How to improve efficiency and increase value? How to stop governance stifling agility? How to set strategy in a rapidly changing market? You might suppose these are the questions that keep private equity investors awake at night. In fact, at a recent event, we found they weigh on the minds of many charity leaders too.
Improving efficiency by cutting duplication
The Charity Commission reports over 165,000 charities registered in the UK, with a combined annual income of £70+ billion. There are clearly substantial financial resources underpinning these myriad organisations, but are charities using those resources to maximum effect?
Merging small organisations to create fewer, larger charities could deliver real efficiencies of scale and enable charities to deliver more. Merging could also help small charities escape a common situation: when funding is tight, focus shifts away from the original purpose –to help people and bring about change – to the simple day-to-day fight to keep the organisation alive. The charity’s purpose and effectiveness is undermined.
A restructuring of the sector through mergers might sound like a good idea, but it’s not the perfect solution. Finding trustees with the right skills to oversee large organisations effectively would be hard. And large charities could risk losing the vital connection with their supporters. Many volunteers are likely to be motivated by highly local causes.
Focusing on the purpose, not the organisation
If full-scale mergers pose challenges, could closer collaboration work better? Successful collaborations already happen. For example, NSPCC and Childline work together to run the NSPCC ChildLine, while Scope and Contact A Family collaborate to offer befriending services across the UK. The consensus in this debate, however, was that collaboration isn’t the sector’s strongest point.
For a start, egos get in the way. When it comes to the crunch, leaders may be reluctant to let go of the status they have as head of a distinct and distinctive organisation. A powerful sense of competition among charities also works against close collaboration. For example, charities can find it hard to follow through on a strategic decision to focus on a few carefully chosen areas when they see other organisations moving into the space they have vacated.
Bringing the board on board
The control exercised by the board can be frustrating for any executive team – and the charity sector is no exception. While trustees play a vital role in maintaining public and donor confidence, they can make leaders’ jobs harder.
For trustees, holding the executive team to account on strategic milestones and key performance indicators (KPI) is a straightforward way to check on progress. For the executive team, it can feel restrictive. Board inflexibility can make it hard for charities to respond rapidly to changes on the ground. And cautious, slow decision-making by the board can sometimes make it feel as if protecting the organisation takes priority over supporting its mission.
Investing time in educating trustees and bringing them along on the journey is key. Sharing evidence and data that justifies any adjustment to plans can help bring organisation and board to a consensus. There’s also scope for charity leaders to challenge trustees on whether the indicators used to measure performance are the right ones. Do the KPIs have a clear connection with how well the charity’s fulfils its purpose – or are they standard measures that provide little real evidence of effectiveness?
Combining strategic certainty with everyday flexibility
Without strategy, any organisation is in danger of drifting. But given the rapid pace of change across markets, economies and societies, traditional five-year strategies could soon be irrelevant. A strategy that takes 18 months to agree could well be out of date by the time it’s launched. Similarly, sticking with a strategy that has become obsolete could mean charities reach the end of a five-year term only to ask ‘did we really do anything worthwhile?’
Making a clear distinction between the strategy and the business plan can help to resolve the conundrum. Strategy sets direction; the business plan sets out the path. There must be scope to flex the plan and adjust the route as events unfold. Charity leaders must have the right to reverse earlier decisions if that’s what it takes to respond to unforeseen challenges or opportunities.
Getting back to bold ambitions
While sharp investors and purposeful charities might face common challenges, the fundamental difference remains. For charities, it’s all about the mission, not the money. Or at least it should be. Growing competition for funding means charities risk being driven by the money they can secure rather than the mission that originally inspired them. Ambition shrinks. Mojo stalls. How to get it back?
The bold, radical founders of the past can be a source of inspiration. These are people who wanted to change the world and reshape society for the better. They saw themselves as leading a movement – rather than leading an organisation. They understood that the fight wouldn’t be won in the first few rounds. The movement would need to stick to its core purpose and underlying values through thick and thin.