Chairman’s Corner: September 2009

Here Comes the Sun

by Mario Morino, Co-founder of VPP

In his book, The Foundation: A Great American Secret, Joel Fleishman offered a wise insider’s assessment of charitable foundations’ great contributions and liabilities. The primary liability he identified was our sector’s lack of transparency. “The only way for foundations to protect the freedom, creativity, and flexibility they now enjoy,” he argued, “is to open their doors and windows to the world so that all can see what they are doing and how they are doing it.”

Foundation leaders offered supportive comments about the book, but I feared the message would ultimately fall on deaf ears in the nonprofit sector because there was no forcing function to drive the kind of change that Joel advocated. The sector does react and appear more introspective about issues of transparency and accountability when we face the threat of Congressional scrutiny. However, Joel’s book came out after several years of scrutiny had dissipated, following the passage of a modest set of charitable-sector reforms and a change in Senate leadership.

In retrospect, I was wrong to assume that waning interest from Congress would mean waning pressure on foundations and nonprofits to heed Joel’s warnings. A new force has gathered tremendous steam in just the three years since Joel completed his book. It’s far more powerful and enduring than a Senate committee’s gaze, and it’s affecting public, private, and nonprofit sectors alike. It’s the power of tens of millions of networked citizens with creativity and attitude. In the words of Internet guru Clay Shirky, “Here comes everybody.

Few organizations will be proactive enough to embrace this bottom-up, citizen-driven transparency revolution. After all, being transparent is a rather unnatural act to the 20th and 21st century command-and-control, top-down organizations that still characterize so much of our public, private, and nonprofit worlds. But mark my words: This revolution is coming.

As hard as it often is to create change in institutions—large and small—it’s only going to take two potent ingredients in this case.

The first ingredient is anxiety, and we have that in spades. Yes, the recession is starting to ease, but the economy is still incredibly precarious—still cutting jobs rather than creating them, and still adding mountains of debt that will dramatically change what we can expect from our government in the years ahead. And that’s just the economy. Add to that volatile mix a political system that’s better at producing vitriol than results, renewed fears of an overbearing government, two wars, terrorist threats, an approaching flu pandemic and you see a lot of people “at the top of the cage.”

In this anxious environment, citizens are not in a trusting mood. They look at every institution—whether it’s our national government or a local hospital—through a skeptical lens. They’re giving no one the benefit of the doubt. More and more, they sound like the masses of anxious, enraged citizens in the movie “Network” who scream out their windows, “I’m mad as hell and I’m not going to take it any more!”

The second ingredient is new technology. Even as the macro forces in our lives feel out of our control, the Internet and the new generation of networked tools are enabling a shift in power into the hands of average citizens. Thanks to these emerging tools, every day it becomes easier, faster, and cheaper for average citizens to:

• share their reactions and reviews with anyone anywhere, and to aggregate, distill, mash up, and use this feedback in myriad ways
• gain the benefit of insiders’ perspectives on how organizations—and those in them—function and perform
• connect, coordinate, and collaborate with those who have shared interests and passions
• access raw data and turn it into actionable information—a process that previously required, in the wordsof The Washington Monthly’s Charles Homans, “a degree in computer science, a university lab mainframe’s worth of circuits, and an awful lot of time.”

Rapid availability and usability have huge implications. Citizens—whether they’re motivated by anxiety, anger, or altruism—are gaining more power than ever to hold leaders accountable. We have to hope that this newfound power is used constructively and does not further harden our views, feed the ideologues, and rob of us of the civility critical to our democratic way of life.

Let me offer a few of my favorite examples that give a glimpse of the potential for positive change:

• Recovery.org, a website created by the Seattle-based information aggregator Onvia, is holding the federal government’s feet to the fire. “The President and the federal government are asking the American people to trust them with an unprecedented level of funding to address the economic emergency…This site will help you track these funds to see how and where recovery dollars are spent and allow you to vote if a project is worthwhile or wasteful.” The user-friendly site is putting constructive pressure on the federal government’s own initiativeto track recovery dollars. A similar, beneficial competition can be seen in efforts by Washington Watch, Open Secrets, and the federal Office of Management and Budget to catalog Congressional earmarks, the pet projects of individual Members of Congress.
• The Good Guide, a website and free iPhone app, helps consumers make more-informed decisions about the products they buy. The guide makes it easy for shoppers to get health, environmental, and social ratings on more than 70,000 consumer products, from toothpaste to toys. The Good Guide is a harbinger of more sophisticated services that will allow consumers shopping at any store in America to scan any product on the shelves with their cell phones and get information about every aspect of the product, the company that makes it, and search for better deals at other online and physical stores.
• In an illustration that no institution is exempt from scrutiny, the Consumerist, a blog run by the Consumers Union, sparked a massive uproar against Facebook, one of the pioneers of social networking. After the blog brought attention to objectionable changes in the Facebook terms of service, hundreds of thousands of users Jiu Jitsued the company by putting Facebook’s own social networking tools to work in organizing the protests. Two days after the Consumerist blog entry was posted, Facebook founder Mark Zuckerberg was forced to reverse course.

The examples barely scratch the surface—and they are just the beginning.

In the for-profit arena, consumers will gain more and more information to help them make more-educated decisions about what to buy and from whom. In a recent article titled “Transparency Triumph,” the consumer-trends firm trendwatching.com concludes, “Think �?transparency’ is an established, maturing theme? You ain’t seen nothing yet.”

Amazon, the pioneer of online customer reviews, has advanced and profited from this trend for many years. But now more traditional businesses are embracing it as well. This past July, Walmart announced that it will create a “Worldwide Sustainable Product Index,” a one-stop shop for information on how Walmart’s products rate in four key areas of sustainability: “energy and climate, material efficiency, natural resources, and people and community.” “Increasingly [customers] want…to know that the materials in the product are safe, that it was made well and that it was produced in a responsible way,” according to Walmart CEO Mike Duke. “We do not see this as a trend that will fade.”

Consumers will gain more power even in the Byzantine world of health care. Websites such as Vimo, ZocDoc, and MedTipster are starting to force greater transparency by giving consumers the tools to make more-informed choices on doctors, insurers, and prescription drugs. And whether or not President Obama succeeds in overhauling our health care system, those patients and their families with access to available Internet-based information will gain more and more ability to advocate for their care. We are starting to see the potential now in the form of emerging online services like RealAge, DrWeil, RevolutionHealth, and Organized Wisdom; the websites of healthcare giants like Cleveland Clinic (full disclosure: I sit on the board); government sources like the National Cancer Institute and the National Library of Medicine; and discussion forums run by nonprofit research and advocacy organizations like the Mesothelioma Applied Research Foundation, where patients share quality information that is highly relevant to other patients.

The power and importance of this trend hit very close to home just three weeks ago. Our oldest daughter was hospitalized, and it appeared that she had a serious, systemic infection. (Most thankfully, she is now fine.) We felt incredibly fortunate that we were able to bring her to the Cleveland Clinic. But even with a battery of tests over the course of a four-day ordeal in the hospital, the doctors had a hard time getting at the cause of our daughter’s condition. We now believe the trigger was my daughter’s use of an antibiotic that has been known to produce symptoms similar to meningitis. Because of our own research, we had this information even before it was raised by those caring for our daughter.

In the public arena, new tools that build on the Recovery.org model will give taxpayers far greater visibility into the workings of government. “Eventually we could see more clearly not just what the government is doing, but also how well what it’s doing is actually working,” Homans wrote in the July/August issue of The Washington Monthly. “For instance, [we could track] education reforms through a matrix of crime and employment data to gauge the rippling effects of policy decisions in something like real time, and [adjust] them accordingly.” President Obama and his new Chief Information Officer, Vivek Kundra, are taking admirable steps to accelerate the dawn of a more-transparent Government 2.0. The latest example is the Administration’s decision to break from precedent and make public the names of White House visitors (with some reasonable exceptions).

In light of these developments, it would be hard to argue that foundations and charities will remain a world apart. Today, according to GuideStar’s first annual report on nonprofit transparency, only a small fraction of the 1,800 nonprofits surveyed post the basic information they are required to make available for public inspection on their websites. But as social media and open-source models, such as Great Nonprofits and many other new sites, start to generate information about these nonprofits, they will be forced to share more of what they do and how well they do it.

Increasingly tight budgets and scarce resources will drive charities to get more serious about collecting, analyzing, and sharing information on their performance and impact. “Unless [nonprofits] can cite evidence that what they are doing…will indeed make the world better,” the much-admired Harvard scholar Lee Schorr wrote in the August 20 issue of The Chronicle of Philanthropy, “they won’t get support. Not from any level of government, not from increasingly sophisticated philanthropists, and not from the public.”

Foundations will come under pressure to open the kimono as well. Prospective and actual grantees have always been reluctant to bite the hand that feeds them. But new tools will give them, as well as those they serve, plenty of opportunity to speak truth to power and share their views with anyone connected to the Internet. Today, we’re starting to see anonymous blogs that watch and scrutinize every development at large foundations, such as the Gates Keepers blog. It is only a matter of time before we see sites that make it easy for grantees, prospective grantees, beneficiaries, and community stakeholders at large to rate foundations, just as entrepreneurs now rate venture capitalists on the site The Funded. And we will see sites that provide a wealth of anonymous insights from foundation personnel, just as for-profit employees are doing on the website Glass Door.

Of course, we won’t like all the feedback. Some of it will be vituperative, ill-informed, or downright silly. But on the whole, the process of opening our windows and doors will make us and our sector far more effective. The truth is, these new online tools provide grantmakers and grantseekers alike a remarkable way to collect the information they need—if they’re willing to listen and then adapt and respond to what they hear.

At Venture Philanthropy Partners, we have strived to be introspective and to hold ourselves accountable to our constituents—especially those who have invested financially in our work. Far from perfect, we have learned how to admit our missteps and share what we’ve learned. We give our stakeholders access to real-time insights through Twitter (@vppartners) and now have more than 800 followers. We recently commissioned our second external assessment to judge how well we’ve done what we claim to do. We shared a summary of the results of the assessment with our investors over this summer, and we’re preparing a version for public release this fall. We’re taking baby steps in the right direction. And we are committed to doing more.

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 very 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.