Courageous failure: The one question to ask when evaluating a charity

I was in a meeting with a small group of donors learning about an organization. The room got quiet, and people were leaning in, listening intently. The CEO was candid and raw as he described a significant shift in strategy they had recently made. They had failed miserably in a relationship with a significant donor. He was courageously vulnerable, and I was curious to learn more.

We all want to know we are making wise giving decisions and that there will be an impactful return on our investments. Individuals, families, and foundations have different levels of due diligence and varying criteria for charities. It can feel complicated and messy to navigate the data and questions to determine where to give. But one question stands out by far as being the most effective I have ever asked: How have you failed?

In the meeting with this CEO, we learned that his organization was built around a proprietary pvc water pump combined with manual drilling technology as a low-cost pump that could help people in under-resourced, rural communities to install their own wells. The organization had completed 1,000 projects, and they had seen that they were able to lower the cost of clean water per person and increase the scale of impact.

There were rave reviews about this model, and the initial projects seemed very successful. Others started to notice and found potential in this new model. The organization was given an extremely large grant to scale the project seven times what they had done previously, and they went to work on implementation of this multi-year partnership. While the organization was thrilled with the scale and how this grew their impact, they began to get some disturbing data after the first year. Something was not working. One country director reported a failure rate of more than 60 percent of the new pumps that had been installed.

When the hard data delivers difficult news

Look where you tripped, not where you fell – African proverb

Every NGO leader has a decision in a moment like this when they see hard data. Do you dive into the problem? Do you push through, assuming it will get better? Do you assure the donor that it will prove out over time? Matt Hangen, president and CEO of Water4, knew what he had to do. He declared a hard stop. He went to the funding partner and humbly acknowledged, “This isn’t working; we have to change.”

The funding partner agreed to pause and learn, and Water4 began a door-to-door survey in a key country where they worked. They asked people questions about what was working and what was not working. They asked questions about how much families were willing to spend on clean water and health issues. They asked them what they wanted and what they were willing to pay for. The results were clear – and quite painful.

Hangen said, “Our whole organization was built on this vision that every African villager could drill their own well in their backyard, and we would provide the tools for them to do it.” The surveys clearly showed that the community members didn’t want their own wells. They wanted the convenience of piped water, and they were willing to pay for it.

“Our model was designed around things that we were proud of that we had engineered,” Hangen said. “In the end, we threw away our own innovations and technologies in order to create a solution that solved our clients’ problems and met their desires.”

After lots of brainstorming and diving into the problem together, the team agreed on a new solution, which resulted from surveying and listening directly to the people. It included an entrepreneurial model in which community business leaders would own and operate a piped water business that serves their community.

Water4 now uses philanthropy to install the well and uses a local business to maintain it. The water system is owned and maintained by the local business that is employing people in the community.

“When you ask someone to pay for something, they tell you what they want. We clearly learned that the communities wanted piped water, not hand pumps, and the money that they were willing to pay for it could go directly back into their community,” Hangen said. “Our beneficiary became our customer.”

“We learned to start asking what problem they wanted to solve and how much that problem cost them, which is what you do to build markets, rather than pushing our product – a PVC handpump – on people.” The solution they wanted cost more, but the rural customers, by solving their problem as they defined it, were willing to pay for it.

This new model not only addresses the clean water issue; it creates an economic development opportunity. And they never would have discovered this new strategy if they weren’t first willing to acknowledge their failure.

3 ways to determine how effective an organization is at learning from failure

1. Is an organization quick to acknowledge failure?
Do they have systems in place to measure progress along the way and to determine if something is not working? Do they have a culture that allows failure to be acknowledged and issues to be addressed?

2. Is an organization up front about the causes of the problem?
Do they examine the full depth of the issue and put all possibilities on the table to find out what needs to change?

3. Is the organization diligent in determining the best possible solution?
Do they ask questions and show relentless curiosity to learn from those who understand the problem firsthand?

Brief failures cost less

In the case study of Water4, the organization held true to one of its core values, which is “Fail fast. Fail cheap.” Hangen commended the funding partner who gave his organization the capacity to “rapidly pilot this new approach – to fail fast, to iterate fast, and to innovate.”

“They deserve a lot of credit for not completely backing out,” he says. “They didn’t stop at failure, and they gave us the ability to scale and learn.” Over time, it has brought great returns for the organizations involved, for the new businesses and employees who now have an income-generation opportunity that was not part of the original plan, and for the communities receiving safe, piped water.

This failure seems like a clear win.

Billionaire CEO Stephan A. Schwarzman says, “Failures are often the best teachers in any organization,” that includes charities. So, next time you’re learning about an organization, be sure to ask the question, “How have you failed?” It may very well be the number-one litmus test of their future viability.

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