We define philanthropy as the giving of resources in an engaged and strategic way for maximum impact and in a tax efficient manner. It can include the giving of money, assets, time, talent, voice and one’s social capital. We believe in the power of philanthropy as a great social connector and the source of many great opportunities.

City Philanthropy

A Wealth of Opportunity

Bonus special: 'Go large' for maximum efficiency

Feb 20th 2013

Wondering how best to use your bonus to maximum good? Caroline Fiennes explains why few donations are better than more

As any 10-year-old can tell you, multiplication is commutative: 2x £70 is the same as 70x £2.

But not in charitable giving, it turns out. Making two donations of £70 is a good deal more valuable to charity than making 70 donations of £2.

The reason lies in the fixed costs. Many charities (unavoidably) get charged a fee for each transaction into their bank account. So two large donations attract only two dollops of that fee, whereas 70 smaller donations attract 70 dollops. That fee might be 10p per transaction. So if the money is given in two donations, less than 0.15% of the total given gets lost in transit between the donor and the charity; if it’s given in 70 donations, 5% gets lost in transit; and if the money were given in 140 donations of £1, fully 10% would fail to reach the charity. Of course, if you gave 1400 donations of only 10p each, nothing would reach the charity at all.

So smart donors give in a few, large dollops. Andrew Carnegie summed it up perhaps most strongly when he said: “put all your eggs in one basket... and then watch that basket”.

Of course, the other great benefit of making only a small number of gifts is that you make better  decisions: it’s easier to analyse (say) 10 charities looking for three good ones, than to analyse a hundred looking for thirty. And, having fewer in your ‘brood’, you can develop more of a relationship with them and get to understand much better their situation and work.

Oddly, the logic for fewer gifts persists even if you’re giving a lot. Charities incur ‘transaction costs’ in dealing with philanthropic foundations, notably in applying for money and reporting on what they then do with it. Research by the US Center for Effective Philanthropy shows that these transaction costs are much higher if the foundation makes several small grants than if it makes a few large ones of the same total value:

 

Grant size

Average time which charities spend applying & reporting

Average amount raised per hour spent

No. hours work in raising & managing $100,000

$10,000

7 hours

$1,500 /hour

70 (nearly two person-weeks)

$100,000

12 hours

$8,500 /hour

12 (only a day and a half)

So when you’re choosing charities to support with this year’s bonus, focus your giving on a few.

__________

Caroline Fiennes is author of It Ain’t What You Give, It’s the Way that You Give It: Making Charitable Donations That Get Results. Find Caroline on twitter @carolinefiennes



‘US research shows small grants are much more expensive than larger ones’: The Center for Effective Philanthropy, 2004, Listening to Grantees: What Nonprofits Value in Their Foundation Funders.

 

Good for: 
Article type: