How much should charities care about transparency?

The ImpACT Coalition is all about encouraging charities to become more transparent to their stakeholders. But how seriously should charities take transparency? And if you do get serious about transparency—signing up to the ImpACT Coalition’s Transparency Manifesto, and taking practical steps to being more open about your work—will anyone notice?

In particular, will donors care? At New Philanthropy Capital (NPC), we’ve been working with donors for the past nine years—helping them to focus their giving on creating the greatest impact. But there’s no one-size fits all model for understanding why and how people give, and little research (so far) on how charities’ transparency influences their giving.

So what do we know?

Well, the Charity Commission’s survey of public trust in charities, launched this month, shows that charities are among the most trusted institutions in society, coming closely behind doctors and the police. It also tells us, worryingly, that the most important factor influencing people’s trust is the proportion of donations that ‘gets to the end cause’. Concerns about cost ratios were seen as more important than making an impact—a reversal from the last survey in 2008.

There is also a brilliant piece of research by Hope Consulting in the US, which looks at donors’ motivations for giving. It found that donors can be segmented according to different motivations. The report suggests a segmentation into six types of donor—Repayer, Casual Giver, Faith Based, See The Difference, Personal Ties, and High Impact. It also finds that ‘major donors’ share the same motivations as regular donors within these different segments.,

On a straightforward reading of these findings, charities would be forgiven for thinking three things:

1. that transparency isn’t an urgent priority because donors already trust them;
2. that any efforts to be more transparent should focus on showing how little money is spent on overheads; and
3. that any efforts to be more transparent about impact can focus purely on High Impact donors, rather than regular donors.

I’d warn against drawing these conclusions. Acevo’s survey last year showed that many donors’ perceptions of charities, and therefore of factors contributing to trust, are somewhat divorced from reality. Those that don’t work in the sector often have antiquated visions of charities staffed only by volunteers and funded only by donations, which should all be spent at the front-line and not on wasteful things like offices and chief executives.?

There is a big discrepancy between what donors say they want to know (how the money’s spent) as opposed to what they need to know (what that spending achieves). And charities often don’t make efforts to challenge this. It can be a lot easier to stick to working out your admin costs than it is to work out your impact. As NPC’s forthcoming paper on impact reporting shows, charities are not yet routinely communicating their outcomes or impact in their annual reports, annual reviews, impact reports or websites, tending to talk instead about outputs and internally-focused objectives.

So how much will donors care if charities get more transparent, particularly about what’s important—what they achieve? Some may not care too much, as long as a scandal doesn’t emerge that destroys their trust. But some will, particularly the High Impact segment of donors. And greater transparency may encourage donations from those that aren’t giving now because they don’t trust charities. In time, greater transparency will help all donors to become more informed donors (just like all consumers become more informed consumers), and their trust will become more directly linked to how well charities communicate the difference they make.

If I were a fundraiser, I wouldn’t be encouraging my board to invest in more of the same old fundraising techniques, with ever-decreasing returns. I’d be encouraging them to get ahead of the game and meet the informed donor’s needs. My message to fundraisers is this: Work hard to capture and communicate the difference you make. Use that to start an honest dialogue with donors based on trust and understanding. And don’t throw all your hopes into a major donor campaign—see what happens if you kick off an informed donor campaign instead.

Study of Navels? We might be onto something.

Last week I spent most of the week at the Leadership Trust with my Clore Social Leadership Programme, exploring my inner navel. Whilst my navel is still very similar to the last leadership course I went on to study it... there was a little something else that caught my eye.

The Leadership Trust has a 'step' model for helping you review your strengths and areas for development as a leader, nothing new there... but what is interesting is the link they have made between trust in leaders and their ability to honestly review their own performance and act on what they find. For mere mortals the process starts with doing something successfully or failing miserably but rather than just leaping back into the next task taking time out to ask yourself how did that go? how do I know? From this point of becoming self aware about what we are doing and the impact we are having we go on to decide what we need to change and exert some self control to make those changes.

Linking this step back to transparency I wonder how many of our organisations, despite confidentially reviewing our performance are failing to take this step of really changing our behaviour as a result of what we see and hear. is this why we sometimes lack the courage to publish that critical evaluation online?? Because we can't promise it won't happen again?? It isn't easy - no change programme is -but it is an essential step before we can achieve the real value of facing up to what is good and what isn't, developing greater 'self-confidence'.

Those organisations I have seen recently that are striving to become more publicly transparent seem to making a step beyond simple organisation improvement as a result of feedback but are developing a sense of confidence about their ability to accept feedback and improve as a result. Take someone on a diet, it isn't realising your over weight or even starting the diet that makes you feel good - it is seeing the pounds come off and knowing you can.

Several CEO's have told me recently that they worry that becoming more transparent will create a culture of risk aversion in their organisations... but if you think about it, that isn't what happens when we become more confident - we actually try new things and take more risks. Innovation thrives in a confident environment.

As the confidence of the organisation grows another magical process begins to happen, 'self-realisation'. The point on the journey where you become comfortable with who you are, the ability to open yourself up, actively seeking advice, feedback, we ask for support where we are weak, gaining the respect of others. ......And these are the people we trust, these are the people we want to collaborate with, the people we want to succeed. Imaging your organisation here.



NB:
The best part of dieting (anyone that says otherwise is not transparent) is actually when some else notices - this too is self-realisation through the respect of others and also feels great!