FORGE & transparency: How radical do we want to be?
Posted on 25 November 2008
Philanthropic bloggers have been abuzz with Kjerstin Erickson’s decision to post the details a few weeks back about a funding crisis that could put her NGO, FORGE, out of business. After Sean Stannard-Stockton described this as an experiment in “radical transparency” on his Tactical Philanthropy blog, many folks have jumped to Kjerstin’s aid, with the agreement that all involved post their perspectives as FORGE, well, forges ahead.
This is a case study unfolding in real time. While Kjerstin’s move provides an unusual learning opportunity for those interested in nonprofit effectiveness and sustainability, it also offers a chance to reflect on the many “facets” of nonprofit transparency.
(1) During my time as funder, several organizations came to us in crisis, laid open their books and spoke plainly about the decisions and mistakes that got them there. In this respect, I don’t find the honesty with which Kjerstin is presenting her dilemma all that unusual.
Crisis can inspire transparency. It’s hard to get the injection of cash or technical assistance you need by trying to mask the fact that you need it.
Most of these organizations already had a relationship with us, and trusted us enough to discuss their problems openly. They were not going to tell just anybody about their state of affairs.
What is unusual is that FORGE is fairly well-established, yet Kjerstin is using online social networking tools to let everybody know about her plight. She has attracted great resources, partly due to the “buzz” created by her initial posts and her courageousness in being so open. But I suspect if it became standard practice for nonprofit leaders to post honest and detailed information about looming financial crises, the novelty would wear off – and subsequent leaders would have a hard time getting the same sort of attention. Which brings up the question – what kind of transparency are we after?
(2) The discussion in the blogosphere centers on the benefits of transparency for donors and, as a learning opportunity, other nonprofit leaders and allies. But nonprofits derive their legitimacy from the constituents and the communities they serve. Shouldn’t transparency also serve them? To what level?
And it’s a two-way street – if I were a prospective donor, I’m interested in what the refugees served by FORGE think (if they know the program is in jeopardy of closing and have some understanding of the decisions that led there yet still choose to participate in the program, that’s important to me). Caveat: I discount the information somewhat if FORGE is the source of the refugees’ voices, since those voices are being filtered through an interested party.
(3) Filters can degrade transparency. We’ve heard about FORGE’s history and decisions almost exclusively from Kjerstin, so we’re getting mainly one perspective (not sure that meets the definition of “radical transparency“). Does better transparency include accessibility to, and information directly from, all parts of the organization?
During my time in NC, the Golden LEAF foundation, funded from the proceeds of the tobacco settlement, held their grantmaking meetings in public (they may still). As a prospective grantee, you could attend and watch as your proposal was discussed and decided.
This example highlights different levels of transparency regarding board decisions: we can get a summary from the chief executive; have access to a copy of the minutes; or be able to listen to the board meeting itself. I probably learn the most if I listen, but can I really do this for each organization that interests me?
Filters might degrade transparency, but they can also make information useful.
(4) Do we want different levels of transparency for different phases of an organization’s evolution? A venture capitalist investing in an early-stage company, for example, may expect a seat on the board – not only for control, but to have the fullest possible information about internal operations. After the company goes public, however, the standards of transparency for new outside investors don’t presume such access.
This also brings up the question of size, both of potential investment and the organization itself. Are large-scale investors entitled to more information than small donors (they might reasonably expect a more direct relationship, but are they entitled to a different level of information?)?
How should our standards serve both the International Rescue Committee, which in 2006 served 15 million refugees in 25 countries with a budget close to $250 million, and FORGE, which serves refugees with a budget approaching $400,000 – and is there a way to design those standards so that the refugee programs for the two can easily be compared? I’d love to see an organizational prospectus that meets the informational needs of all interested parties: the government/IRS, institutional investors (i.e., foundations and high-wealth donors), everyday contributors, and constituents.
(5) I think it’s important to recognize that FORGE is practicing transparency from a relatively privileged position. As Kretzmann and McKnight – who pioneered the asset-based approach to community building – would point out, Kjerstin has a strong base of intellectual and social capital and access to a range of additional resources (evidenced by the amount of support she’s already attracted).
As an organization accrues an increasing amount of “assets” – not just financial, but intellectual, social, and reputational – the instinct is to become increasingly guarded, since more seems at risk. The counter-intuitive nature of Kjerstin’s move is one reason why it has elicited so much attention. I have experienced nonprofit leaders in marginalized communities, for example, who are brutally honest and open about most details of their organizations (mistakes included), but their transparency doesn’t get them much. Often such “assets” are used by those with potentially helpful resources as a proxy for effectiveness (or at least potential effectiveness), and those that seem lacking are too easily dismissed.
If funders are honest, we’ll admit that getting too full a story is sometimes a turn-off; we think it shows poor lack of judgment. Presentation is still important, even when being open.
(6) It’s easy to be glib about “weeding out” the sector, to say that some nonprofits need to close. FORGE’s dilemma demonstrates that the reality is complicated. Refugees would go unserved. (When I hear conference presenters say donors should throw their support behind a well-run homeless shelter that serves 20 people (and has no aspirations to serve more), and stay away from another that serves 200 but where the management is more suspect – that it should be allowed to fail – I always wonder what the 200 people suddenly out on the street would say.) This would occur due to what appears to be a well-intended error in judgment vs. a pattern of bad management.
Yes, some nonprofits should cease to exist, but I don’t trust that at this point, through whatever weeding out processes are occurring – given the fragmented and imperfect nature of the nonprofit capital market, the difficulty of assessing and articulating impact, and our personal biases and predilections – we’ll end up with the organizations providing the most effective services, or that those who might benefit most would get served. We ought to be careful what we wish for – and wish FORGE well.
7 responses to FORGE & transparency: How radical do we want to be?
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Excellent post! I agree with most all of this. I think that it is important to note that FORGE is practicing “radical” transparency and most nonprofits don’t need to go to the level they are. But extreme forms of anything tend to be good case studies.
A couple points I’d like to make:
1) FORGE is doing this in public, not just in a boardroom with big funders. So I don’t think you can compare it to the times you saw a nonprofit share their issues with a funder.
2) Will the “novelty” wear off? The financial markets, public companies have MUCH higher levels of transparency requirements. It is not always a competitive advantage to be transparent, but smart investors will refuse to provide capital to public companies that are insufficiently transparent. I think nonprofits as a group should be more transparent because it is the right thing to do and because I believe they would attract more aggregate donor capital.
Thanks Tony. I thought this was one of the best critiques of the FORGE story I’ve seen.
[...] Humanitarian and International Development NGOs » FORGE & transparency: How radical do we want … Tony Pipa writes an excellent post on the pros and cons of transparency. I agree with most of what he says, which might surprise readers because Tony outlines some of the negatives issues with too much transparency. Remember, FORGE is an example of "radical" transparency. Most nonprofits do not need to embrace the level of disclosure that FORGE has. (tags: philanthropy) [...]
Thanks, Sean. To your first point, I’ve also experienced organizations willing to share their warts in public – we used to hold information sessions attended by 40-50 people, and some leaders were willing to say a great deal in those forums. The paradox is that those willing to do it weren’t that far along or had access to very few resources (they might have been located in NE NC, for example, which has some of the poorest counties in the U.S.). It’s as if these organizations hadn’t yet learned “the funding game” or didn’t see much usefulness in spinning their story. One of my points is that the instinct to be transparent in this way decreases as the organization becomes successful in attracting funds.
The unusual thing about FORGE is that their proclamations in public are truly public – anyone with an internet connection is theoretically able to follow their plight. I agree that blows anything away that I’ve experienced previously.
But let’s not let the finer points downplay how intimidating it can be to spill all to an institutional funder, especially if a great deal is riding on it for your particular organization. My major point is that I’ve seen crisis inspire a level of transparency that’s beyond the day-to-day norm; Kjerstin’s taken this to another level.
On #2, I agree almost completely with all your points, except that I think “buzz” has played an important part in attracting the resources (including yourself) rallying around Kjerstin. That “buzz” would be much harder to create if her level of transparency became the norm. So while it’s important to push for greater and greater transparency, we shouldn’t assume that it will have the same effect for subsequent organizations as it’s having for FORGE.
Hi Tony,
Thanks for this great critique. I think you are very accurate in your point that the response to FORGE’s transparency does not mean that any nonprofit can go out, be transparent, and expect to have services thrown at them. Like we’ve all said, it’s not a magic bullet. That’s not to say, however, that transparency isn’t a helpful value for nonprofits to adopt.
Since you started this general inquiry on the subject of transparency, I thought I’d add in a few of the thoughts that have coalesced for me on this subject, many of which you’ve touched on:
1) Transparency only works if it’s authentic, and is only authentic if it’s complete. You can’t just ‘choose’ transparency as a response strategy to a certain situation – people will see right through that. You need to maintain a track record of openness & honesty for your message to resonate with people. I don’t believe that you can just turn to it in a crisis to help you get out of a situation, as trust is ultimately at the root of transparency and people won’t trust a strategy. FORGE has had people ask us just that – “Are you just talking about it for the sake of attention? That’s not transparency.” In order to be able to respond to that legitimate fear, it’s really important that we are able to show the ways in which transparency is not a strategy but rather a value throughout our organization and its history. We may not have had a crisis like this before, but we’ve always been straightforward about where we were at.
2) Transparency will not solve whatever crisis or problem you get yourself into – but it can help. While I agree with your point that a lot of the attention that FORGE is getting is related to the novelty of coming out publicly, I also know that a lot of it is simply related to people finding out about our situation and wanting to help out. The benefit of transparency is that people find out what you need and can ask themselves if there is anything they can do to help. If you aren’t upfront about your shortcomings and problems, people will assume that you’ve got it all under control. If transparency became the norm, a transparent approach may not get the same kind of transparency-focused press that FORGE has recently received, but it will likely get people to step forward and help out or advise that they wouldn’t have otherwise.
3) Transparency comes with scrutiny, and I believe that more scrutiny can only be a good thing for the nonprofit sector. When you tell the world you aren’t perfect, you are naturally going to open yourself up to all sorts of questions, critiques, and feedback. In order to do this, you really have to be confident that you’ve at least been responsible in the decisions that you’ve made and can adequately explain them to your constituency. In the same way that you take more care to work on an assignment that’s going to be graded than one that’s not, the increased scrutiny that comes with transparency creates a higher expectation and incentive for performance in the nonprofit sphere. If transparency became the norm, I believe that nonprofits would feel more compelled and incentivized to ensure that all of their proverbial ducks are in a row, and that they can justify all of their actions and expenses along a clear metric of change. Not everyone will agree with every step they take, but a mutual respect and understanding can be built and a meaningful dialogue can be opened. Isn’t this a huge step in the right direction?
4) Transparency can lead to efficiency gains. Think about all of the individual donors and grant-makers with whom every organization has to go through basically the same vetting process. If that information were all made public, and if donors could find the answers they were looking for without you needing to take up the nonprofit’s time, I believe that nonprofits could save a lot of money and energy. Most of the questions we’ve received since starting this process are questions that we’ve not only answered for ourselves internally, but have answered to various funders and interested parties in the past (over and over and over again). Imagine if most of the basic dirty work was publically available, and funders only need to come to you with the specific questions and follow-ups? I believe that could lead to large fundraising efficiency gains.
5) Transparency does not mean being willing to be open about problems – it means being willing to be open about anything. If you are to take “transparency” to mean “a willingness to show your warts” you are going to end up with an audience that thinks that you are a pretty ugly duckling. You will soon become the boy (girl?) who cried wolf. To me, transparency means “a willingness to show who you are, warts and all”, which is very different. Nonprofits wouldn’t be doing what they do if they didn’t have a lot of very positive things to communicate, and it’s critical to paint a holistic picture.
6) Having the resources for a pulpit are important, but getting people to listen depends in large part on what is at stake. I think your point #5 about FORGE being in a privileged position from which we can practice transparency is an important one – without a blog on the Social Edge, for example, we wouldn’t have the forum to speak to people. And without building up a track record, we wouldn’t have a blog on the Social Edge or, probably, the response of so many experts. A lot of organizations don’t have this pulpit, just like FORGE didn’t in its early years. BUT – if we had spent time focusing in the early years on how little money we had, it would just be another story of the difficulty of starting a nonprofit. People might be interested in a voyeuristic way, but I don’t think they would have responded to the level they have at this stage of our evolution. A major part of why I think that people have responded to this story is that it’s a true crisis where there is a lot to lose, not just the typical financial difficulties. For people to really pay attention, I believe, there has to be something at stake. As I mentioned above, if in the early years of FORGE we spent all our time talking about how hard it was to find money and complained about sleeping on couches, I don’t think it would have resonated because there wasn’t much at stake while we were building the organization. By focusing on the difficult aspects, we would have been making the story about us when the story we needed to tell was about the refugees (everyone knows that fundraising is hard). But now that we are facing a true crisis in which there is clearly a lot to lose for the people we serve, people will pay attention because it’s not about the organization but rather the cause. So what I’m saying is that yes, having the resources to get your voice heard matter, but so do the stakes. And they often go hand-in-hand.
7) I totally agree with your point that transparency is needed from the constituents themselves! Any organization worth their salt should *want* their constituents to have an open an honest forum to voice their thoughts about working with the organization, and the more unfiltered that is the better and the more trustworthy. I think that a platform like this could do wonders for the nonprofit world. It is relatively feasible when it comes to national organizations working with populations that can at the very least get to internet at the public library. But how does an organization like FORGE that works with populations that have often never touched a computer, have no access to electricity or phone networks, do this properly? I wish I had the answer.
Thanks again for your conversation on this.
- Kjerstin Erickson
http://www.FORGEnow.org
Kjerstin,
I really appreciate your reflections and reactions to my comments. Very helpful to learn directly from your experience as this has unfolded.
I really like your points about authenticity and scrutiny – your statement “trust is ultimately at the root of transparency” succinctly captures a sentiment that colors my comments but that I didn’t explicitly articulate. I couldn’t agree more. Still, how to turn an organizational value of transparency into a practical reality can be a balancing act.
Your point in #4 gets right to the heart of what I was suggesting regarding the design of a nonprofit organizational prospectus, not unlike a corporate prospectus that any potential investor in a for-profit company receives. One report that sufficiently covers all the “basic dirty work.” Obviously the 990 or nonprofit annual reports aren’t meeting these needs.
Regarding your points in #6, I think it’s more complicated than that. What’s at stake is a part of what gets people to listen, but many nonprofits facing crises could place a similar reasonable claim. People react for many reasons; some may resonate with your personal history (see a bit of themselves in you) or the organization’s history, some may perceive a great deal of latent potential, given FORGE’s growth to now and/or your own education and skills; culture may even play a part. The entire narrative is important, and there’s a sort of alchemy that extends beyond just “what’s at stake;” it’s a dynamic between audience and narrator that I can sense but find hard to explain.
Thanks again, Kjerstin.
Tony
Tony, I would just add that I think the value for the early adopters in transparency is the “buzz”. But the much more important longer term value to the field is that if transparency is broadly adopted, I think trust in nonprofits will go up and more funds will flow into the sector.
Transparency is an interesting subject in the NGO sector. The donors we are talking to, often philanthropic donors, but also “professional” donors like governments, are very interested in more transparency. This is one of the main things that attracts them to our work. In fact I see a big demand for increased and “automatic” transparency in the future.
At the same time NGOs are afraid of it. They are afraid that it will expose projects that go wrong, that people who see the result will not understand the process, and therefor react badly to bad news. They understand that they can counteract that with more explanations, better information about how they do their work. But this is a lot of work and one thing I always come away with from NGOs in this space is that they are mostly overworked. So they are afraid of transparency, as if it is done without “full transparency” which requires more work, then they think it can backfire. The threat of a single bad headline in a tabloid “newspaper” can make anyone hesitate.
I don’t think that transparency is something that can be implemented just by saying that you are now going to be transparent. You have to take it step by step and figure out how to do it well. We have just started working with transparent reporting for small water and sanitation project and we are trying to balance the need for reporting with the problem of to cumbersome reporting, which is often mistaken for transparency. One of the key things which we think is important is that transparency is implemented systematically and automatically part of the process, which is something we are attempting to achieve.
I hope all works out for FORGE.