Joe Saxton

In a recent article in Harvard Business Review[1], the author set out how companies were using ‘enhanced or operational transparency’ to improve customer satisfaction, feedback, and sales. The basic idea is that companies are letting their customers lift the lid on their processes and practices so the customer can have greater faith in them. Some of the examples the article gives are:

• A study of airline flight booking found people thought the website was more valuable when it showed how many options it was searching e.g. now searching 1265 options for your flight to Paris.
   
• One company spelled out its costs in making a wallet (materials $14.68, construction $38.56, etc). Even though the costing showing a hefty mark-up sale went up 26% for a $115 wallet.
   
• In Boston, the City Government produce an app which let them take pictures of things such as potholes or graffiti which were then geo-tagged and submitted for action. Workers then took photos of them repairing the things that citizens had reported and posted them. Research showed that this substantially increased confidence that the City Council was taking action.
   
• Even something as simple as replacing audio links at a Starbucks drive-through with video links, or Domino’s Pizza Trackers app showing people making the pizzas increased both sales, engagement, and satisfaction.

In our research at nfpSynergy, we ask a nationally representative sample of the public what would encourage giving or supporting a charity. The top response from a prompted list is knowing how the money is spent. This has been consistent over the last decade.

Typically, charities have three reactions to the public’s demands to know more about issues like fundraising costs, admin costs, CEO pay, and whether their money is well spent. And they are typically the opposite of enhanced or operational transparency:

1. Tell the public they shouldn’t worry ratios or fundraising costs. In a recent blog[2], Kate Lee of CLIC Sargent suggested that we should move away from unhelpful ratios (‘I have been trying to educate folks on why considering how much of the £1 you donate goes into ‘frontline’ services is pointless’) and devise a different kind of measure – a golden formula is her term.

Another example suggests that some charities do not even think it is appropriate for the public to ask about fundraising costs. Caroline Fiennes of Giving Evidence[3] says ‘This unhelpfully implies that managing oversight and raising funds are somehow separate from charitable activities. They are not’. These comments reflect a general view I see in charities – that the public shouldn’t worry about fundraising costs, or admin costs or CEO pay. They should focus on impact or the difference that a charity makes. The biggest problem with telling donors not to worry about fundraising costs is not whether it's right or wrong, but whether it does change people’s attitudes.  

I don’t know about you, but if I worry about my children doing their homework, and my children tell me I don’t need to worry, it doesn’t reassure me! I want to see the proof. Or if I was worried about a company’s safety record, and the company tells me I shouldn’t worry about safety, but how punctual they are, I don’t stop worrying about safety. I want to see the evidence.

So blithely telling donors to worry about impact, not costs, is a deeply flawed approach. Telling people not to worry doesn’t work anywhere else in our lives so we shouldn’t be surprised that it doesn’t work for charities.

2. Manipulate data to make their figures appear better than they really are. A second approach charities use to improve their ‘transparency’ and make their figures look better is to play sleight of hand with them. I have seen three household name charities produce a pie chart which says ‘How we spend your money’ or words to that effect, which leaves fundraising costs out of the pie. Sometimes there is an asterisk saying fundraising costs excluded, sometimes there is a separate line with fundraising costs. However, leaving fundraising costs out of a pie chart of costs is deeply disingenuous.

3. Claim transparency, while burying data deep and make it difficult to understand.  Everybody says transparency is a good thing: as long as it's not being transparent about things that donors want you to be transparent about, like fundraising costs! A recent report on how many charities were being transparent about CEO pay, based on the NCVO guidelines, showed that under 30% were.[4] The SORP, the official framework for charity accounts, have become so complicated that annual reports and accounts now typically go over 50 pages, but the SORP consultation rejected the idea of a summary. Most charities don’t make it easy to find out how much of a donor’s money is spent on fundraising or CEO salaries.

This all matters because I don’t believe that any of these approaches will make donors or the public more likely to trust charities, or worry less about how their money is spent. However, the alternative strategy of ‘enhanced transparency’, set out in the Harvard Business Review article, has real potential.

So, what could ‘enhanced transparency’ look like for a charity? Imagine if, rather than running away from what donors wanted to know, charities explained, explained, explained, why they did what they did. Here are some ideas:

• See a map of your work in action. Imagine a map which shows where all the people are working for your charity that day with pictures and the latest reports. A living demonstration of the work that charity is doing on any given day. Like the Airbnb map when searching for a property but for delivery.
   
• Set out the challenges your organisation faces to donors. Set how the dilemma of how much your charity CEO should be paid. What if you paid a CEO less? How can a charity know whether it’s doing a good job? What are the choices that charities face in pay demands?
   
• How do we make sure your donation is used well? ‘Here are the ten ways that a charity is making sure donations are well used from keeping costs down to monitoring services’.
   
• Talk to the CEO. Live webchat with the CEO or fundraising director or whoever, where donors can ask any question they like.
   
• Show the chain of people from the donor to the beneficiary and why they are all critical to helping the charity do a better job with donors’ money.
   
• We’re regulated! Illustrate all the regulators who oversee your charity’s work and how your charity is accountable to them.
   
• Ask us anything? Get your supporters to tell you the questions they’d like to know the answers to. Write them up and publish them.

One of the frustrating paradoxes of the way that donors and supporters engage with charities is that what you are seen to be doing about transparency is as important as what you do. They don’t want to know the details, just the headlines. In our research just knowing that charity accounts are audited, for example, improved people’s perceptions of charity.

I have no doubt there are charities out there who are already doing some of these things (and we’d love examples in the comments box below). If more charities spent more time tackling the concerns of the donors and supporters head on, rather than trying to disassemble, dissuade or distract I have no doubt it would help tackle the issues that the public care about far more effectively.

If you would like to hear more about our research with the public them e-mail cam@nfpsynergy.net or download the briefing pack below.