Joe Saxton: How should we measure success of charity chiefs?

It's all about profit in the private sector but the voluntary sector still hasn't worked it out, argues our columnist

Joe Saxton
Joe Saxton

Barely a week goes by without the chief executive of a charity leaving after several years in post. Their colleagues congratulate them on their extraordinary achievements. The press office puts out a statement thanking them for their great contribution and saying how difficult it will be to replace them.

But how do we know if they really have done a good job? How do we measure success in a world where profit isn't king? The charity sector still hasn't worked out how to judge what sort of job an outgoing chief executive has done.

In the commercial sector it's relatively easy to decide this. It's about profit. Moreover there are probably another 10 or so measures: turnover, gross profit, share price, earnings per share, return on capital, EBT, EBIT, EBITA, EBITDA (I'm just showing off now), to name but a few. The bottom line is that when an organisation exists to make a profit, measuring that profit is relatively straightforward.

In charities we probably have but a single measure most people would use to judge a charity's success: income, or growth in income to be precise. So a leaving chief might be eulogised because they have grown the organisation from £1m to £2m, or £10m to £20m. The reality is that income is, at best, an incomplete metric. A growth in income might tell us more about the skills of the fundraising director than the chief executive. More importantly, a static or even shrinking income might tell us more about the economy and the impact of austerity on those charities that get substantial income from government.

Measuring a charity's success, or its chief executive's, matters in the end because we want charities to do the best possible job, to make the biggest impact on their beneficiaries and their causes. Donors and funders want to know whether they are supporting organisations that do a good job with their money. Service users want to know that they are getting support from organisations that do a good job, especially if they are able to choose between charities.

There are a number of other measures a charity might use to judge its success. Has it got a better profile and following in social media? Is its image clearer among its donors and service users? Are staff and volunteers more motivated? Has financial health improved? Is the pension deficit larger or smaller? Ultimately, the impact on beneficiaries must be the most important measure - they are who the charity exists to serve - but it is also the most difficult to measure.

That's why the growth in impact measurement is so welcome. The sad truth is that we don't yet have an agreed basket of ways in which organisational success can be assessed. The simplest answer probably remains this: send in the consultants. I have previously argued for an Ofsted-style agency to measure charity performance. I don't underestimate the difficulties of this kind of approach, but if we wait for the perfect mechanism we will get nowhere.

No matter how successful charities get at measuring their success, I still wouldn't expect the press release for a departing chief to say "it's too early to tell whether they were any good; we'll let you know in five years". That shouldn't stop the sector from finding better, more universal methods of measuring a charity's success.

Joe Saxton is the founder and driver of ideas at the research consultancy nfpSynergy


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