How Technology and Transparency Help Funders Increase Giving and Invest for Impact

U.S. nonprofits (including charities and foundations) spend nearly $2 trillion annually. For many, it seems like this astronomical amount isn’t translating into a comparable level of social change. It’s no wonder why communities and donors demand greater levels of transparency. Funders could collectively accomplish so much more if they could eliminate waste (part ways programs that truly aren’t working), maximize their funding towards impact, and transparently share their transformation efforts with the world.

Many donors feel the same. Instead of simply donating to the programs and projects that “sound good,” more individuals are working to ensure they’re spending their hard-earned dollars on things that actually “work good.” According to a study conducted by Fidelity Charitable, at least 41% of donors self-report that they have “changed their giving due to increased knowledge about nonprofit effectiveness. Additionally, 27% percent of donors reported that “their approach to giving has changed due to technological advances” that help them research, fund and learn about charitable projects.

We could boil this trend down into two words: transparency and technology.

Based on this understanding, many nonprofits are increasing their competitive advantage with donors by:

1. Transparently displaying their financial expense breakdowns online.
2. Publicly displaying their performance and impact data online in an easy-to-see format.
3. Focusing on sharing data that speaks to the actual impact of their work (how people are better off) – not just numbers served.

Any funder of any size can practice implementing these strategies for success. Back when I co-founded the Long Branch Athletic Association, I was using severely limited technologies to post our nonprofit’s performance online. I was creating graphs in Microsoft Word and then copy-and-pasting them into a website HTML editor. And there really were no fancy performance management and visualization tools available at the time, so it took me forever. Despite my struggles, I can tell you that almost every grant that we wrote, particularly for the county government, we won.

To reap the benefits of technology and transparency, funders should take the time to develop disciplined performance management systems, standardized processes, and accessible tools. These strategies won’t just lead to more dollars. When implemented in tandem with the other core strategies I explore in my upcoming book Social Sector Hero: How Government and Philanthropy Can Fund for Impact, transparency and technology can lead to more effective decision-making and budgeting for impact.

Transparency and technology provide funders, donors, stakeholders, and partners with actionable knowledge that they can use to reinforce services that work, fix the ones that don’t, appropriately reallocate funds, and improve the relationship between funding and impact.

Here are three ways transparency and technology can help funders increase their competitive advantage by funding for impact:

1. Never report on data without a story.

Data without the story is meaningless. Stories make our thinking about why the data is the way it is more transparent, which helps to surface and challenge assumptions.

An effectively transparent data story includes contributing factors (information that explains what has contributed to progress or prevented it from getting worse) and limiting factors (information that explains what might be holding the data back from getting better).

Developing a story for every critical piece of data – that’s easily accessible to all stakeholders and donors – brings transparency and honesty to the work. It can help surface challenges and assumptions that are holding back progress. Data stories can also help reveal racial disparities, which means strategies will become more effective.

When it comes to donors, accessible data narratives can help highlight successes, bring more awareness to issues, and rally support for effective programming. If the data isn’t looking good, narratives can also help explain extenuating circumstances, reinforce the importance of continued strategies, and prevent dips in funding.

2. Use data and corresponding analysis for effective dialogue.

Effective Dialogue consists of communicative interactions that result in both parties understanding each other and taking action.

Effective dialogue requires trust and transparency. It creates clarity around our thoughts so we can make better decisions. Program and grant leaders will not just think it is a paper exercise if the data, story, and plan are the basis for a regular conversation with their boss or funder.

When it comes to technology, software systems can facilitate effective dialogue by presenting data and narratives in accessible and visually appealing formats — formats that are more ideal for group presentation and stakeholder/ board reporting. Technology systems can also help translate dialogue into action, assuming they offer planning and project management functionality.

3. Share your performance reports publicly.

Both funders and grantees should share their performance publicly, with a focus on sharing measures that speak to the impact of their programs on their clients. This transparency will enhance trust, and trust can lead to more funding.

Performance management and reporting technologies are critical here. Assuming it’s formatted correctly for your needs, technology allows funders to organize, navigate, and analyze their data much more quickly than they could have without the system.

The right tools may also allow you to embed data on your website without having to manually update your website code every time a number changes (like I had to do for Long Branch).

Learn More in Social Sector Hero

You can learn more about all eight strategies in Social Sector Hero, which will launch on July 26th, 2022 at a Virtual Book Launch and Roundtable Discussion hosted with my colleagues:

• Dr. JaNay Queen Nazaire – Senior Advisor at PSG Equity, Senior Advisor at PolicyLink, and Former Chief Strategy Officer at Living Cities
• Jason Green – Co-Founder of SkillSmart, Executive in Residence at Zeal Capital Partners, and Former Associate Counsel to then-President Barack Obama

**If you’re reading this blog after July 26th, you can download the book for free or buy it at SocialSectorHero.com.

By implementing the book’s tips as part of your performance reporting system, you will have better data to share with leadership, funders, donors, and other stakeholders. If you have grantees, they will have put more thought into their performance and improvement plans, and they will build their capacity to demonstrate their impact and attract more funding.

Ultimately, and throughout every industry, data-based transparency and technology can help us all do more with what we have…or even less. Most importantly, we can achieve better outcomes for the children, families, and communities we collectively serve.