This summer will be remembered not only for the remarkable rise of Jeremy Corbyn but also for the rapid and dramatic fall of Camila Batmanghelidjh and Kids Company. Such falls from grace are commonplace in business or politics, but not in our sector.
It was a story that had it all – cash distributions, unpaid staff, flunkies to open the chief executive's bottled water. But lost in all of this has been the deeper question of what really went wrong and why. The book will one day be written, but in the meantime here are some thoughts from someone who, like Camila, founded a charity, grew it and hit problems on the way.
The first thing we should be clear about is that the failure of Kids Company wasn't just about Camila and her ways, peculiar though they were. She was simply a media-friendly example of a type that is quite common in our sector – the charismatic founder. I know a few of them. Indeed, by some accounts, I was one myself. I founded the disability charity Speaking Up in 1994 and ceased to be chief executive in 2010; eventually it merged with Advocacy Partners to become Voiceability.
I would urge you to resist the temptation to blame Camila for the demise of Kids Company. People like her who have bold new ideas and can do something big with them are rare in this sector – so much so that, when they come along, they need to be given some licence, as they are in the private sector. Camila's founding insight – that state-provided children's services fail to deliver love – was profound and true. Kids Company began life as a perfectly legitimate experiment in new techniques to address this love-gap. Such experiments need space to develop under the close direction of a founder. This is the nature of entrepreneurism, recognised in other sectors in the form of so-called skunkworks projects, which allow new ideas to develop and flourish, away from the constraining hand of conventional governance.
But this stage can't go on for ever. Eventually you have to settle down with a model and roll it out. This was the stage when the cracks at Kids Company started to show. Getting a sufficiently strong team around Camila to convert her ideas into long-term, workable programmes proved very difficult. Talented people were brought in, but many left through a revolving door, unable to cope with Camila and an organisation that, according to one insider I spoke to, still felt like a start-up – even after 17 years.
A big reason for this was the board of trustees. It failed to evolve into what it needed to become if Kids Company was to succeed in the long term. The problem is that early boards in our sector tend to be part of the founder's personal support network. My first board was like this. It was there as much to sustain and support me as to challenge me or hold me accountable.
Boards must grow too
As organisations grow, however, boards need to grow too. They need to develop a point of view, weigh risk, influence strategy and hold the chief executive to account on behalf of donors and users. For founder-chief executives, this can hurt. But if a board doesn't mature in this way, it simply remains a fan club for the chief executive.
Of course, I wasn't at Kids Company, but this, I fear, is what happened there. Nearly 20 years in, that board was still unable to exercise any genuine, countervailing influence. It is notable that the chair at the end – Alan Yentob, creative director of the BBC – was also the chair on day one. It is not unreasonable to suggest that a different chair, with no connection to the early years of Kids Company and with a strong background in managing growth, would have been able, as Yentob was not, to address the challenges to Kids Company as a fast-growing charity.
As for the other trustees, none of them was apparently calling Camila out either. After all, this was Camila, who had the Prime Minister and Coldplay in her pocket. Can you see many trustees feeling comfortable trying to put such a formidable chief executive in her place?
So what does the sector need to learn from Kids Company? As I said at the beginning, the charity sector lacks the mechanisms that you find in the private sector for moving founders on. Had Camila set herself up in the private sector, she would have been out within five years and her company, based on her playbook and brand, would have been run by blue-suited MBAs. Had she resisted this, the forces of hell would have descended as investors and board members threatened to jump ship. Her hand would have been forced. This is how growth businesses tend to operate.
In the absence of this type of mechanism, our sector has to create other types of inducements and pressures on founders and their boards. For me, it was the friendly-but-firm voices of funders who suggested that I had perhaps served my purpose and new hands were needed. But I had activist funders and most charities don't. So I think we need a mixture of carrots and sticks.
Let's talk first about sticks. By this I mean tougher regulation that allows remedial intervention. Compared with most regulators, the Charity Commission is gentle, and it isn't geared up to get stuck into problematic charities before they go belly-up. Many of the problems experienced by Kids Company were open secrets in the sector for a long time before its collapse. Turnaround was, for a long time, perfectly achievable.
Tougher regulation, ideally with Ofsted-type ratings, is needed urgently. In the public sector – and, indeed, the private – we have seen huge progress in external regulation and evaluation in the past 20 years. In 2015, you cannot run a shocking hospital, school or private care home without, fairly quickly, having a light shone upon you and an improvement regime sweeping in.
The third sector needs to get over its squeamishness about this. Kids Company was not some kind of weird outlier, as the sector's talking heads were desperate to tell us this summer. A significant proportion of UK charities suffer from exactly the same maladies as Kids Company: opaque finances, dubious impact reporting, chaotic management, serious operational weaknesses, poor risk-management. Sorry, folks, but the time has come to bring charity regulation up to the level found in other sectors.
That's the stick. Second, we need carrots. We must consider afresh how we support chief executives and chairs to improve their act. This isn't easy. Remember, growing private-sector businesses get flooded with investment and talent to do the job properly. Charities, if they are lucky, get the help of a long-term funder, as I did from Impetus-PEF. But most get nothing. The risks associated with growth in our sector therefore often go unmitigated.
This is terrifying. I recall a time, early in the growth of my own organisation, when I knew I was out of my depth. I had very little to draw on beyond my supportive, but underpowered, board. Things were not as murky as they apparently were in Kids Company, but there were times when we were very exposed to certain risks. Every sector now, bar our own, has extremely well-developed mandatory development programmes for its top leaders. We don't let headteachers run schools unless they have been back to learn how to do it properly. Why not something similar for leaders of charities?
To conclude, Camila wasn't a bad apple, but an exceptional founder who ran beyond her own usefulness and became a liability. There are thousands of Camilas right across our sector, skating on the same thin ice. Whether she liked it or not, Camila should have been supported to make the right moves at the appropriate times – and if she had, Kids Company would still be here today. It's not all her own fault. For today at least, I can say: "Je suis Camila."
Craig Dearden-Phillips is managing director of Stepping Out: firstname.lastname@example.org