Let's play Charity Top Trumps

 Happy Christmas everybody. Great to see The Times launch in last week with yet another attack on the charity sector for cashing in on “relatives of the dead.”

Leaving aside the fact that we’re all relatives of the dead, it’s been obvious to anyone who's walked down a British High Street in the past ten years that Charities have repeatedly managed to shoot themselves in the foot in their approach to both face to face and telephone fundraising. Take a good idea, coat it in fundraiser money making batter and then deep fry it in public disdain. Chuggers are well past their sell by date. The reputation of the sector is under attack because charities have ridden roughshod over the public’s trust for too long.

Yet this is only one front on which the sector is fighting, albeit weakly. CEO pay is the second front and the public simply don’t understand why some CEOs earn ￡100-150k for ‘just’ running a charity. A recent reader’s comment on a related article in Third Sector summed this up for me:

“I, and my fellow passengers on the Clapham omnibus want a warm glow from helping a worthy cause with a ￡50 donation.

Putting it towards the ￡150,000 salary of a charity chief executive – however well earned – does not produce a warm glow. Instead, we give to the local food bank or the flood relief appeal where, we believe, the money will have maximum impact on the lives of needy people. We may be wrong and foolish but we will do what we like with our own money.”

The public just want to feel that charities are run by well meaning nice people doing everything for free, because it’s ‘for the kids.’ However, professional donors (the Government, trusts, foundations, corporates et al) want impact measurements, value for money calculations, complete transparency and increasing efficiency. Charity CEOs need to be a cross between Father Christmas, Mary Poppins and Warren Buffett to pull this off.

Research, dismissed by the NCVO and Charity Commission as ‘weak’ and ‘flawed’ from the ‘True and Fair’ foundation is published to show that for many charities less than half of their income ‘goes to beneficiaries.’  The report’s author, Gina Miller, summed up her view saying

 "It is an utter disgrace that so much of the money people generously give is going to feed large charity machines, which are often characterised by obscene overheads and salaries, aggressive fundraising, and bloated marketing and publicity departments, resulting in questionable levels of charitable spending."

So I think we can see where she stands on all this. Despite being unable to tell the difference between a charity’s often substantial costs in, say, running a network of charity shops compared to one distributing cash from a huge endowment, Ms. Miller and her team still had at least one valid points to make: charities do need to be more accountable to their beneficiaries and donors. Charity accounts are complex and there is no central place for information about charity performance that measures across the sector or more pertinently across the sub sectors that define different charity models.

Many charities produce lovely annual reports. The 2013 Kids Company one is particularly imaginative. However, the public at large, and funders, beneficiaries and social commentators in particular are looking for more. We live in a digital age where information is ever present at our finger tips. We Demand Answers.

So here’s my Christmas present to the Sector. It’s a pack of imaginary Charity Top Trumps cards. On each card is a different charity and under each name is a set of key characteristics about that organisation. How well it’s serving its beneficiaries (we’ll call that ‘Impact); how efficient it is at converting cash into value (let’s call that ‘Social Return’); how well regarded the organisation is by its donors and beneficiaries (‘Reputation’) and how robust and sustainable it is (‘Resilience’).

Impact

This is an area where many charities struggle. Many larger funders do not build in costs for evaluation in their grant distribution and as a result it tends to be only the larger charities that engage in formal assessment of impact. And as we’ve seen above, individuals may not understand the need for ￡10 of their ￡50 donation to go towards working out if it was any use in the first place.

New Philanthropy Capital produced a report on impact looking at how widespread measurements are adopted: www.thinknpc.org/publications/making-an-impact/making-an-impact/ . This report highlighted a number of critical issues that need resolving if charities are to improve on their impact measurement:

• Government funding comes with a price tag of around 9% of the amount given just to report back on how well its being spent. Setting up sensible impact reporting frameworks and standardising this would help reduce costs and improve quality.

• Only a third of charities have at least one person whose role it is to measure impact of their work.

• The number of charities claiming to measure impact is greater than those claiming to measure outcomes - suggesting either they don’t understand the concept or they’re pushing the envelope

• 80% of charities involved in impact measurement do not use any kind of planning model on which to base their impact evaluation - making it harder to interpret whatever results they might get from their questionnaires, surveys, and other methods of data collection.

So there’s lots to do here for charities to improve their approach to impact measurement. Imagine if we could get charities developing and using a standardised impact framework that allowed for the many different types of organisation to report on their effectiveness.

Social Return on Investment

According to NPC, “SROI can be seen as a particular approach to cost-benefit analysis with an emphasis on stakeholder involvement. As outlined in the principles of SROI, SROI explicitly casts the net very widely, involving stakeholders at every stage, from deciding what indicators to use to putting financial values on outcomes.”

Not to be undertaken lightly, SRoI can provide the kind of structured approach to understanding impact discussed above and could help organisations provide strong evidence to their stakeholder groups.

Reputation

Charities have a wider range of stakeholder groups than many other sectors. Donors and Beneficiaries represent customer groups but with very different agendas. Staff, volunteers and the Trustee Board represent a similar challenge in terms of assessing reputation. Throw in the Government and the general public and it’s easy to see why reputation management is a growing issue for many charities. 

NfP Synergy produce a range of monitors that help charities see how they’re perceived by the public, by MPs, by young people and a range of other stakeholders. And one thing they’re telling us all is that trust in charities is on the decline.

One issue for many charities is that they’re simply invisible – nearly 170,000 registered charities and many people can only name 20 or 30 before they start to struggle. So developing a successful brand, maintaining, nurturing and protecting it against the slings and arrows of the media is a critical part of any charity’s armoury.

Perhaps the Sector needs a Charity Trip Advisor equivalent to help here – where anyone who uses a charity’s service or supports it is able to rate the experience on behalf of others.

Resilience

Returning to Ms Miller and her analysis of how much charities return to their beneficiaries each year, one of the problems with this simplistic approach is that it imagines charities to be at their best when they’re standing on a metaphorical street corner handing out cash. Kids Company spent 85% of their total income in 2013 on charitable activities according to their annual report – well over the True and Fair Foundation’s recommended 65% level – and look what happened. Charities need to have robust finances, able to plan ahead and develop a response to services that they may not even have imagined yet. Beneficiaries need to know that they will be supported for the duration of their need and not find the organisation has gone bust in a year. So resilience is important – sensible levels of reserves, a business model that is sustainable, funding that is secure and not just throwing money out the door at the homeless people sitting on the front step.  

If the charity sector can get to grips with the need for a curious and better informed public to understand what it does, how it works and just how much value it’s creating in society then it will be better placed to defend itself against the ignorant, simplistic attacks it’s seen in recent months. Although this would be a big project to get off the ground I like to think, looking forwards, that someone somewhere will be willing to play Charity Top Trumps with me one of these days.

Happy Christmas.

David Lale

Chair, Charity People Group

December 2015