Corporations, governments, and even people on the street routinely weigh the benefits and costs of their decisions, so why don’t philanthropists? By estimating the social return on their investments, funders can deploy their dollars more effectively. To demonstrate the power of these calculations, the authors show how three organizations—the Robin Hood Foundation, Acumen Fund, and the William and Flora Hewlett Foundation—use cost-benefit analysis to evaluate their ongoing programs, choose mission investments, and plan long-term strategies.
In selecting a portfolio of investments, deciding whether to attend business school, or choosing the deductible for their car insurance, people regularly compare the costs, risks, and potential benefits of their choices. The concept of cost-benefit analysis has even begun to permeate government regulations: Under Executive Order 12866, which President Bill Clinton signed in 1993, federal agencies must “assess all costs and benefits of available regulatory alternatives, including the alternative...
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