Candid’s Diversity Data Standardization Effort is Fraught with Pitfalls

Candid, the nonprofit research group, recently announced it is leading an effort with funders and charities to standardize diversity data collection.

Called Demographics via Candid, or DvC, this initiative hopes to create a survey similar to the IRS 990 form that all organizations use to report financial information. Advocates think a universal demographic reporting tool will increase efficiency for charities that collect this information so they would no longer have to prepare custom diversity information for each donor who requests it.

A motivating factor behind the collection of this data trove is to quantify how much money is flowing to minority-led organizations as some in the charitable sector do not believe enough dollars flow from philanthropy to non-white-led organizations. This initiative is a response to that concern, and it’s possible this data will be used to bolster that claim. However, collecting and publicly sharing such sensitive information could lead to serious issues, especially for nonprofits and their employees.

So far, three dozen philanthropies have agreed to participate in DvC. Nonprofit organizations have also been invited to participate and pressure their funders and colleagues to join. The next step for Candid will be government agencies, which it hopes will also adopt the form as part of their grant applications.

DvC should be concerning to philanthropies and nonprofits for many reasons.

Most fundamentally, this effort assumes that organizations and funders should or must report demographic data. Many funders and grantees oppose providing demographic data on philosophical grounds. They do not believe the collection of gender, race, ethnicity, age and sexual orientation data of their leadership, staff and grantees is mission-critical. Despite increasing calls for organizations to provide this data, organizations should still be able to decline. However, as more organizations adopt universal data collection, it will be increasingly more difficult to oppose doing so.

Second, Candid is setting up a situation in which grantees who opt not to collect this data could be ostracized from the charitable community or passed over for philanthropic dollars. Unfortunately, this is a very likely situation for some grantees of partners in the initiative. The Kalamazoo Community Foundation will reportedly require its grantees to complete the standardized demographic survey and make it publicly available to receive funding. Everyone should be concerned about the potential impacts of this policy, and specifically, how reducing funding available for those who choose to opt out will ultimately harm those who rely on these nonprofits for support—some of the most vulnerable members of our communities.

Third, underpinning this initiative is the misguided belief that white-led organizations are not as effective at serving non-white communities. In February, Candid’s CEO Ann Mei Chang said, “Organizations that reflect their communities are far more likely to be successful. They understand those communities in a way that outsiders can’t.”

This is not true. There are many pathways to opportunity and strategies that empower and uplift. Minority-led organizations are not necessarily best, or necessarily better positioned, at creating those paths or addressing the hardships that specific ethnicities face.

Throughout history, disadvantaged and minority communities have been helped by those who do not share their skin color, gender or background, but who empathize with their plight. One much-celebrated example is Julius Rosenwald, a Jewish immigrant, who funded the education of 600,000 Black students in the Post-Reconstruction South. At the Wisconsin Veterans Network, Quentin Hatfield helps underserved segments of the veteran population, including Hispanics and Native Americans, navigate the byzantine veteran service space and find the resources and benefits they’ve earned. Other more obvious examples include organizations that provide disaster relief funding and assistance without—thankfully—considering the demographics of the victims as well as those who provide college scholarships based on merit.

For those who opt to provide demographic data, they do so on a universal form that will likely be far less detailed than they might ordinarily provide. Standardization lacks nuance and context. Instead, raw numbers may paint an incomplete picture of an organization, at best, and inaccurate representation of their outcomes, at worst.

In addition, DvC’s data collection could be fraught with privacy and legal land mines. Individual personal privacy matters. For example, collecting and sharing sexual preferences with employers place staff in an uncomfortable situation and could risk their privacy and safety. Many organizations would probably want to avoid such a thorny situation.

There are also ethical issues at stake with consent. When data are collected, given to a third party and further used without the informed approval of all individuals in the database, such a collection could be counterproductive. In fact, people in marginalized communities may be less likely to work for nonprofits if they may be unintentionally outed for their status or defined by their immutable characteristics.

When the government collects data on individuals, it may not publish it if the sample size is so small that the individuals could be identified by the data. In a sector where nonprofits often have few employees, there is no way to ensure real privacy when collecting such data.

My colleague, Joanne Florino, flagged some other issues when writing about guidelines that Apra, an organization of fundraisers, published for collection, storage and usage of DEI data:

“… As the Apra report warns, nonprofits need to be mindful of the type of data that cannot be legally collected and the type of security needed to store and transmit the data safely. Data breaches may result in financial losses from fines and litigation in class-action lawsuits. At the very least, an organization will bear the costs of notification, reputational damage and loss of donor confidence.”

Although Candid is publicly sharing the information collected, that does not satisfy the very personal privacy concerns outlined above.

DvC is positioned as a way to achieve racial equity in society, but efforts like this are really coercive tactics. They are used to condemn organizations and funders falsely as not supportive (enough) of minority-led causes and to then guilt funders to devote their resources to favored causes regardless of mission.

One of the things that has made the uniquely American tradition of philanthropy so strong—and driven innovation and progress in addressing some of our nation’s most pressing challenges—is the diversity of worthy causes and organizations that Americans can freely support. And this type of pressure, in the name of “right-sizing” funding, that this initiative is trying to inflict on nonprofits and donors will have unintended consequences.

Perhaps most importantly, the DvC initiative could very likely harm the exact communities it’s trying to help. This type of box-checking exercise undermines the track records of effective organizations and would harm some organizations that are getting real results through their work supporting struggling people from all backgrounds, including minority populations.