The charity sector has had 12 months unlike any other it has ever seen. We have been under the spotlight in the eyes of the media, public and politicians more than ever before, and rarely for the right reasons. The response of the sector has been varied, and largely ineffective. I have written this blueprint because of my concern surrounding the notion that if we can only sort out fundraising and the sector’s regulation, everything will be alright. I fear the problems the sector faces are much deeper and widespread than just fundraising. In effect we need to modernise the sector to make it fit for the 21st century, and we need to bring our key stakeholders with us on this journey. Before looking at the solutions, it’s worth setting out some of the reasons why we ended up in this situation.
How did we get here?
Behaving like ‘good works’ justifies poor practices
One of the new refrains in the sector ringing out after the crisis created by a barrage of negative media coverage in the summer of 2015 as well as plummeting public trust in charities, is that we should focus on, and tell people about, all the good work that we do. I have no problem with that. The problem is when we believe that doing good means that we should be forgiven for having slightly lower standards in terms of how we raise money, pay CEOs, reveal our financial metrics and the like. I have heard people say ‘what about the beneficiaries?’ in all the recent media coverage. It’s absolutely right that we should remember the beneficiary, but we can never, ever, suggest that noble ends justify less than noble means.
A dearth of scrutiny
The sector has had a dearth of scrutiny. Many people have talked about how we are under attack. The reality is we are probably just catching up with the kind of scrutiny that most other sectors take for granted. Scrutiny is uncomfortable, it’s awkward, and it’s necessary. The lack of scrutiny has made the sector complacent about its practices, and that is part of the reason we are in the mess we are in.
The fractures in charity governance
One of the groups up for blame after the PACAC report is trustees. This highlights a paradox. We love the idea of voluntary trustees, generously giving up their time for the cause. At the same time we now want them to know everything about how the charity they serve operates. We have deluded ourselves if we think people who come to 3 or 4 board meetings a year, with a few more meetings in between, can possibly do all that charity law requires them to do particularly for larger charities. We have a governance model that doesn’t fit the way modern charities, large and small, operate.
Myths about the Charity Commission
Listening to some bits of media coverage, the Charity Commission is designed to be four super-hero regulators all rolled into one: seeking out bad charities, stopping sloppy financial practices, preventing terrorism, and promoting trust and confidence. The Charity Commission is much closer to Companies House as a regulator than it is to Ofsted or Monitor for the NHS. My fear is that some have believed that the Charity Commission was scrutinizing charities for poor management when in reality no one was.
A touch of histrionics distracting us from some home truths
One thing the sector has become very good at, and I fear I have been guilty of this, is assuming that media reports have no validity. It is much easier for us to ridicule negative stories, than it is to actually believe they contain some home truths we should take notice of. Even the True and Fair report has an important grain of truth that the sector has completely overlooked: that many charities have a ratio of fundraising spending to income that is in excess of 50%. Many talking heads, like me, had emphasised how untypical Kids Company was. Yet in an exaggerated form it shares many of the hallmarks of bad management with charities: a too powerful CEO, a too weak board, poor financial planning and control, an exaggeration of the impact it made, and a sense that somebody else was to blame when things went wrong. We need to ask ourselves ‘what can we learn?’ from each new crisis, not just dismiss each story as an ill-informed, misguided or malicious attack on charities.
How do we rebuild our reputation?
So, the sector’s reputation has taken a battering. The thing that the public, politicians and media took for granted, that we were an ethical and principled sector, is now in tatters. Our attempts to explain or rebuff the media stories have been largely ineffective. Here are my thoughts on the way in which we can start to rebuild the sector’s reputation.
Better fundraising regulation
We need better fundraising regulation. I have been writing about the inadequacies of the current system for three or four years. So the new regime of a stronger, better funded regulator with control over the Code of Practice is very welcome. I don’t include the Fundraising Preference Service in this, because amongst other things, it breaks the principle that a charity delivering fundraising to a high standard will be rewarded. Enough of my caveats: stronger regulation, whether statutory or voluntary is a key ingredient of any change in reputation.
Trusteeship needs a revolution
The standard of charity trusteeship needs to be higher, both through better trustees and better practices. The code of good governance for the sector is at best treading water (though Northern Ireland has just re- launched its code), and at worst moribund. There is no audit mechanism or quality control. Is there a single job in the sector dedicated to trusteeship? We need a Code for the Governance of the sector that is as central to trusteeship as fundraising regulation is to raising money. We have to stop expecting that we can find trustees for organisations with a turnover of tens or hundreds of millions of pounds who remain unpaid. The non-executive directors of all sorts of public and charity sector are remunerated, and each charity should have the choice whether it’s right for them.
Better media messages and spokespeople
The sector’s performance in the face of media stories has been patchy to put it mildly. nfpSynergy has been sponsoring some group media training to give more organisations the confidence to put their message across. However, when the big stories have broken the sector has been unable to effectively counter the accusations made against us. Our messages aren’t clear, and on occasions we have resorted to saying that charities aredoing important work as some sort of defence. The Banks are a critical part of the smooth running of an economy, and a thriving business sector, but nobody sees that as a valid justification for all the outrageous things they have done. Charities are no different. So we need better media messages and spokespeople who represent the diversity of the sector. We need to explain how and why charities do what they do (as the Understanding Charities group has started to work on).
Forget our good works
Because we are the charity sector, there is a tendency to believe that doing good works makes us different. That we operate to a different set of criteria to the public or private sectors because of this. It’s interesting that the Catholic Church, another sector with a higher purpose, has suffered scandals because it seemed to believe that it was beholden to a different law to normal institutions. On a lesser scale, I fear we have fallen into the same trap. We must never let the good work of the sector make us feel we can do things that other sectors wouldn’t be able to get away with.
Start the search for new funding
We need to start looking for new sources of funding and fundraising. There is no doubt that a revised code of practice from the new fundraising regulator, combined with opt-in from the EU, and the information commissioner waking up to charity practices, will reduce charity income. The most convincing estimate, indeed the only estimate that I have seen, suggests an annual drop of around £2 billion after five years. That is a lot of money that charities won’t be spending on beneficiaries. So we need to start looking for new sources of income for charities.
Develop a thirst for scrutiny
We need a culture change in the sector in which we welcome scrutiny. The Daily Mail is doing an investigation – ‘great what can we learn from it’, should be our response; a select committee wants to investigate – ‘a good way to hear what key stakeholders think of us’; extending Freedom of Information to charities and other publicly funded bodies such as companies – ‘bring it on’. We need to embrace scrutiny, not least because it is one of the ways we understand gaps between what we do, and how we are seen.
Create an Ofsted for charities There have been many attempts to find a way to evaluate the performance of charities. Many thought it was what the Charity Commission should have been doing with Kids Company. If we want charities to have a health check, for both internal and external purposes, we need a new body to do it. A kind of Ofsted for Charities which would have a set of key criteria about how charities were working. These could include: governance, financial management, effectiveness of mission delivery, fundraising, communications and so on. It would take time to build enough data to make comparisons between charities, but make no mistake it would be a hugely powerful tool for improvement.
Better charity metrics and clearer charity accounts I have lost count of the number of times that I heard donors, members of the public, companies and others wanting to know how much a charity spends on admin or fundraising. Many in the sector decry this thirst for information about fundraising or admin ratios. ‘All charity expenditure is on the cause’, one blog recently proclaimed. Aside from the fact that this isn’t true, it certainly isn’t helpful. Has any donor ever heard that and gone away happy? So we need to provide clearer and better information to help people judge charities, both on how they spend their money and how well they do their job. This means changes to charity accounts, and also better ways of charities summarising the differences they have made.
Get the message across about our good works In apparent contradiction to the early section, we need to make sure that we are in the news for the amazing works that charities do. The media coverage of charities is divided into the terrible and the angelic, the former we have seen so much of recently, and the latter is prominent when there is coverage of individual volunteers, or responses to floods and other disasters. The problem is that as long as the media cover these bigger events this blots out the routine, every day, differences that charities make. We need to find ways to make the coverage of the work that charities do normal, not exceptional.
Comprehensive stakeholder research One of the weaknesses is that the sector seems to do little research in how different stakeholder groups see charities and the sector. While we at nfpSynergy carry out a lot for our clients, and do our best to publicise the relevant bits, there is precious little done on a systematic basis. I am not sure the self-regulation fundraising community has ever commissioned research to find out what the public think about fundraising: for the purposes of code development. We need some comprehensive research to help the sector know where it is going wrong and what it is doing right to rebuild public trust.
Create a 10 year plan During the last year, there was too much knee-jerk response by the sector to the media coverage. This consisted of desperate efforts ‘to get the issue off the front-page’. These didn’t work. The media have discovered that exposing dodgy dealings in the sector is like taking candy from a baby. They have discovered their readers are right behind them, and for the most part the sector has no adequate response. So they will continue digging for dirt for the foreseeable future. This means there are no short-term fixes to the situation we are in. We need a 10 year plan to tackle it and not a series of sticking-plaster solutions.
If we are creating a plan for the sector there are various other issues we need to address, even though they are not strictly about the reputation of the sector. These include:
The gap between large and small charities. The sector is increasingly fragmented and fractious. Small charities struggle at almost every point in their existence, and the irony of a new tougher fundraising regulation regime, which is the result of the actions of the larger charities, is not lost on them.
How charities deliver their mission is a little talked about issue. However, if income is going to go down, then focusing on how to use finite resources to maximum effect can only become more important.
The next decade is going to be tough for charities. Government income is going down, donated income will almost certainly decrease, the economy is turning for the worse, and we have lost the trust of some key stakeholders. Other than that, everything is rosy. To weather this storm successfully we will need to take actions that go beyond just what people expect so that they can see we are serious about reform and regaining our reputation. Charities should expect more tough times ahead, and prepare for some new mantras: ‘honesty beyond necessity, transparency pre-empting scrutiny, and humility for our past mistakes’.
If you have any complaints, queries, or comments on this blueprint please do drop a line to Joe Saxton on firstname.lastname@example.org
nfpSynergy is a research consultancy that aims to provide the ideas, the insights and the information to help non-profits thrive.
We have over a decade of experience working exclusively with charities, helping them develop evidence- based strategies and get the best for their beneficiaries. The organisations we work with represent all sizes and areas of the sector and we have worked with four in five of the top 50 fundraising charities in the UK.
We run cost effective, syndicated tracking surveys of stakeholder attitudes towards charities and non-profit organisations. The audiences we reach include the general public, young people, journalists, politicians and health professionals. We also work with charities on bespoke projects, providing quantitative, qualitative and desk research services.
In addition, we work to benefit the wider sector by creating and distributing regular free reports, presentations and research on the issues that charities face.