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Strangely positive tidings from the charity (not-for-profit) sector

Rod Schwartz
Rod Schwartz, posted on 21.11.12

Blog comments4 comments

Earlier this month, I had the good fortune to be asked to join a dinner attended by CEOs from the UK charity/not-for-profit (NFP) sector. I have always been amused by the NFP description, as it always felt a rather American phrase and I left there 25 years ago--but relax, this post will not be about language and the "Transoceanic Divide". It was an excellent dinner, organised by a well-regarded recruitment firm. Not being an expert on the Chatham House Rule, I will leave it to this firm if they wish to identify themselves by replying. In any event, it was one of the most astonishing dinners I have ever attended. The topic discussed concerned the strategies and prospects for NFPs in the 21st century. The CEOs were in a buoyant and optimistic mood. Given all I had read about the UK charity sector and its prospects, an upbeat and jovial evening, with executives brimming with optimism was far from what I had expected. What was going on??

Nearly all who spoke gushed about growth achieved and their prospects. One talked of their operation having tripled over the past few years. Although most agreed that the dethroning of David Cameron and collapse of the Coalition Government would be good for the sector, not one fretted about cuts in income from the public sector--a reduction which should only increase in severity next year. No one mentioned the report recently released by NCVO and CAF , reported recently in Philanthropy UK, which suggested that donation income could be down in real terms by around 20% this year.

The internet was seized upon by guests as a huge positive for the sector, enabling charities to communicate directly with their donors and interested others in new and creative ways. Each diner who spoke had some upbeat story about how they had used social media to reach out in a novel way.

I could go on, but by now most readers will "catch my drift". Now there exists the possibility that the event suffered from selection bias--in that those invited were doing unusually well--or that those doing well were disproportionately present at the dinner. But for this possibility, I cannot believe that all the downbeat stories we all read about the NFP sector are so wide of the mark. I truly worry that some of this group were in denial, or perhaps just reluctant to admit to the miserable reality which confronts them in front of their peers. Any of these explanations, apart from selection bias, is deeply worrying. Circumstances confronting the UK charity sector are downright scary and the very structure of these organisations is under serious threat, from our vantage point. Many have been in contact with us at ClearlySo, as they seek access to social investment. In my view these circumstances are both cyclical (stemming from the weak national economy) and structural in nature, and would exist also if a Labour Government were in power.

My judgement of the group of CEOs I met is that they seemed a competent and professional selection--thus the likelihood that they are in denial feels small, so I am opting for the idea that as tough as things are, few wish to admit this in front of their peers. This seems unfortunate. I would imagine vocalising the problem would be therapeutic, but this may be the sort of thing someone born in NYC would say. Also, I believe that more active sharing of problems enables solutions to be more readily found--based on the old adage that "a problem shared, is a problem halved".

I was, however, particularly troubled by their optimistic comments about the internet and social media. On this issue I did feel their optimism was unwarranted. Fundamentally, charities are an intermediary between well-intentioned individuals and the causes they wish to support. If the internet and organisations which are fundamentally about social media (e.g. Kiva, Spacehive and JustGiving) can connect people directly with causes, then the need for costly intermediation diminishes--and costs in the charity sector are very high for intermediation compared with the online platforms. This is as true in the charity sector as it is in banking, where services like Zopa also threaten financial intermediaries.

Yes, there are also cool things the internet allows charities to do with their supporters, and perhaps beneficiaries as well--but I would see the trend as more threatening than the CEOs I met earlier this month.

(Disclosure: Both via ClearlySo and in a personal capacity I have an economic interest in Justgiving and Spacehive)


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4 comments so far.

Blog comments Tina Crouse, 21.11.12, 13:09

Well Rodney, you won't like my response but I think it's just that they're British. The 'stiff upper lip' game has been afoot for at least a full century; add in the charity "smile" and you have the culmination of what leadership has to look like in a public setting. From state education to local food services, the stress that people are under is evident but they face it internally. I truly believe it's cultural training.

Blog comments Trent zum Mallen, 22.11.12, 14:44

I believe that many worlds living parallel existences would be extremely powerful if they could find some common ground. Foundations, banks, funds, public financing should put their heads together to come up with new ways to finance innovative, social organizations (i.e. Social Enterprises or Organizations seeking to transform themselves into SocEnts ;-))). Loans and equity capital could join capital coming from donations to create formidable instruments for financing SocEnt growth. This is so important because Social Entrepreneurs create more value - or save society more costs - than they consume and so it would be wise for our societies to invest in spreading their social impact. They deserve/require a large spectrum of financing opportunities for growth. It is an investment a smart society would make - but where is this spectrum today?. It is non existent here in Germany. How about the UK?

Blog comments Arthur Wood, 22.11.12, 15:24

Rod - I agree with you - this crisis is cyclical and structural - structural in two senses - driven by the twin pincers of demographics - a huge growth of youth populations in the developing world threatening instability and the ageing of populations in the developed world - secondly and more fundamentally that if we wish to solve issues measured in billions then the current un-leveraged un-annuitsed 19th / early 20th century grant and aid model more importantly simply just has not got the funds even in the wildest dreams over the last whiskey at dinner to solve the problems. I particularily like it in its purest unquestioned form - give us 0.7% of GNP and everything will be alright. But who wants to say the Emperor has no clothes...There are solutions but it is not about whether we have good or bad chairs on the deck of the Titanic - its about changing the course of the ship before we hit the iceberg

Blog comments Tom Mansel-Pleydell, 22.11.12, 16:23

Having worked at Justgiving, ClearlySo and latterly at JPA consulting, where I was supporting charities looking to develop social businesses, I would say you are bang on the money. Charities desperately need to acquire the capability to develop new (more value based?) revenue models in order to fulfil their (mostly) admirable missions - something social enterprises have already 'baked into the batter' of their own offerings. It seems to me that the first - and most crucial - capability charities need to build is not so much financial/intellectual as emotional, in that they need to re-evaluate their relationship with risk. My experience of boards of trustees - and I've known a few - is that they are deeply uncomfortable with the levels of uncertainty that running an enterprise entails. This is understandable, given their past, but needs to be addressed as the NFP landscape evolves and charities see social enterprise models unlocking progress - and revenues - in causes which were previously the exclusive province of charity