Comparing the impact of multiple organizations has traditionally been a difficult task for donors since there has not been a standard method of measurement to compare organizations with varying missions. In an effort to change this--for the sake of raising the level of impact for all philanthropy--we have developed a process that empowers donors to find the “best” charity by approximating impact using a standardized measurement called Cost Per Quality-Adjusted Life-Year, or $/QALY.
The QALY measurement has actually been around for decades, and is used by healthcare economist as a threshold to justify and compare various health interventions. We use a variation of this calculation so that donors can approximate how much money (via donations) it takes to “buy” an additional quality year of life (or avoid a disability year) given a specific charitable intervention. More simply, this process is useful to compare any two charities whose intended outcome is one or more of the following:
The first step in the process of finding the best charity is to consider a common moral dilemma that we call “Home or Away?” This process allows donors to come up with a metric called a “multiple”, which is a way of articulating how much you value helping people from your own community or country vs. helping people outside of your community or country.
The exercise is designed so that the end result best reflects your individual beliefs as a donor. The results are then used to help you determine a $/QALY benchmark when you evaluate and compare charities. You can visit our Home or Away page online to go through the process of calculating your multiple.
The QALY Calculation
Next, donors will need to calculate the impact, measured by $/QALY, using the impact calculator. This calculator looks at recent past results of a charity--generally over a period of at least one year. It also takes into account the scope of the issue and other metrics that relate specifically to the cause that the charity focuses on.
This process requires donors to gather a small number of data points (generally around 10) from creditable sources. The process can be somewhat intimidating for first time users, but we provided two case studies, detailed instructions, and resources that can be used to help find the necessary data points.
Based on our case studies, we recommend that donors use a benchmark of $500/QALY (assuming a home or away multiple of 1). It is our belief that charities with results that exceed $500/QALY do not provide enough of an impact relative to more effective alternative organizations.
To add some additional perspective to this metric, the accepted threshold for healthcare interventions in the U.S. is $50,000/QALY; making our recommended benchmark 100x more effective. To critics that may think our recommended benchmark is too strict, we should also point out that both of our case studies (available in the calculator) fall well below the $500/QALY benchmark that we recommend. In fact our Save A Life and Fight Poverty programs provide donors with donation opportunities with an impact of $31.39/QALY and $129.87/QALY respectively.
Finding the “best” charity requires careful consideration of both personal preference and an individual charity’s ability to deliver on their intended results. Donors that take the time to evaluate these metrics prior to committing to large donations can feel much more confident that their investment will be appropriately positioned to have the “best” possible impact.