The sudden collapse of Kids Company took the most of the nation by surprise this week. How could a £24m charity, led by one of the third sector's best-known figures, disappear almost overnight? And what lessons does Kids Company offer for other charities and social businesses?
As with all businesses that suddenly implode, the problems run long and deep. Since it was set up under some railway arches in 1996 by Camila Batmanghelijdh, Kids Company has had a remarkable rise, largely due to the alpha-networking skills of its founder, who was easily the sector's most publicly recognisable figure.
So what went wrong? I would point to three related things: founder's syndrome, weak governance, and under-developed executive management - all factors that are common in fast-growing businesses of all kinds.
Firstly, founder's syndrome. This is a well-researched phenomenon whereby the driven, bossy person who sets up a successful venture comes to believe that they are right to lead it beyond its entrepreneurial phase. In truth, it is seldom that the skill-set needed to get a venture going is the same one needed to make it work and scale it up. But some founders really struggle to see this and then dig in, often actively undermining the people they bring in to help them. So rather than, over time, allowing other people to become associated with the operation of Kids Company and taking on an externally-facing relationships role, perhaps coupled with a wider public role, Camila was calling the shots right until the end.
Secondly, weak governance. Despite having an illustrious chair in Alan Yentob and an impressive-sounding board, the problems of Kids Company suggested that the core task of the charity's board - to understand and address risk, to set strategy and to keep executives accountable - was not being properly carried out. This is not always entirely the fault of trustees. The quality of governance Information in many organisations is astonishingly weak, making it very difficult, even for the most enquiring of trustees, to get to the heart of the matter. Often a charity won't have the capacity, resources or expertise to generate this information.
Added to this, the role of a charitable board in setting strategy and ensuring accountability is made far harder when the chief executive is herself a formidable force inside and beyond the organisation. Every trustee knew how dependent Kids Company was on Camila's ability to bring in the money. This would have given her enormous influence on trustees, who would have been mindful of this when considering any challenge about strategy or performance.
Thirdly, under-developed executive management. While Camila didn't surround herself with pygmies, what is clear is that she did not grow a cadre of senior people who could run a tight ship, operationally and financially, in the long term. There appeared to be a high level of churn at Kids Company, particularly at senior level. I have spoken to a number of very good people who took on senior roles there but left because they were not able to run their part of the business in the way they saw fit. This led, in the end, to a dangerous situation because one of the mitigators of risk around a strong CEO is a brilliant team who are comfortable about challenging the chief executive when they see the need for change or when the chief executive interferes unduly.
So what can be learned from this sorry tale? While Kids Company played a dangerous game in courting prime ministers and pop stars, the wider lessons are more prosaic: founders are amazing but potentially dangerous people whose roles need to be defined as an organisation develops beyond its baby-years. Boards of trustees cannot be just cheerleaders for charities but must insist that the risks a charity is running are at least understood. And, finally, executive power in a sustainable organisation needs to be distributed rather than centred on one sovereign individual.
Craig Dearden-Phillips, is Managing Director of Stepping Out