The use of information in charities - with apologies to Hayek

Is your organisation a planned economy?

Is your organisation a planned economy?

The economist Paul Seabright once mentioned travelling through London with a Russian bureaucrat who asked him ‘tell me, who is in charge of the supply of bread to the population of London?’ It’s a dazzling question – and the answer is, of course, no-one. Who, after all, could possibly calculate the needs of the city, and plan the delivery of your daily bread from seed to toaster?

It’s impossible to know everything. Sounds obvious. But how often do we allow ourselves to set a strategy assuming that we do – that we know A means B will follow, and C will tell us how much more D we need?

Information is key to decision making. But the data charities have access to is often imperfect, assuming that it is possible to gather at all.

In many cases, the public’s connection with charities is a personal one, born of experience with the causes they address. But the flip side to this ‘imperfect market’ is that donations are made with so little information about the effectiveness or efficiency of their donations that people often resort to substituting aspects such as branding and awareness. So what is information, where is it, and how can it be used?

Hayek1 won the Nobel Prize in economics for showing that the market operated with limited information available to each of the participants. For example a business owner, needing tiles for a factory roof, did not know about the availability of clay for tiles, or the numbers of workers in that field or the demand for clay for other purposes. However, he did have access to that information in a handy index: the price. The price of these tiles told him everything he needed to know, and allowed him to make an informed decision as to which type of tiles he wanted to buy. The price had, encoded in its digits, all the details of the delay in the cargo ship two months ago, or the sudden glut on discovery of a new source, or the current status of labour relations in the tile-making industry. In short, the price told him everything, even those things he didn’t realise he had to know, because they all impacted on the price.

In these terms, what information can charities glean, and where is it? Certainly, charities are the recipients of donations from various donors.  But information received about the donor base can tell you conflicting things. Has Steve Jobs released the latest iMusthave, tempting people to eschew the public-good that month? Has a company director been tempted by his new secretary to change their CSR strategy? Or are your donors giving less because they entertain notions of a charity being too rich, too wasteful, or simply not interesting anymore?

The information is in there, somewhere, but the simple index of donations does not, in this instance, show a charity how it should react in times of a downturn. Unfortunately, it’s often at moments like this that charities realise that they do have to do something, but where is the information with which to inform that decision?

Trying to measure

Our fictional business owner also received more information from prices, namely, the demand for his own product. He can tell what aspects of his business are impacting on his bottom line, and his sales can tell him if his price is too high, or too low, and he can adjust accordingly, thus completing the circle of knowledge.

Such clarity rarely, if ever, exists in the ways in which charities operate. Perhaps the clearest example of trying to correct this is Social Return on Investment (SROI). At the April CharityComms seminar Sarah McCoy of YouthNet gave a presentation2 on how a charity could measure its success. Inputs into the formulae such as staff times, administration, and overheads were measured against outputs - the direct benefits resulting from the work of the charity. These figures are monetized by calculating the benefits of these costs while trying to take into account the ‘deadweight’ factor, i.e. people who would have had a similar outcome without the help of the organisation in question. Scaled up to a charity sector, SROI could create a ‘market’ in which donors could see how effective their donations are, and charities could measure their success and ‘competitiveness’ and work out where they need to improve.

However, not all projects are amenable to this sort of rigour: how would you monetize the invaluable work a hospice performs? Nor can all organisations afford the capacity and resources required to mine the data needed for such calculations.

Of course, you can’t mention information without its constant companion – technology, which brings us to the interesting example on gathering knowledge from the recent experiences of ‘The Gap’. They haven’t revealed how much they spent on redesigning their logo, but Twitter and Facebook were buzzing with complaints before they even released it. Once in the wild, it lasted one week before being pulled due to the sheer volume of protests on these two social networking sites alone. With the sort of brilliance and cheek that comes from full time PR departments, they came back with a spokesman saying: 'We've learned just how much energy there is around our brand, and after much thought, we've decided to go back to our iconic blue box logo.'3 (Then again, we wouldn’t entirely dismiss the possibility that the whole situation was from the same department …)

But of course, gathering information from online conversations with the public are fraught with their own problems, as Peter Higgs4 wrote about in the August newsletter. Whilst Gap should have clearly listened to the information they were receiving, and the government website Your Freedom  (aimed at collating public opinion as to which laws to repeal) could be fairly certain that ‘repealing the  3rd Law of Thermodynamics’ was not meant not be taken seriously, it is rare that that such information is so clearly sign-posted as significant. But there is information out there, the question is how to find, and record, the bits (and bytes) that matter.

Overcoming the Gaps

So charities certainly face challenges: information can seem scarce and the information that is available is often difficult to access. Many of the databases that hold information on charities feel designed more to frustrate and waste time rather than to get usable (and more importantly benchmarkable) information from.

The thirst for information on which to base decisions is palpable among charity audiences. At a recent workshop on how to use research participant after participant described how their charity agonises over what to do, and where to find the information to guide them. They described the prospect of research as confusing, expensive and uncertain to deliver the information they need. Often this leads to over-comparison. If an organisation finds it can’t get the information it needs to inform decisions, it can be tempting to look at a similar charity and try to follow their route, despite different starting points, different aims, and different capabilities.

Charities need information – and if you can’t find it, maybe its time to start collecting it yourself. What factors impinge on your ability to carry out your aims? Can you measure them?  Do the actual results match your predicted outcomes? What other aspects of your organisation’s interaction with the big wide world did you perhaps not account for? Which factors don’t have the impact you expected?

Each organisation is different in many ways, but by starting to monitor the information that you do have (in an accessible form, please) you can, just like our fictional businessman, make sure you too have a roof over your head.


Enjoying this article? Subscribe to our newsletter to get the next one first!

The Use of Information in Charities

To download this file please enter your details in the form below and click the Download button.