Concentrating on money is unlikely to help charities become successful, says a new paper commissioned by the Northern Rock Foundation.
On the Money, published in July and written by Fred Robinson and Tony Chapman, professorial fellows at St Chad’s College, Durham University, argues that many people running organisations in the third sector think that money is the answer to all their problems.
This particularly applies to those running larger organisations, the paper says.
"The trouble is that the relentless search for money can start to become an end in itself – whether third sector organisations are currently in financial trouble or are thriving," it says. "TSOs should attend to issues surrounding key organisational objectives first and think about money second. Money is a medium – but not the only medium – for getting things done."
The paper says that a well-governed organisation should be able to recognise when a source of income will be able to help it achieve its objectives, and when it could do damage.
"If money is brought in to do something the TSO is self-evidently ill-equipped to achieve, then something will go wrong," it says. "Like as not, it will cost the organisation more than the value of the money brought in."
The paper analyses findings from data gathered by the researchers in three separate surveys conducted in north-east England and Cumbria. It says that income fluctuation is "endemic" to the third sector and that the success of a charity cannot be measured using the same criteria that would be used for a private sector business. But it says that some charities are not used to this fluctuation.
"Most TSOs, irrespective of their organisational ethos, live on a mixed diet of money from many different sources, including earned, given and borrowed money," it says. "We think that this is unlikely to change."
The paper says that making good decisions is about balancing an organisation's "altruistic mission to achieve social outcomes" and its need to be "resilient, capable and have sufficient assets to do its work"."We have come to a view that good governance means that a TSO has sufficient resilience to organise its assets and to achieve its mission," it says. "By definition, this means that organisational success is not, in our view, about financial growth or even stability."