Tuesday 5 September 2017

Why the toad leaves the hole: the charity transparency paradox

We hear an awful lot about “transparency” in the charity sector whether we are discussing the future or considering how to avoid scandals. Transparency is brought up whether you’re talking about pay, governance, technology, recruitment, switch to digital, fundraising and everything in between. It is in the news again after Which? supported future AGM votes on transparency-enhancing governance measures and the Charity Commission publicised advice on salary declarations.  But frankly it is often little more than a mantra.

There is a general presumption that goes like this:
If charities are more transparent, then the public will pay attention, they will see which charities are good and which are bad, and accordingly support the best ones and shut off the worst. This will allow the sector to flourish, and will ensure charities cannot stumble into crises, indefensible spending, PR disasters or toxic leadership decisions.

This logic may be neat but doesn’t reflect the real world. I don't buy it. To obtain the benefits above more than transparency is needed.
Transparency in our sector means that the public, or very small section of concerned citizens any rate, get to see “how the sausage is made”.

The problem is: most of them don’t know how a good sausage should be made, so will often judge perfectly good sausages harshly. The problem is compounded by the fact that some widely known purveyors of delicious pork meat actively misdirect the public as to appropriate banger composition.

Transparency for its own sake, say, publishing minutes of all subcommittee meetings or tables of salaries can be an empty exercise. And who on earth is interested in minutes? A list of salaries in misleading unless it is taken in context. A good charity, one that is delivering excellent service or research but is straining at the edge of its resources, could easily be judged as a chaotic failure that needs intervention or closure. A mature medium-size charity that is ticking along and spending a sensible sum on a review of its board and paying for one-off strategy training for senior team to stay relevant and socially useful, could look wasteful, complacent, and self justifying.

The current craze for publicising salaries tells you little about how the charity is run. Frankly a charity with a CEO on near the average wage, say £30k, might get approving nods in the Daily Mail but could be useless at delivery to beneficiaries.

As the saying goes, a little knowledge is a dangerous thing. If charities are much more transparent, but the public and media don’t know what they’re looking for, the wrong organisations could be hounded and the wrong ones wreathed in laurels. To borrow a concept from the private sector (something charities are constantly encouraged to do) the crusade for greater transparency is an attempt to create a “market” with “perfect knowledge”. We all become cleaver-wielding butchers.

The logic above then assumes the public will have the perfect rationality to act appropriately. However, we know people  don’t act in a perfect rational manner, hence the whole field of behavioural economics. In any case, the would-be charity judges would not have perfect knowledge because they do not know what makes a good charity.

Indeed, most of us in the sector don’t claim to know exactly what makes a good charity. This is why we have the debate about how to quantify and compare impact.
There is excellent research and considerable resource funnelled towards answering this question. Until this has been broadly resolved, until our sector can present a more or less united front agreeing how our good can be measured, then the transparency crusade will be over-reaching.

Of course charities should not regress in their openness or attempts to explain themselves to the public: if any charity has an urge to cover something up, it probably should be revealed. Transparency lets us catch the outright frauds, incompetents and crooks – at least those unable to obscure their maleficence behind legal justification or accounting contortion.

Current norms should let the media do their job of highlighting the rot, but perhaps also invite them to attack the healthy. At the moment, overexposure and transparency for transparency’s sake, when there is no good benchmark for judgement, means the sector risks opening itself to critique from those who may have little idea about how a charity should be run. Indeed the nonsense on the salary front is revealed when you get members of the public saying they are surprised that charity CEOs are paid at all!

Analysis from the website Giving Evidence shows that there has been and continues to be a strong bias towards old established charities gathering more confidence and funds than newcomers, even though the last 20 years have shown an explosion in all forms of datasharing. Perhaps this means that the oldies are just the best, but I’d guess it implies the public just doesn’t scrutinise the information in the manner market theory suggests.

If we want the information revolution to really help sort the hog from the swine, our transparency efforts must be twinned with bold, clear public information on what to look for.

So perhaps the Charity Commission should address the need for better communication of the job of charities and the great work they do than their current guidance on charity salaries. Frankly we have seen a little too much of the finger wagging of the Commission and too little of the promotion of the great work we do. I get a little tired of the negative publicity that is often engendered by the Commission when we would all like them to understand you promote trust in charity not just by finger wagging but by solid hard work in promoting our worth to the media and general public. Let's have some transparency about just how many lives are saved by our work in the refugee camps or amongst the homeless and the destitute. A transparency agenda driven by the likes of the Daily Mail is not one to which I wish to subscribe.


Roy Norris said...

Another spot on analysis from Sir Stephen.

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