Nonprofit Chronicles

Journalism about nonprofit organizations and their impact

bg-janah-aboutSocial entrepreneur Leila Janah is a regular on the do-good circuit: She’s been to the Clinton Global Initiative, the Aspen Ideas Festival, the Fortune Global Forum, SOCAP, BSR, SXSW and Tedx. She’s a media darling. She’s got a new book out.

But what has she accomplished? Let’s have a look.

There’s lots to admire about Janah, a 35-year-old graduate of Harvard who is the founder and CEO of Samasource and LXMI, two social enterprises that provide work to poor people in Kenya, Uganda, Haiti and India. By all accounts, she is well-intentioned, energetic and, importantly, committed to measuring the impact of her work.

Samasource is a nonprofit outsourcing company that recruits young people to do digital work for such clients as Google and TripAdvisor. A for-profit business, LXMI — it’s pronounced “luxe-me” and evokes Lakshmi, a Hindu goddess — sells luxury beauty products that are sourced from shea nuts in Uganda.

Both capitalize on opportunities created by globalization to alleviate poverty.

In her new book, which is called Give Work: Reversing Poverty One Job at a Time, Janah writes: “Give work–dignified, steady, fair-wage work–and you give the poorest people on the planet a chance at happiness.”

Well, sure. Wasn’t it Ronald Reagan who said that the best social program is a job?

So what’s not to like?

For starters, the book. Give Work is a mush of well-worn ideas and fuzzy thinking.

Sometimes it reads like a college admissions essay: “We all agreed that our time in Ghana had been transformative.”

Sometimes it states the obvious: “The world’s most destitute citizens are not poor because they are hopeless. They are not poor because they lack smarts, talent, motivation or will.”

9780525499435Sometimes it’s self-aggrandizing: “I thought what Muhammad Yunus did for microfinance, I could do with outsourcing.”

Sometimes it’s grandiose: “It is my hope that those dedicated people working at the government level and within international agencies will see in this book an exciting new foreign aid model, one that could overhaul the role of organizations like the World Bank and the International Monetary Fund (IMF).”

Still, Janah is an entrepreneur, not a writer, so she can be forgiven a clunker or two.

But why write a book about about Samasource or LXMI? Neither is path-breaking. A nonprofit called Digital Divide Data pioneered socially-responsible, digital outsourcing back in 2001 when Jeremy Hockenstein who, like Janah, is a Harvard grad and former management consultant, set up shop in Cambodia. (Digital Divide Data gets just a passing mention in Give Work.) As for LXMI, Janah writes that there was “no Chanel of social impact” until she started LXMI, but other companies sell nearly 150 Fair Trade-certified beauty products from about 50 countries.

The same question–why?–can be asked about the uncritical, even adoring, coverage of Janah and Samasource by the press. The book jacket of Give Work notes that Janah

has been profiled in the New York Times, Fast Company, Wired, Forbes and Inc. She was named one of Conde Nast’s Daring 25 and Elle’s 2016 Top Women in Tech, and Samasource was named one of Fast Company’s Most Innovative Companies of 2016.

Fortune, my former employer, named Janah one of its 40 Under 40, an annual ranking of the most influential young people in business, and flew her to Rome with big-company CEOs to meet the pope. A story by Laura Arrillaga-Andreesen in The New York Times’ T Magazine named her one of Five Visionary Tech Entrepreneurs Who Are Changing the World. Another was Elizabeth Holmes of Theranos. That didn’t end well.

This isn’t Janah’s fault. She’s glamorous, as well as dedicated, and the buzz around her can help attract donors and clients to her enterprises, as she notes in Give Work.

Stories or data?

“When our communications team pitches a story on Sama to a journalist, it often turns into a story about me and my life, complete with a glossy photo spread,” she writes. “It can be embarrassing, but the thing is, it works. People like personal interest stories more than they like data.”

She goes on to say: “It’s time we social entrepreneurs stopped being so self-effacing.” This evidently is not a problem for Janah. Last year, she wrote a essay in Glamour headlined No, Freezing My Eggs Isn’t Selfish — It’s the Best Decision I’ve Ever Made.

Nonprofit Chronicles, as it happens, is interested in data as well as personal stories, so let’s turn to the data. To Janah’s credit, Samasource is one of only seven nonprofits to have undergone what’s called an “impact audit” by a startup called ImpactMatters, founded by Dean Karlan, a Northwestern economics professor, and Elijah Goldberg, his former student. The people at ImpactMatters are serious about estimating impact; their audit of Samasource runs for 123 pages.

The trouble is, measuring the impact of Samasource is hard. ImpactMatters’ audit highlights many unknowns, particularly around the counterfactuals: What would have happened to the people who worked at Samasource if they had not gotten that job? Would they have languished in poverty? Or would they have found work elsewhere? As workers must undergo training, secure a job with Samasource and keep the job, they are likely to be highly motivated and therefore more likely than their peers to see their incomes grow, even in the absence of Samasource.

Similarly, if Janah and Samasource had not come along, the digital work that Google and TripAdvisor and others customers needed done would have been done elsewhere, almost surely in a poor country. If the Samasource workforce is merely displacing other low-income workers, in India, say, or the Philippines, most or all of Samasource’s impact could be offset because it is creating losers as well as winners. Tricky, no?

“For donors, Samasource is a sensible investment of philanthropic dollars only if it generates greater impact than its for-profit competitors,” the audit says.

Samasource’s own measures of impact did not impress ImpactMatters. (This would probably be true for 90 percent of nonprofits that self-report their impact.) Samasource surveys its alumni to see whether their wages have gone up, but only 32 percent report back; these are likely to be the most successful, the auditors note. For these reasons, the auditors say: “The rise in earnings Samasource reports is an inaccurate estimate of how much beneficiaries’ earnings rose in the labor market.” Ouch.

ImpactMatters takes a stab at estimating what it calls Samasource’s Donor’s Cost of Net Impact, and finds that for every $100 donation, the nonprofit generates $64 in earnings over three years for its workers. That doesn’t sound good. Still, without benchmarks, it’s hard to compare Samasource to other nonprofits that aim to improve the livelihoods of the poor. Almost surely, though, donors would be better off giving to Village Enterprise, which helps poor people in Africa start small businesses and, according to ImpactMatters, generates $180 in income for every $100 in donations. (Village Enterprise is also a recommended charity of The Life You Can Save. Its CEO is Dianne Calvi. I’ve never heard of her either.)

All that aside, ImpactMatters praises Samasource as a learning organization, saying:

Samasource makes systematic and continuous changes to its model…Samasource’s iterations were adopted systematically, with recognizable components of the Plan-Do-Check-Act cycle.

Samasource has proven that it is not only unafraid of change, but also embraces change.

Indeed, Janah branched out from Samasource to start not only LXMI but also Samahope, a crowdfunding site for medical treatments for the poor, and Samaschool, a program to train low-income Americans for jobs in the so-called gig economy. Samahope raised more than $1m to fund critical care for almost 17,000 women and children in 11 countries before Janah merged it into Caring Crowd a crowdfunding platform run by Johnson & Johnson. That’s impressive.

Samasource became profitable in 2016, Janah told me by phone. So maybe the question of how much impact donors are having has become moot. “This is a viable model that should be scaled up,” she said. If Samasource can grow without donations, that would be a excellent. Annual revenues of Samasource and Samaschool will be about $15 million this year, and about 9,000 people have gone through the Samasource program since it was formed in 2008. To better understand its impact, Samasource is planning a randomized controlled trial with Innovations for Poverty Action, an independent evaluator.

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So, to return to the title of this blogpost, how should we think about Leila Janah? The key is to think, and to resist the temptation to cast NGO leaders as saviors. It’s also crucial to  remember that good intentions are not enough. So much of the reporting on Janah focuses on her big heart, and her personal story; it’s hard to resist a pitch about an attractive young Harvard graduate, out to save the world. Very little of the coverage asks whether Samasource is actually doing good, at what cost, and at what scale. If it did, Janah might not have the hubris to present her ideas as “an exciting new foreign aid model” that could overhaul the World Bank and IMF.

In the end, though, this isn’t about Janah. It’s about the reporters and book publishers and conference organizers who perform little or no due diligence when it comes to nonprofits. They may think they’re helping, by shining light on a hero or heroine. In truth, they’re doing a disservice to nonprofits–especially those that go about their business, quietly and effectively.

3642179597_2ccb2dd44e_m (1)We’re gradually learning more about the investment performance of foundation endowments.

The news is not good.

The Chronicle of Philanthropy yesterday published my story about foundation endowments. [Paywall] The peg was the Ford Foundation’s decision to publish the investment returns of its $12.1bn endowment for the first time in several years. Ford has done well–its endowment generated 9.2 percent in annual returns for the five-year period ending December 31, 2016.

Most others who manage foundation endowments were not as smart, or as fortunate.

A new analysis of more than 5,700 foundations finds that they generated a median return of 7.72 percent over that same five year period. Most of those foundations employ active asset managers–that is, investment advisors who engage in stock-picking and market-timing, or look to hedge funds, private equity funds or real assets like land, buildings or timber to improve their returns.

Most would have done better to buy a simple mix of low-cost index funds, with 70 percent of their portfolio invested in stocks and 30 percent in bonds. A sample portfolio put together by Vanguard, the index-investing giant, found that the 70-30 mix returned 9.1 percent over that same five years, just a notch behind Ford but well ahead of the median foundation. Continue reading

Why is meat so cheap? McDonald’s sells a McDouble burger for less than $2. A rotisserie chicken costs $4.99 at Costco.

Government policy comes into play. Farmers get low-cost water. Cows, pigs and chickens eat federally-subsidized corn. The USDA and the Small Business Administration guarantee loans to farmers, including owners of CAFOs (Confined Animal Feeding Operations). Animal agriculture benefits from federal commodity checkoff programs that fund marketing (“Beef, it’s what’s for dinner”). They take advantage of taxpayer-funded research at state universities. Prison inmates raise cattle in Kentucky, and they process ground meat and poultry in Florida.

What are the costs of all these policies, and what, if any, are the benefits? A new nonprofit organization called The Greenfield Project aims to find out. Launched last spring by Liz Hallinan and Ashley Allen Carr, with a $500,000 grant from the Open Philanthropy Project, The Greenfield Project will conduct research, do regulatory and legal analysis and education, and connect farmers to consumers, all with the goal of cultivating “a more joyful and resilient food system.” It hopes to support small and mid-sized farms that treat their animals and the environment well.

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Liz Hallinan

“We’re going to push for rules and policies that we think will help animals—and consumers, their health and the environment,” Hallinan told me when we met last week in a D.C. coffee shop. Carr, who is based in Austin, Texas, said by phone: “We feel strongly that improvements in animal welfare are tied to improvements in sustainable farming. We want to take a more cohesive and comprehensive approach.”

It’s not clear that the animal-welfare movements needs another nonprofit. The Humane Society of the U.S. has a big Washington operation that deals with Congress, and the low-profile Animal Welfare Institute works on federal and state legislation and produces research on farm animals. Continue reading

Thousands of donors visited Charity Navigator in the wake of hurricanes Harvey and Irma, looking for charities to support. They got some help, but not enough–the Harvey page of the Charity Navigator website lists about 50 organizations, the Irma page another 25 or so. They include the American Kidney Fund, to help dialysis patients in distress, First Book, which is shipping books to affected children, and the much-maligned American Red Cross. Huh?

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Michael Thatcher

People ask Michael Thatcher, who runs Charity Navigator, where to give. “How can you answer that?” he wonders. The fact is, you can’t, you can’t even know which organizations are effective and which are not, and that’s a problem: A list of 50 choices is only marginally better than no list at all.

This week, though, Charity Navigator, which is the most popular charity evaluator in the US, and GuideStar, which is the world’s largest database about nonprofits, said that they will work together for the first time to share more information about nonprofits and their effectiveness. It’s a small step in the right direction for both organizations.

Who knows? Maybe the two organizations, whose missions are aligned, will merge someday. It’s been discussed, Thatcher and Jacob Harold, the CEO of GuideStar, told me, although nothing is imminent, they say.

Here’s how the new collaboration will work: Beginning on Giving Tuesday in November, Charity Navigator (CN) will publish information about goals, progress and results that charities have provided to GuideStar. It will also note whether charities have achieved Gold or Platinum status on GuideStar; charities achieve status by providing qualitative or quantitative information about their outcomes. This moves CN closer to reporting on what matters about nonprofits: their impact.

If nothing else, the new information should put another small dent in the overhead myth — the misbegotten notion that nonprofits should be judged by how much they spend on programs versus overhead. Continue reading

Central Carolina Community Foundation is in most ways a typical community foundation: Based in Columbia, SC, it supports social service organizations, colleges, churches and arts groups in the midlands of South Carolina.

In one important way, though, Central Carolina foundation stands apart: It invests most of its investable assets, which are worth about $94m, in low-cost index funds from Vanguard that track the markets, rejecting, for the most part, the lure of Wall Street asset managers who claim they can do better.

This iconoclastic behavior has proven to be good for the endowment, and thus for the citizens of central Carolina served by the foundation. Central Carolina Community Foundation’s investment performance is superior to the average performance of other community foundations, of small and mid-sized private foundations and even of private foundations with $500m or more in assets, most of which turn to well-paid chief investment officers, consultants, hedge fund operators and investment banks to manage their money.

This should not come as a surprise. Numerous studies — here’s one from mutual-fund tracker Morningstar — demonstrate that actively-managed funds, taken together, lag index funds that track a market benchmark. This is because index funds typically charge lower fees than their actively-managed counterparts, and because most stock-pickers can’t consistently beat the markets or, for that matter, monkeys that throw darts at the stock pages.

“The only thing you can control with your investment is its cost,” JoAnn Turnquist, the president and CEO of the Central Carolina Community Foundation, told me by phone the other day. Continue reading

Racial+Justice+Actions+for+White+FolksYou’d think that nonprofits would lead the way when it comes to diversity. After all, many serve the downtrodden, including people of color, immigrants and the poor.

But no.

A new survey of more than 1,500 nonprofits found that 90 percent of their chief executives, 90 percent of their board chairs, and 84 percent of their board members identify as white. Some 27 percent of boards identify as all white. The survey, published in a report called Leading with Intent by a group called BoardSource, found that boards are less diverse than they were in 2015, when the research group conducted a similar survey.

These is nonprofits, mind you, not foundations. But foundations, it appears, do little better. A recent Chronicle of Philanthropy analysis of the 20 wealthiest national foundations found that 72 percent of trustees are white. Non-Hispanic whites account for about 61 percent of the US population.

Does this matter? Absolutely, says Doug Stamm, the chief executive of the Meyer Memorial Trust, which lately has been engaged in what it calls an equity journey. It has put the issues of diversity and inclusion front and center for the Meyer trust and, increasingly, for the nonprofits that it supports.

“It is not an overstatement to say that delving into equity profoundly changed me and Meyer’s direction,” Stamm says. Continue reading

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Texas national guardsmen rescuing a woman from her home. Source: US Dept of Defense

The devastation in Houston was terribly sad.

So, in its own way, was the philanthropic response, particularly from business.

Big brands including Amazon, Apple, Google, Starbucks, Walmart and many more are making donations to the American Red Cross, and encouraging their customers to do the same.

Former President Obama retweeted:

It’s understandable. People see TV images. They want to help. That’s wonderful.

But the American Red Cross? Can’t we do better? The question answers itself. Continue reading