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.

Guest blog: who studies charities seriously?

This blog was written by Harry Brooks, who was on work experience with us this week.

Research is one of the most important aspects of the third sector, often relegated behind more glamorous aspects like fundraising and big donations from philanthropists etc. I’ve spent the last week delving deeper into this key field, and what goes on outside of the UK.

My initial impression of the academic research scene was the difficulty in getting any information, truly like getting blood from a stone. The lack of a centralised list of institutes and centres presented the main challenge, especially when approaching non-English speaking universities.

There were however some very useful resources that provided a foot in the door. From there it became obvious that the Anglosphere is still the dominant research area, from the UK to the USA, and a reasonable number of contributions from both Canada and Australia. The general feel from this was that as countries with very close links to the UK their third sectors, and subsequently their research, is also similar in content and scope.

The USA deviates from this slightly as it has a less regulated sector, in terms of charity foundation and tax breaks. However their sheer number of institutes makes up for this. When compared to their Anglosphere counterparts, continental European higher education establishments with third sector research seem few and far between.

The main two institutes that I found in continental Europe were however, large, and in the case of the WU (Wirtschaftsuniversität Wien-Vienna University of Business and Economics) rather prestigious. Their research is quite wide in scope, from Czech NPOs (non profit Organisations) in Masaryk, and Austrian organisations at WU to general management to the accessibility of data about the third sector.

As we move further afield towards Asia, there is a clear absence of academic rather than corporate research centres. China seems to be trying to buck the trend by partnering with universities and established philanthropists like Bill Gates in order to try to achieve parity. I came across an institute based in Karachi however, with a feature that I found rarely in my search and prevented any further insight - limited access to research. For the Karachi institution there were no examples of papers that did not require a registered paid account, so I was forced to move on

Even amongst the corporate centres in Asia, the focus on philanthropy was clear and perhaps highlights the meteoric rise in numbers of high earners in this area, particularly China and India. However, as has been seen in recent disasters, this growth has somewhat applied to charity too, with more and more people able to see the positive effects it can have. Religion is also very closely linked with at least some charity in almost all places but China. Despite this China is not devoid entirely, instead mainly populated by foreign entities like UNICEF and the Rotary Club.

Beyond the three continents above there are a very limited number of research locations, especially in Africa, although this may be due to prioritising research in other subjects, seen as more traditional.

I think that while it always pays to be cautious, the concerns of many that charity research has reached somewhat critical levels are thankfully a bit pessimistic, and that across the Anglosphere, and to an extent the rest of Europe and China, the only way is up.

Harry Brooks

History of Charity lecture, New College, Oxford, 3 July 2017

My lecture is available to download here!

Politics and our Third Sector

I was delighted when I saw that Baroness Dianne Hayter had been elected as the Deputy Leader of the Labour Lords. Dianne, when she was Director of Alcohol Concern, was one of the founders of the Association of Chief Executives of Voluntary Organisations (Acevo), some 30 years ago. She has been a passionate advocate of our sector in the Lords since her 2010 elevation.

She joins Baroness Smith of Basildon, the Leader of Labour in the Lords. Angela was the Third Sector Minister in the Brown Government and she knows the importance and value of the sector in driving change. She and Dianne are powerful advocates for us.

But what of the Government benches?

It's interesting that two such prominent sector stalwarts are in such positions. It contrasts with the decline in interest in charities by recent governments. The position of Third Sector Minister, a post set up in the Cabinet Office by Tony Blair in 2006, at the heart of the executive, and given to then-rising star Ed Miliband, has been repeatedly downgraded. Angela and Ed were Minsters of State. Now we have an Under-Secretary in the Culture, Media & Sport Department, where the current post-holder is also responsible for sport, a busy and respectable portfolio in itself.

Charity is so far down the pecking order it hardly matters in Whitehall. And let's face it, you would be hard-pressed to find mentions of charity in recent party manifestos.

To be fair, this decline in interest is matched by the pusillanimous behaviour of many charities, which now appear to find it hard to say “BOO!” to a goose , let alone anyone in government. These days unless you flex a muscle you will be walked over. I may not like the DUP but they know what they want and bully their way to getting it.

This is degrading and stupid. What we have seen with the tragedy at Grenfell Tower is how impotent the state can be, but how powerful charities and civil society are.

Increasingly third sector work in social care, in hospitals, in disability roles, in rehabilitation and employment, and in education, charities and social enterprises play a major role. More than a third of all mental health services are provided by charity.

We know that public services are under strain. We know that state provision often neglects the consumer or beneficiary. We know that often the third sector has the answer to better and more cost effective service. Look at care for the elderly: a third of beds in hospital are occupied by the frail elderly.  Many of them could be better cared for at home or in community provision. That is cheaper and better.

I'm giving a lecture at New College, Oxford on Monday on the history of British charity. We have a proud and noble tradition. I will speak of our record in public service delivery, our campaigning and advocacy that have achieved so much social reform. Sadly it appears that for some this record is hardly worth a thought.

The government is wilfully neglecting the role charities can play. It's time the current administration woke up to the power and potential of our sector.

Sir Stephen Bubb

Tweaking Governance Incentives

Societies’ need for the work of charities is complex. It is affected by the social and political systems, the economy, population growth, government policy, private sector’s social responsibility, and climate & environment, to name a few. 

Charitable endeavour is likewise affected by need itself, as well as levels of donations, professionalism, governance, public opinion, government policy & relations, voluntarism, and philanthropy. 

There are lively debates in the third sector on fundraising practices, on the use of Randomised Control Trials, the best ways to demonstrate impact, and the nature and practice of individual altruism.  There has also been some focus on governance itself, as displayed in the House of Lords Select Committee on Charities’ recent report: Stronger Charities for a Stronger Society.

Rather than propose a big shock-and-awe intervention in governance, this blog is an attempt to think through the incentives and disincentives that affect those engaged in it. There is no silver bullet for fixing charity governance, no easy-to-follow formula. A board can have a diverse set of talented people who meet at appropriate intervals with adequate information – they can look  perfect on paper – and still fail the charity they are meant to steward. Likewise a board that by description sounds chaotic can, with devotion and passion, steer a charity to robust growth. As we know from experience, governance is both about good process and strong dynamics in the organisation. 

We know that weak governance can cause serious problems for charities, and that boards which just keep a charity ticking along, without effectively challenging and stimulating the executive team, fail in their duty to help their charge be the best it can be for beneficiaries. We also know that if the relationship between a Chair and a CEO is bad then this will affect delivery and effectiveness. 

One way to think about this is to go back to basics, at least so far as management studies and behavioural economics would say: what are the incentives and disincentives for people becoming trustees and doing their duty as well as possible? 

Once we’ve established those, we can look at suggesting tweaks to the system to minimise the deterrents and boost the encouraging factors.

The list below is far from exhaustive and we’d welcome more suggestions. The list does not assign weight to each factor, so more items in a column doesn’t mean we think that column is overall more compelling. The factors certainly don’t all apply to all boards equally, or at all.

Incentives

-         Belief in charity’s purpose, goals and work

-         Interpersonal reasons (favour for friend/family)

-         Warm glow/ advancement of spiritual enlightenment/ faith 

-         Enjoyment of the trustee role

-         Social status/acclaim

-         Social expectation (those of high standing; religious obligation)

-         Career advancement (looks good on CV; builds experience; contacts & prestige)

-         Good relationship between board and senior team

Disincentives

-         Time commitment (including holiday days taken up, evenings reading, fundraising events; opportunity cost over leisure or earning)

-         Weight of responsibility and tough board choices (even if you vote against)

-         Pecuniary liability if things go wrong

-         Legal and regulatory scrutiny (and related stress)

-         Risk of media and moral hazard, community distrust

-         Costs of travel, sundry expenses

-         Learning strain (trusteeship training or self-education) or feeling out of depth

-         Boredom/diverts from passion of frontline volunteering

-         Competition from other non executive posts that offer remuneration

This prompts a few simple ideas to minimise the latter column. They would not revolutionise charity governance by any stretch, but taken together, could increase diversity, attendance, enthusiasm and confidence.

A. Volunteer days in law

If the state made employers offer 3-4 days, or even half-days, as paid leave specifically for volunteering this would free up countless individuals who would like to join boards but cannot justify taking so much time off. The third sector often discusses the personal growth benefits to serving on a board – these could be useful to the trustee’s main employer too, so volunteer time should not be seen simply as holiday, but as a form of constructive training. 
The flip side would be: hold all board meetings outside work/study hours. This presents travel problems but is often the easiest solution…

B. Normalise travel costs being paid by the charity

The cost of travelling to and from board meetings is a barrier to entry for some potential trustees. Charities are already encouraged to expand their capacity for holding meetings using digital communications technology, but this too presents affordability challenges (laptop, microphone, broadband line). Charities that can should consider normalising the cost of travel (and other similar expenses) to and from board meetings – many already do.

C. Recruiting and paying trustees

As discussed by New Philanthropy Capital, it may be appropriate to consider paying trustees in more cases than we currently see. Recruitment should also be open (at least on the charity’s website and social media if not through an HR firm) to avoid any accusation of bubble-headedness or cronyism. Payment need not be shockingly high or comparable to a salary, but could compensate those who really can’t give up working time, however much they’d like.  This is often a constraint for having proper beneficiary/service user representation on a board and should be considered deeply as a matter of diversity – only with genuine diversity rather than tokenism can a board fulfil its proper function of testing and challenging the executive. Modest payment also allows a charity to demand adequate time from its board to take appropriate reading and training/development steps if available.

Some argue that this changes the dynamic of what volunteering is about, what board service means. Is this really a problem? Are we willing to accept less-than-optimal governance for the sake of a vague Victorian sense that voluntarism is inherently noble, to the detriment of those unable to work for free?

Of course there are myriad other suggestions that would affect governance, and hopefully have a knock-on effect in charities’ impact – reform and support for and from the Commission; a public better educated in the realities of fundraising and charity action; better training and resources for boards of all stripes – but these are fuzzy, indistinct. The improvements suggested above are simple, and B & C can be done by charities tomorrow, without any long legislative process. Idea A can be supported by individual employers tomorrow, again, if the private sector sees what it can do to help (and to promote its employees’ responsibility and skills). The ideas explored here could apply equally to social enterprise directors, small charity boards or global research foundations.

Sir Stephen Bubb

The fantasy of a well-supported charity: Spontaneous Combustion Support

Imagine a fictional charity, Spontaneous Combustion Support (SCS). This charity, as the name implies, provides advice, preventative care services, and post combustion family counselling, for sufferers of the grave affliction. The most visible work it does is sending volunteers and medical professionals to identify suspected sufferers displaying early symptoms (wisps of smoke escaping from the nostrils, high fever, insatiable desire for curry) and chill their cores, then monitor their ongoing progress.

SCS operates along typical charity lines. Its workforce and volunteer pool are highly motivated, well intentioned, and generally good at what they do. The charity is always struggling for funds and often has to dip into reserves to keep delivering its vital services. Its IT systems are nearly a decade old and often freeze, while the scanners that their volunteers used to identify especially hot individuals in public places tend to break down or identify those puffing tobacco.

The charity has a couple of good researchers but their efforts to develop better cures and diagnosis tools are limited by the need for them to also act as coordinators for SCS personnel on the ground. The company’s logistics a poor: emergency teams often scramble to rescue those who are either already piles of ash, or perfectly healthy but standing near radiators. Staff salaries are below those of the public sector and completely out of sight of comparable private sector positions.

The charity has no budget to train its senior leaders, to help its board bond and learn to support and challenge the executives appropriately, nor does it have nonrestricted money for raising funds. Its efforts to alert people to the dangers and early warning signs of spontaneous combustion are limited to free social media platforms and simple infographics on its website. In some areas the NHS welcomes its help, in others the reception is frosty.

In short it is a worthy charity providing an important service, surviving but not thriving.

One day tragedy strikes. The daughter of a prominent businessman taking a refreshing walk along the Thames is healthy one moment then seen with smoke billowing from her ears the next. When the affliction hits she is a mere 20 minutes from a trained SCS volunteer who could help. However, the public is not aware either of the disease or of the charity’s ability to cure it. She is first ignored, assumed to be a poor example of performance art, then finally an ambulance is called, but it takes her to a general hospital without dampening and chilling facilities. By the time a staff nurse alerts SCS, Alicia Postlethwaite is alight. A charity volunteer team exerts themselves to put out the blaze but is too late.

Alicia’s father, once recovered from his grief, decides to hold a fundraiser for SCS with the vow that nobody else should perish from such a preventable disease. Mr Postlethwaite consequently holds The Businesspeople’s Big Bucks for Back Office Bash, inviting all of his besuited friends for a glitzy four course meal and auction of pledges. His associates and colleagues are well aware of the importance of supply chain, upstream facilitation, quality logistics and coordination, and proactive governance. They see an opportunity not only to help SCS and make something good of Mr Postlethwaite’s grief, but to provide a new model for the charity sector. This fundraiser is unique: not a penny raised is ringfenced for the front line. The businesspeople compete in largesse to support all aspects of the SCS engine room.

The charity is turned around in a matter of months. It becomes the Google/Twitter/John Lewis of the charity world, with fantastic facilities, state of the art technology, trendsetting best practice project management. A chief executive is brought in from a FTSE 100 outsourcing conglomerate. SCS offers fun diversions for staff, great pay and CV potential, training and development budgets. The best of the best compete to work there - even if not all are strictly motivated by altruism or charitable feeling. Its comms are efficient, frontline staff are sent where they need to go when they need to be there, research is joined up and coordinates with other charities and the private sector & universities.

Writers from the FT and Economist run articles on SCS’ innovative restructuring. Management finds it can collaborate with local spontaneous combustion charities such as Cornwall Against Combustion and Burnley Burn-Not, combining its medical expertise with their greater knowledge and links with chronic sufferers. The public learn how to spot the first signs of the disease and know who to call. Soon spontaneous combustion is little more than a myth used to scare naughty children.

In summary, far more SC sufferers are treated and saved than would have been if Mr Postlethwaite had demanded that all the money he raised be spent on paramedics and body-fridges.

The question is: would this be bad? From the description above Spontaneous Combustion Support no longer sounds much like a charity – it sounds like a typical private sector company that happens to run on donations. 

Is that a problem? It is very much meeting its charitable purposes after all.

More to the point, why is the story above so unbelievable? Fictional disease aside, it does not seem unrealistic that those many in society who understand the importance of back-office and business process should be motivated to donate to charities in a sophisticated manner.

They should frankly be annoyed by calls for every penny to go on the front line, for overheads to be minimised, for accounting acrobatics or actual austerity to create misleading ratios between giving and direct charitable effect spending. It is understandable that many in the public view charities with suspicion, but given the sector’s progress in transparency and accounting openness, why is there no support among those whose own businesses are run with proper infrastructure, for the voluntary sector to have the same bedrock?

JL

Is there a science of charity, and would we want one?

A few months ago Joe Saxton, Driver of Ideas at nfpSynergy, wrote a thought-provoking blog challenging our sector’s enthusiasm for randomised control trials. Joe’s article and the debate started in the comments, were fascinating and deserve a read. But it prompted consideration of the question one step removed – before we look at charities borrowing science’s tools, is it appropriate to compare charitable and scientific worlds?

Randomised control trials are the current highest point of evidence collection in the scientific method, a method whose genesis is hundreds of years old and whose structure is supported by countless examples of error, trial, error, improvement. When scientists operate, their experiments rest not just on the shoulders of giants, but on the backs of a pyramid of giants, trolls, charlatans and visionaries. Science learns from itself, from its mistakes, around the globe and across the centuries.

The scientific method demands that results be replicable, and expects an important experiment will be run by entirely different people time and again. Science has operated for decades within the infrastructure of the academic world, with a host of peer review journals and challenging conventions, allowing distant practitioners to test the validity of claims and build on success. Rivals and successors pore over datasets, read failed experiments and negative results, perfect techniques. The world has far more STEM graduates than experts in charitable operation or social policy research. The sector’s main notable academic journal is that of the Wellcome Trust, Wellcome Open Research. It is excellent, and it is, of course, a science journal.

This is not the only difference. Science and technology are wedded more firmly to economic progress. 

Shareholders, government, hospital directors and the public take note of new drugs, stem cell breakthroughs, rumours of groundbreaking green energy generators. Charity practitioners have nowhere near this level of awareness – not because we are lazy or intellectually inferior, but because we have no such support structure or history of sharing. Too often in the charity sector, it is not just a case of one hand not knowing what the other hand is doing: it is two fingers on the same hand each reaching out to grasp the same object and still failing join up.

In the corporate world, certainly in the boardrooms of pharmaceutical and tech companies, directors are inquisitive and acquisitive. There are aware of all their competitors’ projects, what newcomers try, innovation springing up in far-flung corners, blossoming SMEs. They are not only concerned with keeping their own company afloat but with exploring expansion on the frontier. They have teams of researchers comparing clusters of studies and meta-analyses to scope opportunity. They are supported by both the academic literature and by business media – the Financial Times and rolling TV news. Likewise they have a worldwide network of business schools, economics departments, management courses, decades of theories on effective leadership and proactive governance.

There are of course a great number of collaboration efforts in the charity sector, from the Good Exchange to the concept of “generous leadership”, from joint initiatives between funder organisations and umbrella bodies to local projects in the same town or village. One of Charity Futures’ ambitions is to compile a directory of these, listing free and paid resources on charity academia, leadership and governance training, and emergency support. Hopefully by signposting both collaborations and smaller ventures, even more efficient partnerships can be forged. This could grow in utility by adding neutral reviews and learning aids, so a bewildered new board member could easily find out the different tools available to help her.

The other difference between science and voluntary worlds is simply that a lot of charities do not operate in a manner with quantifiable results. The goal of some is to enable a sport to be played, or to make a group’s life more tolerable, hopefully enjoyable. There are sector activities which suit social science measurements, like helping ex-prisoners reintegrate or educating children, but a host of important charitable activities are little to do with numbers. Has enough thought been devoted to testing an ethical component, are quality-adjusted life years enough?

Trying to get a picture of impact by asking beneficiaries to rate their experiences feels like missing the point, even if methodologies were sound enough that they could be compared across location and type – which they aren’t. Some of the largest management consultancies have been trying for years to set out a standardised system to rate charity effectiveness and each model sinks on its flaws. What the voluntary sector does brilliantly is use hard science evidence in campaigning – against smoking near children for example – and funds investigation of this type. But that does not contribute to a central corpus on how charities themselves campaign.

The question of randomised control trials speaks to the charity bubble’s current focus on, possibly even obsession with, transparency and impact. You get the sense that many charity leaders believe that if we could only display our accounts and give hard numbers on how many people we’re helping, then the public and press would return to treating all charities as angelic.

This is a limp hope. Few people have the time or inclination to check the accounts and annual statements that charities painstakingly polished, even fewer compare different possible donations in such detail. Even if they do, they may not have the statistical grounding to make informed decisions, or may leave with the wrong message, that all the charities they compared spend too much on staffing, premises, IT and training. Certainly the sector should not retreat on transparency, but nor should it slog on under the delusion that once we reach a certain crystal-clear level, the public will fall in love.

Another difference charities may be more happy about. The sector is far less regulated, and while the Charity Commission comes down hard on some charities and may be seen as too bureaucratic, it pales in comparison to pharmaceutical watchdogs. We have nothing that functions like the FDA/MHRA testing and delaying new drugs for years. The Charity Commission does not review every new project, grant or intervention that a charity plans, not even very large experiments. Likewise most donors or funders would not be able to block a charity functioning.

Try as we might we cannot create a ready-made academic milieu for the voluntary sector, with the centuries of history, the international network of journals, the expectation of challenge, refinement and peer review. Multi-institutional multi-national collaborations do not spring up overnight, but after years of relationship building, sharing techniques and ethics, agreeing shared goals. But this is certainly a goal to have in mind: through thought leadership, debate, seminars and working with the university sector across disciplines, we must strive to introduce higher standards of intellectual rigour and collective progress.

This article first appeared in Third Sector magazine, here. 

Sir Stephen Bubb is Director of Charity Futures. Jonathan Lindsell is the Research & Programme Manager of Charity Futures.