Cathy Pharoah: Consolidation or growth? The sector struggles to resolve the contradiction

Under the current pressure for survival there are two different cultures emerging, says our columnist

Cathy Pharoah
Cathy Pharoah

There are two conflicting articles of faith in the current thinking about how the sector should deal with the shrinking economy and build a sustainable future. One is about rationing the available resources and promoting mergers and acquisitions; the other is about untrammelled entrepreneurialism and growth. One appeals to order and common sense to sort things out, the other to the power of competition and market forces. Unfortunately, the debate is not merely academic - it is also about where the sector's funds will come from in the future.

On the neat, civilised side of the debate, two donor advisers - one supporting local donors and the other high net worth families - spoke at conferences I attended last week: both expressed similar calls for more charity mergers, reduced competition and an end to wasteful duplication of resources. Both said donors were confused by the huge choice in charities they faced and inhibited by fear of poor returns on their donations. They called for greater efficiency and a reduction in the number of charities. Some mythical figures were flung around, but that's all par for the course. There are too many charities to be counted!

But for some, the answer to duplication of services is not collaboration, but heightened competition. The former TV actor Adam Rickitt, chief executive of Help Harry Help Others, told Third Sector his charity had rejected the idea of partnership, preferring to emphasise the special and unique value of its proposition.

Also on the entrepreneurial side of the debate, last month saw the launch of Big Society Capital's first funds and a new drive to create a thriving social enterprise sector. With an emphasis on stimulating growth and competition, this approach holds that only the market can drive efficiency in the sector. Social investment and government funds, such as Innovation in Giving and the Transition Fund, are aimed at sector creativity and innovation - scattering seeds from which winning ideas will grow. With public and private sector job opportunities closing down and high youth unemployment, the social sector is one of the few places where talented young people still have an opportunity to develop their skills and ideas.

Under the current pressure for survival, it seems, two different cultures are emerging. One is risk-averse; the other embraces risk. One looks for contraction, the other for growth. These require not only contradictory aptitudes in a charity but also different beliefs about what will be most effective in releasing future funds for the sector. Their stark differences make a nonsense of the call for the 'diversification in income streams' approach that many charities see as the answer to economic difficulties. This has been perceived largely as a challenge for the charity's capacity and attitudes, but the truth is that sector growth or contraction is a vital issue for potential donors and funders.

Cathy Pharoah is professor of charity funding at Cass Business School

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