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December 11, 2009

Today, in my final post, I want to offer specific suggestions for Intrepid Philanthropists who want to maximize the upsides of transparency.
I want to start about by acknowledging—transparently—that my preaching below is ahead of my practice. These suggestions represent an amalgam of what I’ve observed from some of the country’s most forward-thinking grantmakers. No one grantmaker that we’re aware of does all of these things.

  1. Share policies that help others understand your approach to grantmaking and investments. As many people will remember, in early 2007 the Los Angeles Times published a series of hard-hitting articles that accused the Gates Foundation of hypocrisy for investing in companies whose activities in developing countries undermined the foundation’s global health and development goals. The foundation spent months on the defensive—taking fire not just from the media but also from gadflies in the charitable sector. Moral of the story: Be forthright about sharing policies that others will question, and take the time to explain the rationale behind these policies well before the klieg lights are shining in your face.
  2. Share your goals and strategies. If you want other public and private funders to join you in addressing a major goal, you need to be transparent about the goal itself and how you’re trying to address it. As super-smart consultant Lucy Bernholz noted, the Lumina Foundation was remarkably open about the strategic planning process behind its goal of increasing the proportion of Americans with high-quality post-secondary degrees by 60 percent by 2025. The Center for Effective Philanthropy has concluded that clear communication of a foundation’s strategies is rare—despite the fact that it is one of the three most important drivers of quality relationships between funders and grantees.
  3. Share your results—good and bad. If you want others to join your efforts, then show them where you drilled holes and found water—and, just as important, where you came up dry. We at VPP have worked hard to do this, as CEO Carol Thompson Cole wrote about in a recent columnThe Edna McConnell Clark Foundation has justifiably earned a great reputation for transparency on performance—both the performance of grantees as well as its own performance. This is one important reason it has been successful in attracting co-investors. Another great example comes from Sean Stannard-Stockton and his blog Tactical Philanthropy, which I read regularly. Sean reported on how Kjerstin Erickson’s remarkably honest blogging about her mistakes as a young Bay Area social entrepreneur resulted in an outpouring of financial and strategic support. (One point of caution is essential: be extremely careful in how you discuss “bad results” to avoid inadvertent harm by placing blame on others.)
  4. Support efforts to create common methods for reporting results. Unquestionably, there is great value in individual foundations’ reporting more openly on their results. There is far greater value when multiple funders plowing similar fields report results using the same basic metrics, enabling meaningful comparisons across hundreds or thousands of grantees. Acumen Fund, working with Google engineers and a host of other partners, has invested more than four years and $1M in developing PULSE, a system for comparing the performance of its investment partners. As FSG Social Impact Advisors reported in its excellent report on shared measurement systems, “A key factor driving Acumen’s effort to build the PULSE system was its belief that the lack of comparative performance data available in the social sector limited its effectiveness and potential for growth.”
  5. Use transparency to tap the wisdom of crowds. This is the ultimate example of using transparency to play offense rather than defense. When the Packard Foundation was considering an initiative to stem nitrogen pollution, it created a wiki to seek innovative solutions from researchers around the world. The Packard Foundation and many others have also tapped the wisdom of their existing grantees, using the Center for Effective Philanthropy’s Grantee Perception Reports. The GPR has sparked improvements in foundations’ operating procedures by allowing foundation leaders to see their grantees’ anonymous (and therefore pretty honest) perceptions of their practices and impact—and to benchmark these results against other, similar foundations. And thanks to the Center for Effective Philanthropy, Keystone Accountability, and others, foundations are getting smarter about tapping the wisdom of those they hope will be the ultimate beneficiaries of their work.
  6. Be transparent with applicants you choose not to fund. This is a hard one, because it can be unpleasant, time consuming, and delicate. But it can be enormously beneficial to applicants to explain openly why they didn’t merit funding. This is as true in grantmaking as it is venture capital funding. I have had the good fortune of working with several venture capital and private equity firms that have been deliberate about explaining to aspirants why they were not selected for funding. The results are not always well received initially. But when the VC shares the results with respect and candor, executives generally come around to understand and value the VC’s point of view.

Transparency is not a fad of the moment; it is a fact of life. This genie is not going back into the bottle—and that, on balance, is a good thing for our society. Applied constructively, greater transparency means more-accountable public, private, and nonprofit leaders and institutions. It means citizens achieve greater power to make informed decisions. It means increased pressure for better, more-sustainable products, services, and social impact. It means smarter allocation of precious financial resources.
The new transparency is a huge challenge for all of us. But the sooner we acknowledge its inevitability and importance, the better we’ll be able to harness this new force for our own good.
Monday’s post: The Inevitability of Transparency.
Tuesday’s post: The Transparency Revolution.
Wednesday’s post: The Dark Side of the Sun.
Thursday’s post: Transparency for Offense, Not Defense.

Mario Morino