The Appeal of Transparency (Even About Failure!)
by Adam Huttler, Executive Director at Fractured Atlas
I spent the first half of this week at the Fortune Tech Conference. Usually when I go to events like this they’re totally arts-centric, so it was (mostly) refreshing to be surrounded by folks with a completely different perspective. (Note to Andrew Taylor: thanks to everyone’s obsession with VC-funding and industry gossip, this conference was optimized around informal networking. It’s not as hard as it sounds, and largely comes down to less programming in a smaller space.)
Yesterday morning I attended a breakfast session called “Is Philanthropy Dead?” The panelists were Charles Best of DonorsChoose.org, Premal Shah of Kiva.org, and Dan Shine of AMD’s 50x15 Initiative. Despite the deliberately provocative title, the session spent relatively little time bashing the traditional philanthropic model. Instead, most of the conversation focused on the issue of transparency in fundraising.
Best and Shah both credit the transparency of their processes as a primary factor behind their success. The most compelling story came from Best, whose organization gives individual donors the opportunity to fund classroom projects in public schools. DonorsChoose.org guarantees that donors will receive a packet of photographs and thank you letters from the grateful recipients (and facilitates that process behind the scenes).
Apparently this works as planned 98% of the time. In the other 2% of cases, however, the teacher reneges on his responsibility to coordinate the thank you packet. When this happens, DonorsChoose.org preemptively contacts the donor to inform her of the error and offers to “refund” the donation by crediting it towards another project. Well, it turns out that these “we screwed up” phone calls are the most effective fundraising appeals they ever make, with a large number of donors declining the refund and offering to fund another project. This experience is consistent with research into consumer behavior which suggests that the most loyal customers are those for whom something went wrong but the company quickly and effectively resolved the problem.
Unfortunately, most of us in the non-profit sector are terrified about admitting failure. It’s as if the fact that people give us money to carry out our work creates such a solemn responsibility that 100% success is the only option. This absurd mindset has several negative consequences. First, fear of failure makes us risk-averse to a sometimes crippling degree. Second, when failures occur despite our cautious hedging, we’re totally unwilling to speak candidly about the experience. This prevents us from learning from our peers and advancing understanding in the overall sector.
Transparency is about more than owning up to failures, of course. It means disclosing information about your organization’s processes, financial performance, and business model. And, of course, it also means sharing information about your successes in a way that lets donors feel like respected collaborators. This last category is where Kiva.org really excels. Kiva.org gives individuals the ability to provide 0% interest microfinance loans to small business entrepreneurs in the developing world. Lenders receive regular progress reports and — most of the time — get their money back upon the project’s completion. Shah described the effect of this transparency as being almost addictive. Many lenders check their loan portfolios daily, obsessively tracking the impact of their support. It seems to me that arts organizations are particularly lousy at these kinds of transparency. Part of it stems from a misguided desire to maintain the mystique of the creative process. For the most part, though, I suspect we just don’t give it any thought.
So here’s my challenge to the field: what would this kind of tranparency look like for an arts organization and how can we build it into our routine operations?
Adam Huttler is the Executive Director at Fractured Atlas, a nonprofit technology company that helps artists with the business aspects of their work. To learn more about Fractured Atlas, or to get involved, visit us here.
