Opinion: Hot Issue - Should charities be compelled to optimise their economic impact?

The NCVO has told the Charities Bill scrutiny committee that the Charity Commission's objective of maximising charities' social and economic impact should not be used to define public benefit.

YES - Peter Hollins, director-general, British Heart Foundation

Philosophically, any charity should strive to maximise its social and economic impact - why otherwise would it exist? However, this is pretty meaningless as a serious measure of effectiveness.

It is perfectly reasonable to measure any charity in terms of, for example, its administrative costs to income ratio and whether it is improving or not. It is also essential that charities are accountable to their supporters for the impact they achieve. They therefore need to express their achievements as clearly and simply as possible.

At the British Heart Foundation, we continually measure our administrative efficiency and strive to define the impact that research we fund has had on improving heart health in the UK. There are huge social and economic benefits accruing from the reduction in fatal heart attacks in the UK, justifying many times over what we have spent on research, care and education.

While this is difficult to quantify, charities should be forced to look at what they spend and ask themselves whether they are making sufficient impact. Such an obligation would create a more level playing field, although it should not be allowed to restrict creativity and ambition.

NO - Belinda Pratten, policy development officer, NCVO

Of course charities should use their resources efficiently and effectively, and many are identifying ways of measuring their impact. But the key question for charities, their donors and supporters is: have they made a difference? And making a difference is not the same as optimising economic impact. Rather, it's about whether a charity has furthered its aims and objectives and, if so, how well they have done this.

It is not hard to think of charities that have little, if any, economic impact - a small self-help group, for example, or a charity whose purpose is to preserve a building or landscape. And nor should they - that is not their purpose. Some organisations, such as environmental charities, may have a negative economic impact, yet may still benefit the public.

The NCVO supports the draft Charities Bill because it makes clear the link between charity and public benefit. To then add a requirement that charities must have an economic impact just muddies the water. It is more important that charities are able to demonstrate that they provide public benefit - that is what being charitable is all about.

NO - Judith Brodie, chief executive, Impetus Trust The charity sector is wonderfully diverse and charities have a wide range of objectives and impacts they wish to make. For many, economic impact may only be part of what they are trying to achieve - defining economic impact in relation to charities is some considerable way from being an exact science. We have to ask: on whom is the economic impact? Charities have many stakeholders, and a positive economic impact on one group may economically disadvantage another. And who judges when that balancing act is optimised?

With a lack of clarity in the objective, compulsion is difficult. There is clearly progress to be made in the debate on impact measurement. Progress will become more significant when there is greater ownership by charities of that agenda, and it is common practice for charities actively to pursue efforts to assess social and economic impact and value for money. The more we try to get to practical and meaningful impact measures, the better we will become at it.

A culture shift is needed on impact measurement. Many charities are already showing the way. But compulsion without clarity is not the answer.

YES - Fiona Halton, director, Pilotlight (venture philanthropist)

At Pilotlight we have developed an evaluation tool that enables our client charities to measure both their effectiveness, and the impact our members' advice has on their organisation, in social and financial terms.

This isn't easy. It can seem counter-intuitive to imagine you can put a cost on an individual's happiness, for example. But even 'soft measures' have economic consequences - crime and ill-health being two obvious examples.

Effective evaluation demands clear objectives and measures of success, and an analysis of other providers that are meeting the same need. This exercise is crucial to the future of small charities in its own right.

And, of course, being able to demonstrate effectiveness helps to secure funding. Putting a monetary value on what resourceful small charities do will further prove their worth as social entrepreneurs.

A changing climate of giving is already 'compelling' many charities to measure their social and economic impact. But measurement is a means to an end - it should enable charities to help more people more effectively.

Anything else is just extra paperwork.

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