Martyn Drake: We must be comfortable in our own mixed-economy skin

Half of charity income is earned commercially, so remember that when the media attacks us for being 'too like businesses'

Martyn Drake
Martyn Drake

According to the Directory of Social Change, which is usually pretty hot on these topics, the subject of charity pay is about to be in the news again. 

Cue the inevitable media focus on a handful of outliers and the implication that true charities should only ever be small, entirely voluntary, local organisations with no overheads, helmed by retired majors or ladies who lunch.

Don’t get me wrong, there are probably organisations out there that fit that exact profile and are doing great things, but they represent only one part of the sector, arguably the part with which the media and politicians are most comfortable. 

It’s the other charities, those with big complex operations, big cohorts of paid staff, big turnovers, big reaches and big voices, that will be in the firing line and will inevitably be called out for fat-cattery and that most acidic of charity attacks, for “acting too much like a business”. 

I hope to be proven wrong, but I fear most will shrink back from challenging this ludicrous idea, that charities and businesses are two entirely separate species and that never the twain should meet. 

It is not only inaccurate; it’s also damaging to the sector and its future. 

Because this is the reality: even using the definition supplied by the National Council for Voluntary Organisations, which excludes universities and various other fee-earning non-profits, half of all charity income is commercially earned. 

Public fundraising, philanthropy and legacies, though incredibly important to the sector, collectively represent less than 25 per cent of its total income, with government and corporate grants, lottery funding and investment returns making up the final quarter. 

If that feels uncomfortable, I make no apology. I’m simply giving the facts.

Many charities earn some, if not most of their income through trading, and most of them are competing and collaborating with businesses every day, in all kinds of markets, from social care and justice, to retail, consumer goods and services. 

And as Karl Wilding, chief executive of the NCVO, recently pointed out, all charities are constantly competing with the commercial sector for talent, time and attention.

The third sector should have powerful advantages in that competition. 

Most businesses would give anything for the brand power of a national charity, or the incredible loyalty and commitment shown by colleagues, supporters and volunteers. 

Indeed, many businesses are stealing a march on the idea of mission and embracing purpose and social responsibility, their way paved by exemplars, ranging from the Body Shop to Unilever, who’ve built a body of evidence that having an ethical purpose need not distract from financial performance, but can actively enhance it. 

But whereas businesses increasingly embrace those synergies, as a sector we hold back. 

We’re concerned about confusing donors, being mauled by the media, taken to task by trustees. 

The competitive advantage of a crystal-clear dedication to social purpose goes unrealised, every bit as much as the gaps in commercial acumen go undiscussed, while selling remains the sector’s skill that dare not speak its name. 

We eschew the capabilities that the “two-species idea” tells us should fall only in the bailiwick of business, that they should define the unbridgeable divide between us.

The point is this: charities don’t need to “act like businesses”, but we can become far more effective and competitive as the social businesses that many of us already are. 

To do that, we need to recognise that certain “business” skills and attributes are fundamental for funding and delivering our missions. 

They don’t distract from our charitable aims; they enhance our ability to achieve them and because of that, they’re worth paying for. If we can’t embrace and champion that simple fact, how can we expect others to?

The charity landscape is extraordinarily diverse and operates a complex mixed economy, a mix that creates equally diverse requirements for overhead, skills, investment and, indeed, chief executive salaries. 

But we can’t ever hope to change perceptions, to shift the media narrative and to help people understand and appreciate the reality of our sector if we can’t first get comfortable in our own skin.

Martyn Drake is founder of the management consultancy firm Binley Drake Consulting

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