entire job, and they’re good at it. An example of how we handle/avoid approach-based decision situations is laid out below.
Let’s take the cause of climate change. PocketChange would never say “Charity A does X activity” and “Charity B does Y activity” and we think that X activity is more impactful than Y activity, so we’re going to select Charity A.
We will never make that decision, ever. We only look for standouts based around impact and actual results. If there isn’t a standout and a call needs to be made, we rely on aggregation of external research and decisions to make that decision. We look to other foundations that have granted money to the charity, and specifically at how many foundations have done that, comparing that information to the other charities.
Aggregation of Expertise: Why?
We do that because every foundation that grants money to the organization we’re analyzing has an entirely independent decision making criteria from ours. They have different leadership, evaluation metrics, processes, and teams of people doing their own research. If we can compare two organizations, and Charity A has received 10 large contributions, and Charity B has received 100 large contributions, we select Charity B. We do this because it means that 100 foundations researched the cause, and selected Charity B as the most effective charity for that cause, through 100 entirely independent processes, metrics, teams, and philosophies. Seeing other high level organizations financially endorse organizations brings more eyeballs to the issue, and provides us a ton of external validation. This process allows us to step back from individual experts, and look at collective expertise and understanding when making our decisions.
As much as we wish we could claim this as our own, this methodology was not created by us. We adapted it and refined it, but it is currently used by the Gates Foundation, El Pomar Foundation, and many others large granting foundations. Not only is it endorsed by many others in the industry with great results, but it also has a host of underlying unintended positive effects. With the aggregated expertise approach, benefits such as collaboration between organizations for faster and better progress, and community buy-in and adoption occur. This often allows for even more lasting and sustainable change, because it comes not just from one source, but from many.
To keep our commitment to transparency let’s get real specific. We only look at contributions of $25,000 or more to consider it a “large contribution”. We do this because we have found that anything less is often donated without an evaluation process, perhaps through family connections, legacy giving, and so on. Above $25,000 we find that the organization has been researched more thoroughly and put through more stringent processes. Another benefit of using aggregated expertise is that these lists are not required to be publicized – if they are, it shows us how transparent of an organization a charity is.
Keeping costs focused and effective is essential to any well run organization. We care about efficiency because it demonstrates the ability to scale, financial aptitude, & a deep set belief for maximizing donor impact. In terms of overhead, we look for organizations in which at least 85% of your donation goes directly to the cause.
What does this mean?
Financial efficiency is the financial strength of the organization in every aspect. The most prevalent & talked about number we measure for financial efficiency is “Program Expense Percentage”, which is the amount of its total spending that is spent on an organization’s programs – doing the actual work. It’s the money actually given to the cause, and not over-paying for executives or fancy lunches.
Our aim is to work with organizations that spend 85% or more of their money on programs, so you – the Changers – know that when you give through PocketChange, it is going to the best work, and making the most impact possible. Our 85% criteria is 20% higher than Better Business Bureau standards and 10% higher than CharityNavigator’s standards. However, depending on the industry/sector, this number can change slightly to match the needs of the problem. The key point to remember is this – the organization that you give to through PocketChange operates at the highest levels of financial efficiency, on top of everything else.
Program expense percentage is not the only method we use to measure financial efficiency, it’s simply the most talked about metric so we addressed it first. We also evaluate financial efficiency through a variety of other metrics such as fundraising efficiency or working capital ratios to make sure that the organization is financially stable, effective, has a good reputation, and focuses on sustainable outcomes vs outputs (discussed in the “Sustainable Impact” section.)
Why it matters?
We look for charities that are efficient because when donation sizes are small, we have to make sure that waste is kept to a minimum. We select charities that understand and acknowledge the power that can come in $0.25, and the fact that the habituation and collaboration of a lot of those makes a MONUMENTAL difference. That can only happen when people know that their money is actually getting to the cause at hand. We also know that the biggest negative perception about charities is that they aren’t actually using the money for programs. These criterion address those concerns.
An interesting note about program expense percentage is that it is not the end all be all criteria that many donors think it is. It is irresponsible and frankly foolish to limit a charities potential by focusing purely on financial efficiency, because it could stop an organization from doing actually important work that might cost more. Financial efficiency is only one of the pieces we look at. We agree with the philosophy that evaluating charities based primarily on program expense percentage is a very destructive oversimplification of how change happens. A great argument for this philosophy is made in this TEDTalk. However, because we’re evaluating thousands of charities and picking one, we can use certain financial metrics like program expense percentage to get us a little bit closer to selection. But as we’ve stated over and over again, it’s just one piece of our much larger strategy.
We believe total transparency speaks volumes about the character of an organization. It shows attention to detail, desire for feedback and improvement, and an inclusive focus. Transparency is also what lets PocketChange make great decisions, because we know what’s actually going on.
What this means:
Transparency is one of the most crucial metrics we look at when evaluating charities. Transparency can take a lot of forms, from IRS audits of financial information, to rankings from credible & independent third-party organizations like Guidestar & CharityNavigator, to the publishing of documents & information above and beyond what is required, and even going the extra mile to make sure all that information is easy and accessible. Any organization we work with, we want you – the Changers – to be able to hop onto google and find out every detail of the charity you just micro-gave to. Now, we publish all our research and information for each organization on our website at www.pocketchange.social/cs so that you don’t have to do that, but we’d like you to know that it’s always there.
Why it matters:
Transparency matters to PocketChange because we can’t make good and fair decisions if all the information isn’t presented to us, or isn’t presented honestly. We need to see the charity’s decisions and strategies, without any filters, in order to make sense of them. We need to know everything, down to the smallest details, of what goes on at a charity, because we need you to be able to trust PocketChange and our decisions. We don’t want you to worry about the organization we selected, because you know that our teams spent endless hours researching every detail of that organization before a quarter is ever given to them.
From knowing exactly where every dollar in the organization is going, to the specific impacts of all programs (both outputs and outcomes, as discussed in the ‘Sustainable Impact’ section), to what other foundations are invested in this charity, PocketChange dives into it all. We believe that relationships are predicated on trust, and trust is not possible without total organizational transparency. We hold ourselves to these same standards, publishing as much information as possible on our website, talking about exactly how we do things, and producing as much content as we can about the inner-workings of what goes on here at PocketChange. We expect the exact same for every organization that we work with.
Organizations that think locally, but act on a larger scale are paramount to creating measurable change worldwide. PocketChange focuses directly on organizations with a strategic focus on addressing the problem for everyone, everywhere that’s impact can still be seen on a local level.
What does it mean?
Scaling focus means that this organization is operating and focusing on a problem at the largest and most inclusive possible scale, ideally helping everyone affected by the problem. This often means operating at a global level. However, we say scaling focus, rather than global focus because we understand that sometimes maximizing impact doesn’t mean being everywhere – it means tackling the places where it’s most impactful. For example, for the cause of Poverty, our organization American Jewish World Service operates all over the world because poverty affects people all over the world. For the cause of Immigration, our charity the “International Rescue Committee” operates worldwide, but with a focus on Yemen, South Sudan, Myanmar, Nigeria, Syria, Somalia, and the US because those are the most affected areas for that cause.
Why does it matter?
PocketChange is a solutions company over everything. We are looking for problem eradication as much as is possible (as talked about in “Program Diversity” section above). That isn’t possible if an organization only operates in one small area. The people using PocketChange – you, the Changers – are from all over the world, and we want to make sure that your giving reflects that. We know that for a problem to be authentically relieved, it can’t just work for the people who can pay for it or for the people who it’s easy to help. The solutions – the programs, the aid, the development, the change – has to work for everyone, everywhere. Period.
While we select organizations with global and/or scaling focuses, we also know that no two instances of a problem are the same. Homelessness in San Francisco and New York are two drastically different beasts with different problem makeups. So how can an organization like BuildOn, our organization addressing homelessness, successfully operate in more than one place? The answer comes down to solutions focused on partnership and collaboration with communities.
BuildOn, as an example, works & partners with local community organizations, leaders, and movements to help implement the goals and missions of the larger organization. Whether through grant funding, local chapters, partnerships with community organized events, or empowering the communities themselves to be the change they seek, the large organizations work to understand the problem in the specific area. There is nothing more dangerous than a large organization coming in, without understanding the local area, and trying to begin doing work.
There is a story that is told in the non-profit realm about this exact problem. A large, national organization began donating outhouses to a rural community to help with water sanitation. The community was getting sick because of the waste being put into their streams and drinking water. They did not take the time to understand the community and its needs, and just started sending the outhouses, thinking that this would solve the problem and help the people. However, they did not work with any local groups to educate the community on why this new technology would help them. The community, once the outhouses had been received, simply used them as a safe place to store their food stuffs, and continued to use the streams as a bathroom. This is the classic example of a mismatch between large, national organizations and the needs of individual communities, and the importance of collaboration for real change.
At PocketChange, we look for organizations with an inclusive, scaling focus, who qualify that with specific, localized approaches and collaboration.
What Smart People Are Saying
“One of the things that made me so excited about PocketChange is how quick and how simple it is to get involved. PocketChange cuts through the time burden of giving.”
“The rigor and attention to detail PocketChange uses is extremely impressive, & their theory of change is well-thought out – something I believe to be genuinely possible. PocketChange makes trusting where your money is going easy.”