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!

Does your impact have impact?

As a matter of transparency, all charities should host their annual report on their websites, but let’s be honest, not many people trawl through these reports, so it might be better to start elsewhere. If you want to begin improving accountability and transparency, start by thinking about who your stakeholders are, what they want to know, and what the best way to communicate with them is.

Each group of stakeholders has a slightly different perspective on your organisation, they will therefore want different information. Unfortunately, there isn’t a one-size-fits-all approach to demonstrating impact; you need to present information in a variety of ways if it is to hit its mark. Funders will want detailed analysis of the outputs and outcomes of your projects, beneficiaries may look for evidence that they are being listened to, and that improvements to existing services have been made. Similarly, supporters and staff may want ‘softer’ information, for example, anecdotal evidence of the change your organisation has made to people’s lives. But don’t guess what they want, ask them!

A good place to begin is to consider the kind of language you use to explain the difference your organisation makes. The language used in monitoring and evaluation reports is fine for funders, they have to read them, but they’re paid to do so. If you use the same language in impact literature, then you are likely to send your audience to sleep, or worse still, alienate them. It’s encouraging for stakeholders to hear that your organisation has hit all its targets, but it’s not very inspiring. This is the point at which you need to take off your performance hat and put on your marketing hat. The aim is to breathe some life into what can often be quite dry information. Think about using snappy quotes to illustrate qualitative information, there is nothing quite as powerful as a beneficiary explaining the improvement in the quality of his or her life.

Next is the amount of time a person will spend reading about the impact your organisation has made. At the risk of appearing to slide into an infinite regress, you have to be aware of how much of an impact your impact is making. What do I mean? Ask yourself how many impact reports you have received over the last year, and then how many you have read, and then how many you remember. I imagine for most of us it’s a dismally small number.

Room to Read, an NGO that builds schools and libraries in developing countries, has a novel approach to tackling this problem. It too produces an annual impact report, but it also demonstrates its impact by including a very brief ‘live’ summary of achievements on it website and below the signature of every email it sends out. At time of writing it read ‘Our impact: 1,128 schools, 10,000 libraries, 433 books published, 7.4 million books distributed, 8,944 girls scholarships, 4.1 million children benefited’. This information is included one the 'About Us' section of their website in every email a Room to Read member of staff sends, and with offices all over the world this means that their impact message is delivered thousands of times each day. Granted, it lacks the emotional edge of anecdotal evidence, but it is nonetheless a very powerful and effective way to demonstrate impact.

Demonstrating the difference your organisation makes creates a lasting positive impression, but it’s not easy. Finding new and inventive ways to get your message across can be challenging, but as Room to Read shows, it’s not impossible, and it need not be expensive.

Being the change we want to see...

The ImpACT coalition is shortly to launch its transparency and accountability manifesto, calling on leaders across the sector to get serious about the commitment to being honest and open about our business and how we operate.

Number 8 on the list is for organisations to agree that it is important that they publish an easily accessible suggestions and complaints procedure for beneficiaries and supporters.

I was reminded of the necessity for this only too clearly whilst visiting an elderly relative recently. She told me that a volunteer had been helping her from a local elderly care charity. Whilst the volunteer had been very successful at helping her get the benefits she deserved she didn’t like the way the volunteer often talked to benefits staff on the phone, “she was very rude to them and quite aggressive and on more than one occasion she said I was her mother, which I didn’t really like”. When asked whether she had complained her story was sadly too familiar, “I didn’t like too. She did get me the money I need; besides, I didn’t really know how… she gave me lots of leaflets about how to complain about my benefits but nothing about her organisation.”

It strikes me that we are often in the position of trying to advocate on behalf of those we work with, strengthening and empowering them, but we afford them the same view of our organisations are we are hoping they will get of the statutory services.

Morally most charities would find it hard to argue, but maybe we should also go further. What about publishing how many complaints a charity has each year? A short summary of the type of things and how the organisation plans to address them… True accountability starts at home; maybe it is time for us to take the lead in being the change we want to see…