Anger and dismay greeted the announcement last week that the Wounded Warrior Project, a nonprofit that helps wounded veterans, had fired its top staff. Many Americans gave their trust and donated their money to this nonprofit—to the tune of more than $372 million in 2015. But investigations revealed that the organization spent millions of donor dollars on first-class airfare, employee retreats and extravagant salaries. The programs it did create for veterans often served more as showpieces for marketing than as efforts to address the actual needs of veterans.
Besides devastating both donors and wounded veterans, this news could undercut public support for the nonprofit sector as a whole.
Why do the misdeeds of one nonprofit cause mistrust of all nonprofits? The problem is the horns effect, one of the many thinking errors that are a consequence of how our brains are structured. When we dislike one member of a group, our dislike spills over to other members of that group, even if there's no good reason to think badly of them. In other words, the Wounded Warrior Project scandal will likely reduce trust in all nonprofits—including effective ones.
Such unjustified distrust of high-quality nonprofits could undermine our society. The nonprofit sector provides social services that governments can’t or won’t, including providing food, shelter and free higher education to the poor. To continue addressing these social needs and address the distrust caused by nonprofit scandals, we need to improve our nonprofit sector.
Each of us can make a difference by becoming a more effective donor. The easiest way to do this is to take the perspective of a savvy investor and research donation options to make sure you do the most good per dollar donated.
We must also pressure nonprofits to be transparent about their activities and finances and measure the impact of their work. To do this, w e must give numbers priority over emotionally compelling stories. When you are considering whether to give, let your heart be open to stories but also ask how representative those stories are of actual clients or results. This helps prevent another common thinking error called scope neglect, in which our brains fail to ensure that our emotions correspond to the actual impact made by our donations.
Recently, a social movement called Effective Altruism has been pushing the nonprofit sector to become more transparent and accountable. Several Effective Altruist organizations, including The Life You Can Save and GiveWell, provide information to donors about the impact of various charities addressing global poverty. Some of the top picks of these charity evaluators include the Against Malaria Foundation, which protects families in the developing world against deadly malaria-carrying mosquitoes, and GiveDirectly, which transfers money directly to some of the poorest people in the world. Another organization, Animal Charity Evaluators, gives recommendations on the most effective charities to prevent animal suffering.
Crucially, these evaluative organizations, called meta-charities, do not receive any funding from organizations they are evaluating. Instead, meta-charities receive funding from donors who appreciate the services these organizations provide, allowing meta-charities to stay objective. With time and support from donors, new meta-charities will arise to evaluate other areas of nonprofit activity.
We all have the power to ensure that we can truly trust nonprofits to spend our money wisely. Doing so is vital for our society today to address the various societal needs that our governments do not address, and thus helping our society flourish.