"Charities’ costs eat up 78% on donations." Well, that Sunday Times headline certainly made my heart sink again. Another investigation of fundraising costs without understanding how it works? Another gratuitous pop at charities?
There was an element of that, of course, and there was some inevitable knee-jerk defensive reaction on Twitter. And yet…
The Sunday Times was reporting on a recent Charity Commission investigation of a selection of charities dependent on direct mail for their fundraising, which, indeed, seemed to absorb between 63 per cent and 90 per cent of their expenditure. Beneath the headline it became clear that these charities were using a US marketing firm, which delivered a rather paltry net income to the charity after deducting its expenses.
The headline did leave the impression that this was widespread practice (which I strongly doubt) and that there were more skeletons in the sector’s cupboard that the Charity Commission could be looking at (which I doubt less – and would put money on certain newspapers doing so). Another website reinforced that impression by adding that these were "leading UK charities" – hardly, but it's a detail that would be lost on readers.
At face value, it’s quite reasonable for some fundraising activities to cost a high proportion of the immediate income raised to secure larger long-term income. Charities need more long-term income to secure their programmes. But you’d expect to see that return, and not run year on year at that sort of 70 per cent cost.
That’s not what seems to have been going on with the charities investigated here. It seems to me that these are mostly, if not all, UK fundraising operations for US-based charities, which wasn’t made explicit in the article. What I recognised in the story were some elements from my time fundraising in the US 10 years ago – not all inherently bad, but not to the taste of most UK fundraisers.
First, the general mass-mailing approach that is characterised as "churn and burn". In the US, print, data and postage costs are all low enough to make direct mail the most cost-effective and dominant form of fundraising, at huge scale. Concerns about supporter experience and hounding the vulnerable, which consumed the UK last year, are not top of mind. It’s cheaper to keep mailing huge volumes than worry too much about supporter retention and why people don’t give again.
Creativity, engagement and message are secondary to techniques that drive return on investment. It’s where you get the heavy use of "premium" mailing – the freebie cards, stickers and more – mentioned in this Sunday Times piece, and the prize draws. Charities would advertise their supporter data on the list-rental market (something I once described at a conference as "pimping", which didn’t go down too well). Well, "it works…"
Then there’s how US marketing agencies operate. I still remember the scene in The West Wing where President Bartlet himself haggles with the advertising guru over the percentage he’ll take for the campaign direct mail. It’s a model that has rewarded agencies on volume in the past, so it's no surprise they have been keen for charities to do more. I don’t know how widespread it is, and I don't know of a marketing agency in the UK that works this way.
However, marketing agency investment has been beneficial to some charities, underwriting fundraising campaigns to allow them to grow. For years now, large US charities have expanded their fundraising operations into Europe. It’s a slippery slope if, before you know it, the agency is running everything and all you have to do is take the cheque for the net income at the end (which seems to be the case here).
Again, investing in new markets is no bad thing in itself because it engages new constituents. Several large, high-profile and very effective UK charities started that way, with investment from the US and fundraising based initially on the US model of low-cost, high-volume direct mail. Several UK charities have similarly been investing in new country markets around the world. Concern for causes and a culture of giving are universal. Fundraising techniques cross borders.
But the charities investigated by the Charity Commission don’t seem to fit that model either. They aren’t necessarily large, established and credible US charities. They appear to be small, with easy causes related to religion, hunger and cancer, using an agency to milk the UK from afar. As well as the same marketing agency, the charities share the same UK-based lawyer. Some have no website, others just a basic one on a template. A couple share the same London address, and the same trustees, based in the US. Some of it feels fishy indeed.
So if anything, The Sunday Times, in its haste to cast lazy aspersions on the charity sector at large, might have missed a more important story that really should be investigated – of charities playing fast and loose with governance rules and UK standards, and, as they have succeeded in doing through this story, bringing the sector into disrepute. No one should defend that.
Matthew Sherrington is a charity leadership and communications consultant at Inspiring Action. @m_sherrington