Charities could learn from private equity

There has been a lot of fuss recently about the less savoury activities of venture capitalists and private equity companies.

They are accused of buying up companies, selling off assets, sacking staff, undermining trade unions, borrowing against the future to pay themselves unjustified dividends - and doing all this under a cloak of secrecy while making billions.

The GMB union has been at the forefront of efforts to bring attention to private equity pirates and their asset-stripping ways, warning that they are bad for staff and bad for business by concerning themselves only with short-term value and results, not the long-term health of companies and the economy.

We know that what works or fails in the private sector does not always apply in the charity world; the rules are different, and ditto the motivation, values and expectations. So could the evils of private equity be rather less awful if practised in a non-profit context, stepping up the pressures for cost-effective performance?

Raking over the missed opportunities of Gift Aid and the unfulfilled potential of payroll giving, The Economist noted that all the efforts of fundraisers have, in the sense of baking a bigger giving cake, been in vain, because the overall level of giving has "just about kept pace with the rate of wealth creation during a 15-year economic boom, but no more than that".

By the by, it may suit Lindsay Boswell, chief executive of the Institute of Fundraising, to mark the 20th anniversary of payroll giving with a lot of guff about its fantastic impact, but £84m a year and less that 3 per cent of the population using Give As You Earn is what most would characterise after two decades as a fundraising failure.

As The Economist highlighted, the NCVO is more realistic - it reckons that 42 per cent of all giving comes from about 1.5 million people. The Institute for Philanthropy suggests most giving is done by a distinct and shrinking minority who attend church, have mainstream political allegiances and take a broadsheet newspaper.

If the cake stays the same or shrinks, it may be time for a private equity model that allows charity to do more with less, cut costs and staff, focus on results and bring a major reduction in the number of charities through mergers and acquisitions, thus ensuring economies of scale and forcing out non-performers. Is it time for charity to eat itself?

• Nick Cater is a consultant and writer:

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