Paying for effort vs. Paying for results

Abstract

This article argues that conventional grant-making, which covers a project’s expenses based on the justification of its output, is flawed because it puts donors in a position of determining the allocation of resources for charities. In contrast, the article promotes paying for outputs instead, as this aligns incentives and provides useful information for both donors and charities. It further adds that paying for outputs encourages innovation and can enhance coordination and allocation of resources among funders. The article acknowledges the challenges associated with estimating the effectiveness of interventions but emphasizes the importance of continuous evaluation. It concludes that shifting the focus towards paying for results can bring significant pragmatic and cultural benefits to the non-profit sector. – AI-generated abstract.