Unusual juxtapositions reveal fresh insights. At PA we often compare the way different industries address common challenges. Looking beyond sector boundaries broadens our thinking and helps us bring forward new ideas that make a real impact for our clients.
So juxtaposing private equity firms and charities might not be as bizarre as it first seems. The two sectors couldn’t be more different. For private equity firms, it’s all about the money. For charities, it’s all about the mission. But can charities learn something from the way private equity firms go about their business?
This was the question we put to leaders of some of the UK’s best-known charities over dinner at our London offices in 2016. To get the ball rolling, we contributed some of our own observations of what private equity firms look for as they try to pick future winners. They ask:
Improving efficiency with closer collaboration
In the UK, 200,000 charities are able to survive, which suggests there must be enough resources but whether we are using these as efficiently as possible to make a difference for the people we aim to support is debatable. Inefficiency tends to continue until the money runs out, and we just try to keep the organisation going instead. Too many charities are trying to do the same thing or duplicating efforts, so how can organisations come together and use the many different models for collaboration besides full merger? Whether trustees have the skills needed to run bigger charities is yet to be answered and there is also the danger of getting caught up in a corporate machine and neglecting connections with volunteers.
Focusing on the purpose, not the organisation
The narcissism of small differences. There are too many egos and they will never come to the decision to merge as they are trying to preserve their own jobs and organisation. To do so successfully, they must drop their egos. If we truly exist for our purpose, why would we care about competition from other charities? Examples of successful collaborations are the NSPCC & Childline, Cancer Research Fund & Imperial Cancer Fund, and Scope & Contact a Family. We haven’t really understood what collaboration means because just being part of every initiative going isn’t real collaboration.
Bringing the board on board
A five-year strategic plan is an easy way for trustees and the public to check what charities have been up to. Boards want to see milestones and performance against KPIs, and whilst they only meet quarterly, they are not part of the journey as the charity tries to respond to changing market needs. It is vital we challenge and educate the board to ensure our KPIs are measuring the right things, taking them with us is a crucial part of the CEO’s role. Time must be dedicated to managing upwards. Often, decisions take too long because charities are too concerned about the reputational risk, therefore, is the structure of the boards moving us away from responding to changes in society or are we instead more worried about protecting the organisation?
Combining strategic certainty with everyday flexibility
Strategy, especially a five-year strategy, needs to evolve to reflect the changes in the real world. Taking 18 months to prepare a five-year strategy doesn’t reflect the pace of change in the wider world. There is no good sticking fast to a business plan to deliver the strategy if you get to the end of the period and have to ask ‘did we do anything worthwhile’. A plan involves thinking ahead about how to keep all stakeholders happy, within the restrictions that exist. It should provide something you can flex and change against, a sense of direction rather than a rigid pathway. Charities should use data to reassess their business plans more frequently and need to generate insight more quickly from data available to them, then act fast, but still within the overall strategic framework or the long-term view of mission, vision and purpose. We need to reserve the right to reverse decisions in order to seize new, unforeseen opportunities that emerge with changes in markets, economic climate and opinions. The trick is to involve trustees in changes and ensure they see the evidence and data so that the board and business can come to a collective view. Preparing a 15-year strategy really stretches when thinking about how the world will be different.
Getting back to bold ambitions
There is danger of charities being shaped by funding that’s available and not by their mission. We used to create a massive difference, but we don’t really ‘move the dial’ anymore, such as organisations like Momentum and Occupy. We used to be called ‘the voluntary movement’ and not the voluntary sector, or even today, the third sector. Carers UK rebrand reintroduced ‘carers’ movement’ to replace ‘carers’ organisation’. Are we ambitious enough about reshaping society and the world? We’re moving away from pursuing core purposes, big and bold ambitions. We need to play a long game, the fight won’t be run in the first few rounds so we need to stick to the core purpose and underlying values. Charities set up by amazing, bold people, then bits and pieces bolted on and left managing the organisation. We do too many things, we should focus on being famous for one or two things and have courage to drop others. For instance, the British Red Cross is neutral, impartial help from volunteers to whoever needs it. We need to use the power of people and learn how to get our mojo back by tapping into the energy of employees and volunteers who join us at work or support us.
Further insight on what charities can learn from private equity firms.