Can a charity be run like a business?

Alien values are now invading charity boardrooms, warns columnist Wally Harbert

Until the 1980’s, large national charities tended to be inward-looking and slow to change. The introduction of competitive tendering was the sector’s Big Bang. Change was sometimes seismic. There are vivid accounts of long serving volunteers being unceremoniously dumped by men and women in suits.

The sector is now urged to become more business-like. Management skills are seen as more important than technical know-how. Trustees search more widely for chief executives and have increased their salaries to appoint candidates in their own image. We know that a business cannot be run like a charity but can a charity be run like a business?

The situation is not new. Big business colonised professional football decades ago, creating huge disparities in pay while commonly failing to pay the living wage, pricing low income fans out of the stands and adopting dubious merchandising practices. These alien values are now invading charity boardrooms.

Fundraising has become more aggressive, sometimes displaying the same lack of integrity that characterises scandals in big business. As the sector struggles – sometimes unsuccessfully - with equal pay and the living wage, there are demands for trustees to have the power to pay themselves. Political lobbying is more strident but lacks the lubricating power of political donations so is more easily ignored.

In former years the sector’s USP was its dedicated and poorly-paid workforce. Staff are still generally poorly paid but a cynical public is entitled to argue that chief executive pay has caught up. However illogical, many people are unhappy if their donation for the poor and needy is pocketed by someone who is better off than themselves.  National charities need another USP.

Charities legitimise their claim for public support by helping to build cohesive communities and by drawing minorities into the mainstream. We desperately need more communication between diverse groups in society and know that leaders can emerge from the most disadvantaged communities to galvanise residents into working towards greater mutual understanding. But they benefit from outside support.

Not all charities possess the specialist skills required to empower communities and some have no desire to do so. Philanthropic charities are a Victorian invention needing regular updating and renewal. Perhaps some of the largest have run their course and their work will, in future, be undertaken by new and more responsive locally-based organisations.  Charities that live by the business ethic can expect to die the same way.

Another feature the sector must cultivate is its ability to empower individual service users who, too often, are excluded from decision-making. Power lies with budget-holders, often located at a distance. This leads to unresponsive services and a sense of powerlessness.

The contract culture thrives best with central control and uniformity whereas quality social services require devolved power and the exercise of professional judgement both of which are costly. Greater control by users needs more ability from practitioners and skilled, professional leadership which, increasingly, chief executives in the sector cannot provide.

It is heartening that ACEVO and NCVO are discussing how to promote better public understanding of the sector but, by encouraging the belief that charities should be run like businesses, both organisations bear some responsibility for current failures. The problem is more fundamental than poor PR.  By better respecting the needs and wishes of all its stakeholders, the third sector can become a third way; otherwise, a government that champions the Big Society and localism will have every reason to reassess the way public service contracts are awarded.

Wally Harbert has worked in the public and voluntary sectors. His book about older volunteers, Baby Boomers and the Big Society, was published in 2012.

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