When it comes to being transparent about costs, context is everything. But are charities focusing on the right things?
In part one of our focus on transparency, we explored the need for the sector to properly address the issue of transparency about fundraising costs. In today’s post, we dig down into the issue and look at some of the complexities it holds.
The dangers of transparency without context
If we’re going to lay bare our fundraising costs, what message do we actually want to convey? Adrian Sargeant, professor of fundraising at Plymouth University, says context is everything: “The problem with saying that your fundraising costs are, for example, 15 per cent of your charity’s income, is that that actually tells the public nothing. What are they supposed to make of that? Is 15 per cent good, bad or neutral?
“Transparency without concurrent education does nobody any favours, as it raises more questions than it answers. Worse still, it can create the illusion that something might be wrong. You need to provide people with the right anchors, so they can draw the right conclusions.”
The vehicle by which we present information about fundraising costs requires careful thought, too. Adrian suggests a sector initiative that publishes comparable figures. “You could direct your supporters to a central site, where they can view your chief executive's salary, for example, against what other organisations pay, and against what corporates pay”. That way, only the outliers will need to present the case for why their costs need to be as high as they are.
How much should we reveal?
Context is one thing, but what about the content we unveil? What exactly do we need to be more transparent about, and to what degree? Adrian thinks that perhaps less is more. “I don’t know if I’d get into the minutiae of your costs, otherwise you look like you’re trying to justify your position”, says Adrian. He suggests that providing titbits of information, in key areas of concern, might do more to engender trust than publishing everything. “The reality is that people don’t tend to pay much attention to that anyway; they tend to look just at the headlines you give them.”
Greater transparency means publishing more facts and figures, and giving careful thought to how they might be justified in the public eye. This means more work, and the smaller organisations in particular may wince at the prospect of an even heavier administrative burden than they already have. “The sector just can’t cope with another big burden”, says Donald Steel of RL Experts. However, he thinks this can be alleviated to some degree by taking things slowly and steadily. “It's much better for the voluntary sector to have a gradual, increasing process of openness. You gradually disclose more and more, up to a point. You don't have to publish everything tomorrow - that would be a huge amount of work. Instead, you start in a manageable way.
“You may decide to begin by disclosing just the board’s salaries, for example, in your annual summary. But then you make a commitment that every year, you're going to be even more open than the year before. Who could argue with that? The public expect greater openness, but the last thing they want is yet more money to be spent on bureaucracy, and so this needs to be minimised.”
No pain, no gain
Even so, starting along the road to transparency can be painful, says Donald. “When you start publishing this kind of information, there is an initial interest and you get people saying: 'I didn't know that, and I'm not sure if I like it'. You then have to explain to people the reason why that person is paid that amount, or why that expense is necessary - because it's their money you’re spending. But the fact that it might be painful at first isn’t a compelling reason not to do it. And if you keep doing it, it becomes part and parcel of normal business.”
Looking in the wrong place?
At the heart of the rhetoric around greater transparency, there is an assumption that because the public has expressed concern about charities’ fundraising costs, they want to know what our fundraising costs are, and how these compare with others’ - as though this is going to provide the solution we’ve all been looking for. But what if we’re focusing on all the wrong things? From the public’s perspective, how important is the figure we pay our chief executive, compared with the actual impact we make on the cause?
“We are actually more transparent than many other countries in terms of our financial reporting; what charities are less good at is explaining more about the work they do, and the difference they make in society, and sometimes you have to dig deep to find out exactly what a charity does”, says Adrian.
Social entrepreneur Dan Pallotta said in his brilliant 2013 Ted Talk that we need to shift the conversation about charity fundraising away from costs and onto impact. It makes sense; after all, if we encourage people to make their decisions about who to support based on how much of their pound goes to the cause, rather than the impact the charity is making, then that’s surely a broken business model.
To find out more, see part one of our focus on transparency in the charity sector, and read about what Charity Choice is doing to help bust charity spending myths with their new charity financial reports.
Jenny Ramage is editor of The Fundraiser
