Closing a charity might be beneficial for beneficiaries

Sometimes you can do more good by getting out of the way, says Rod Schwartz of ClearlySo

Rodney Schwartz
Rodney Schwartz

In a recent issue of Third Sector, I read a remarkable story that concerned the closure of the Otto Schiff Housing Association, which is chaired by Ashley Mitchell.

I was intrigued to read how Mitchell went about his decision to close the charity without any external impetus.

Mitchell chose to make such a move because, in his words: "Our first objective is to support the victims of Nazi persecution, and that client group is dying off.

"In 10 to 15 years' time, there will be none left, so we decided to give them as much help as possible immediately, by funding the charities that are best placed to help them."

Few organisations I am aware of take such dramatic action without the encouragement of creditors and the inability to make ends meet. That Mitchell took this decision on his own is unusual; that he gave away the proceeds of the winding-up to other charities is extraordinary.

Most see it as their ultimate responsibility to keep their charities operating; there exists a blanket presumption that this is always the best thing to do from the perspective of beneficiaries - but is it?

I was once involved in a charity that was very successful at hoovering up money for a particular cause. Unfortunately, it was not cost-effective when it came to service delivery. By remaining in existence, it was actually doing more harm than good because it was taking in money that others could have used more effectively.

Any suggestion we should outsource our services to the more efficient charities was met with scorn. The notion that we were not putting beneficiaries first caused murderous and self-righteous rage.

Such blatant neglect of client interest by some charities will become increasingly hard to justify in a resource-constrained environment. Boards should and will be challenged as to whether their continued existence is in the public interest or in the interest of their beneficiaries.

Trustees are frequently unwilling to take on these questions. I have seen incredibly bright and competent individuals leave their brains at the door when they come into trustee meetings. Mitchell speaks of how "trustees saw it as a networking thing and weren't doing anything useful for the charity". He replaced them.

Readers might point out that the case of Holocaust survivors is an extreme and emotive one, and they would be right. Yet I have had personal experience with those who use even this client group to further their career and institutional aims, at the expense of those who have suffered greatly and whose lives are shortly coming to an end.

Of course, the process of closure needs to take the interests of staff and other stakeholder groups into account and any charity taking this route needs to act properly. Private sector firms that act with such disregard for their core stakeholders - their shareholders - find their leaders booted out or are closed down. It is right that charities meet a similar test. However, unlike private firms, their core stakeholders rarely have a vote - and few have an Ashley Mitchell.

Rodney Schwartz is chief executive of social venture capital website

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