Transparency Talk

Gorillas in the Midst: Foundation Accountability in a Networked Age

(Jacob Harold is philanthropy program officer at the William and Flora Hewlett Foundation. This post appears courtesy of Alliance magazine.)

Gorillas – whether or not of the 800-pound variety – are powerful creatures. The presence of a gorilla on the cover of the [September 2011] issue of Alliance was a winking reference to the sheer size of the Bill and Melinda Gates Foundation. Indeed, foundations have a bit in common with gorillas: powerful, independent and rather unaccountable.

Just as a zoo designer must balance safety and freedom when creating a gorilla exhibit, so must society balance accountability and freedom when considering the role of foundations. The flexibility of the foundation structure offers space for the creativity, risk tolerance and long-term time horizons necessary to tackle society's toughest challenges. But foundations' lack of direct accountability – whether to voters, investors or customers – brings with it moral and strategic challenges that have often been discussed in these pages and in many a conference hall.

As fiscal crises cause governments to pull back funding to services and research, the demands on foundations are likely to increase. While the Gates Foundation's size presents unique challenges and opportunities, it is just one of tens of thousands of foundations – including about a hundred with more than a billion dollars in assets. As a class of organizations with masses of free capital in constrained times, foundations are certain to find themselves under the sceptical gaze of the media, policymakers, academics and the general public.

A shifting accountability context

Indeed, all organizations face a shifting accountability context. Businesses regularly encounter new expectations from consumers and investors about the social and environmental consequences of their operations. Government agencies face evolving demands for openness, citizen voice, and evidence of results. Non-profits are constantly asked for greater detail on programmes, financials and operations.

Technology has supercharged the voice of the many – enabling new forms of communication and collaborative action. The Arab Spring and Occupy Wall Street are not mere Twitter revolutions, but the fluent use of social media from Tahrir Square to Zuccotti Park more than hints at new possibilities in collective action.

Both the sources and targets of accountability are multiplying. There are simply a lot of institutions now: the US alone has 30 million businesses, 1.2 million non-profits and 80,000 government agencies. Such scale changes strategy: more actors means more variables; more variables means more factors to consider; more factors means less certainty.

Add in the upheavals brought by globalization, terrorism, demographic shifts and climate change and we must ask if the top-down regulatory structures that defined governance in the 20th century will prove sufficient. Centralized government action is surely as important as ever; regulation is here to stay. No organization should use this flux as an excuse to abdicate its fundamental responsibilities. But these changes have resulted in great confusion. How should organizations respond? How do we integrate formal, top-down regulation with distributed, bottom-up accountability?

Luckily our governance mechanisms are catching up with our changing world. We are still early in this transition, but I argue there are four behaviours that are proving necessary for any business, government agency or non-profit to maintain a social licence in this dynamic environment. Together, these behaviours form what University of California political scientist Lee Drutman and I have called the 'new governance bargain'. By fulfilling their part in this new, implicit arrangement, organizations can retain permission from society to operate without excessive regulatory constraints. What is more, these behaviours can fuel increased effectiveness by enabling organizations to learn better, react faster, and better understand their context. Each of the four behaviours is directly applicable to the unique context of foundations.

Transparency

The first behaviour is transparency. By sharing basic information with stakeholders, organizations can avoid accusations of opacity, head off false rumours, and prevent the suddenness of a Wikileaks-style exposure. More positively, transparency allows stakeholders to feel included in an organization's work, enables benchmarking, and supports collaboration and learning. For foundations, the practices outlined in the Foundation Center's Glasspockets.org site offer a start towards systematic transparency. Tools like Creative Commons licensing and standardized metadata promise new forms of open productivity. At times, of course, foundations must exercise discretion – especially if transparency compromises a strategy, as can be the case when your grantees face an active opponent. But in general foundations can and should move from a stance of opting into transparency when convenient towards a stance of opting out when necessary.

Measurement of multiple bottom lines

The next behaviour is the measurement of multiple bottom lines. We see the emergence of non-financial measures across society: corporations sharing carbon emissions data, countries dropping GDP in favour of 'Gross National Happiness', and non-profits proclaiming that the administrative cost ratio tells nothing of their impact. Foundations with rigorous strategies and evaluation systems can easily do the same. Their measurement systems can and should go beyond endowment size and payout ratio to systematic tracking of the quantity and nature of the work done by foundations and their grantees. As the work of the Robert Wood Johnson Foundation and the Edna McConnell Clark Foundation has shown, a good measurement system can help offer both grantmakers and grantees clarity, insight, and – ultimately – greater effectiveness.

Proactive engagement with stakeholders

The third behaviour is proactive engagement with stakeholders. Decisions made without reference to stakeholders often elicit fury– and, if one isn't careful, a boycott, recall election, protest or lawsuit. But stakeholder engagement offers far more than a mechanism for avoiding angry response. Consider the extensive use of focus groups in consumer product development, the role of polling in politics, or the ways that non-profits use social media to engage their communities. Foundations can and must engage with their stakeholders; as the title of a recent Grantmakers for Effective Organizations report put it, 'Do Nothing About Me Without Me'.

Given foundations' independent structures, such constituent engagement requires proactive efforts. The Center for Effective Philanthropy's Grantee Perception Report offers a simple, powerful tool to elicit stakeholder feedback. Innovations like the Peery Foundation's live Twitter broadcast of a board meeting or the Packard Foundation's use of a public wiki for strategy development around agricultural pollution promise new ways to learn from our communities.

Collaboration

The final behaviour is collaboration. In a complex, interconnected world, it is a rare organization that can hope to solve a problem in isolation. Complex problems often require the specialization made possible by division of labour and the reach made possible by cross-organizational economies of scale. Collaboratives like the Climate Works Foundation, STRIVE and the True North Fund offer new models of aligned strategy powered by common goals, pooled capital and shared measurement systems. Foundations' unique perspective on a field and ability to convene key players enable them not just to participate in collaborations but to catalyse them. And their privileged position is much more likely to yield results if grantmakers apply it humbly, fully aware of the power dynamics inherent in any funding relationship.

Together, these four behaviours offer a framework for foundations to be more effective while avoiding unproductive government intervention. They are not simple boxes to be checked: each is an attitude that must be embedded across foundation activities and constantly refreshed. You cannot dial in to a new social contract.

Over the next few years, we will start to learn whether these behaviours are enough. We may well discover they are not and we will have to reconsider the top-down regulation of foundations. But for now, instead of caging our gorillas, let's set them free – under the watchful eye of us all.

-- Jacob Harold

No pain, no gain.

(Larry McGill is vice president for research at the the Foundation Center.)

Transparency can be painful. Trust us, we know.

The Foundation Center is the primary data collection, analysis and reporting agency for the field of U.S. institutional philanthropy. Each year we analyze more than 150,000 grants awarded by about 1,500 of the country's largest and most influential foundations, and load them into our master database that now comprises more than 3 million grants awarded over the past 20 years.

Every year, our database is accessed by thousands of grant seekers, looking for funding to do their work. It also underlies all of the research reports written by the Foundation Center, tracking trends in the field over time.

But here's the thing - our data aren't perfect. And we want you to know that.

Moreover, despite the limitations of our data, we fully intend to keep publishing reports documenting and explaining the work of U.S. foundations. Even if what we produce sometimes comes back to bite us.

Case in point - we have published a number of reports in recent years on issues related to diversity in philanthropy. Not everyone is satisfied with the findings we report, regardless of the caveats we issue about the limitations of available information on the populations that benefit from grantmaking. But we issue the reports anyway, because there is burgeoning demand for this type of information.

Why would we issue reports based on imperfect data? Because it is the only way the data will get better.

To build our grants database, we have relied for most of our 55-year existence on publicly-filed IRS Forms 990 and 990-PF filed by foundations. We transcribe verbatim the information provided by foundations on these forms that describes the purpose of each grant awarded during a given year. Sometimes this information is richly descriptive, sometimes it's sketchy, often it's nonexistent.

In recent years, we have developed a platform that allows foundations to send their grants information directly to the Center through an electronic reporting system. With more than 700 foundations participating, this has significantly improved both the range and depth of information available for analysis. But the quality of information we receive still varies a great deal from foundation to foundation.

As we confront the limitations of the information available to us, we have to make a choice about how best to spend our resources to build a database that describes the work of U.S. foundations. We can accept the limitations of the existing information and try to collect data on the work of as many foundations as possible each year.  Or we could drastically limit the total number of foundations and grants we analyze and focus instead on trying to obtain as much additional information as we can about each grant awarded by those foundations (e.g., about beneficiary populations, geographic area served, etc.). The former strategy, the one we've chosen, allows us to add more than 150,000 grants to our database each year. The latter would allow us to add only about one-tenth of that amount. We believe we owe it to the hundreds of thousands of individuals who use our grants database to make it as comprehensive as possible, so they can maximize their ability to find support for their good work.

Adopting that strategy means we have to live with some data limitations when doing research based on the information we have. But what is not generally understood or appreciated is that this is simply a fact of life regarding all research, at all times and in all places. Any research study that does not come with caveats, or explicitly stated limitations, is not an honest piece of research.

In our reports, we use colors, italics, boldface letters, boxes, sidebars, methodology sections, and other strategies to make people aware of both the findings and the limitations of our research. Of course, it's never enough. Findings still have a way of disconnecting themselves from the methodologies used to generate them.

But that's fine - as long as it leads to good faith conversations about what we think we know, what we don't know, and what we need to know. As the primary data collection agency for the field, the Foundation Center is committed to doing the best it can to answer the questions that people are asking about institutional philanthropy. The need to know will not go away, and we - all of us who care about philanthropy - must do whatever we can to ensure that we have the kinds of data that will allow us to meet this need.

Do you have thoughts about how we can collectively improve the quality of data available to the field? Let us know. Like all fields of endeavor in the 21st century, to be effective, philanthropy must operate from a solid base of knowledge that can only be built from reliable data on the issues it is addressing and the approaches it is taking to make a difference.

-- Larry McGill

Glasspockets Find: HIP’s New Infographic Highlights 2011 Impact

With a moniker like HIP, there's a certain predisposed obligation to produce snazzy, eye-catching web content.  And that's just what Hispanics in Philanthropy (HIP) has done with its new Building Capital for Latino Communities information graphic (aka "infographic").  With graphic visualization, HIP has provided an interesting and compelling summary that highlights its reach and impact during 2011.  A year's worth of data and activity has been compressed to showcase HIP's "Building Capital" theme—knowledge capital, financial capital, and human capital—while simultaneously featuring HIP facts, HIP grantees, and HIP events.  The infographic concludes by explaining that its achievements in 2011 form the basis for Game Changers: Ideas and Investments for the Next Decade, a "2012 series of briefing papers, events and forums [that will seek] to answer the question: How do we increase the size and impact of philantropic investments in Latino communities?"

Infographics serve as yet another transparency device, one that can present a complex set of data in a visual format that can be quickly and easily processed.   Have you used infographics to tell your story?

-- Mark Foley

Glasspockets Find: 2012 Annual Letter from Bill Gates

Bill Gates speaks candidly about his work at the Bill & Melinda Gates Foundation in his fourth Annual Letter. As a tool for transparency, the letter is a unique glimpse into the mind of a foundation donor, revealing Gates' critical thinking with respect to the foundation's activity, what has worked, what setbacks have been encountered, and what lessons have been learned by the foundation and its partners and grantees. The need for innovation continues to be a central element to his thinking. This year's letter is an argument for making the choice to keep on helping extremely poor people build self-sufficiency." The foundation will continue to encourage innovation in areas, including agriculture and public health, "where there is less profit opportunity but where the impact for those in need is very high."

Gates devotes a significant portion of this year's annual letter to innovation in agriculture. This is clearly an area that he believes holds great promise to improve the lives of billions of people in a relatively short period of time with rather modest commitments of resources. He cites many reasons for optimism, including exciting new understanding of plant genes that should greatly accelerate the pace of agricultural innovation.

Most of the foundation's resources go to global health issues. He shares many positive developments in this area, including a milestone in the fight to eradicate polio: on January 13, 2012, India marked its first anniversary of being polio-free. This was a huge accomplishment, calling for the coordination of many players. The effort reveals many lessons that will hopefully lead to successful campaigns in the three countries where the virus remains endemic-Afghanistan, Nigeria and Pakistan.

The foundation's domestic work focuses on U.S. education. Here, Gates is impressed by the technique of peer evaluation among teachers that has been tested in the Tampa, Florida, school district and hopes it may serve as a model that can be replicated. Interestingly, the concept of learning from one's peers arises again when Gates later discusses the first of what will be an annual meeting of those who have taken the Giving Pledge. He would like to focus attention on how the web can be used to allow "givers of all sizes to connect to causes and see the results of their giving."

One of the perennial challenges that Gates admits facing is the common belief that development money is wasteful or doesn't produce lasting results. But he is "convinced that when people hear stories of the lives they've helped improve, they want to do more, not less." Given this, Gates attempts to put into perspective the news that some of the money provided to the Global Fund to Fight AIDS, Tuberculosis and Malaria was diverted for corrupt purposes. The Gates foundation is the largest non-governmental donor to the Global Fund.

Gates concludes by making a plea for continued funding from the world's wealthiest nations, even in challenging economic times, for development that benefits the world's poorest. A "relatively small amount of money invested in development," in his words, "has changed the future prospects of billions of people-and it can do the same for billions more if we make the choice to continue investing in innovation."

To read or download the letter (available in Arabic, Chinese, English, French, German, and Spanish), click here.

Those interested may send feedback about the annual letter to annualletter@gatesfoundation.org.

Tweet using #billsletter to join the conversation. Follow Bill Gates on Twitter: @BillGates.

-- Mark Foley

Open a Window on California Philanthropy

Social media tools, like Twitter, allow us all access to the messages institutional philanthropists are highlighting, increasing transparency for philanthropy news and trend data. Thanks to support from the James Irvine Foundation, we are piloting a regional approach to Glasspockets with this California Foundations Twitter widget. Just click on the "Get Widget" button to give your audience a window on California philanthropy on your own web site.

So far we have identified nearly 100 foundations in California who Tweet. Our staff is hard at work uncovering which other online tools California foundations are using to increase their visibility. Check out the online communications platforms used by over 1,300 foundations across the United States at Transparency 2.0.

Do you know of a foundation Twitter feed, or other social media activity, we should include? Send an email to glasspockets@foundationcenter.org.

-- Janet Camarena