A safer outcome today - or a better one in 10 years?

Absolute Return for Kids makes it clear in its name how it measures its impact on beneficiaries. How many other charities have thought about how they invest in their beneficiaries, asks Helen Simmons of the Diocese of London

Helen Simmons
Helen Simmons

The annual dinner of the charity Absolute Return for Kids brought out huge numbers of the rich and beautiful to show their appreciation for charity. Kate Middleton dazzled in a shiny frock, Prince William joked about getting wolf whistles from admiring women and £17.2m was raised for children's charities.

One of the things that was interesting to me was Ark's name. Is the charity called this because its founder is the financier Arpad 'Arki' Busson? Or is it because it raises money from hedge funds (which are also called absolute return funds)? Or is it because it has a set of objectives that tries to break down what is actually meant by 'achieving an absolute return for kids'?

I've spent a lot of time thinking about how charities can measure their impact, and it's unusual to come across a charity that has its preferred method of impact measurement right there in its name.

I started to wonder how Absolute Return for Kids would differ from any charity that might be called Real Return for Kids or Total Return for Kids - apart from being shortened to the less-pronouceable Rrk or Trk.

A charity focused on the lives of children would be looking for investments that can only go up, not down, in the future - something that continues to pay dividends over the long term and never goes bust. Does this terminology really cascade through Ark's operational plan?

If it does, the charity might look to invest in children in a way that capped the downside risk, but would not be able to wipe it out completely. There might be low-risk investments in many different interventions that helped many children, creating steady and gradual improvement over the course of their lives. This investment might be drip-fed over time or could focus on key points in the life cycle of the child where extra attention and investment is needed.

It would be good to see more sector organisations combining financial measures with qualitative measures in order to show outcomes for beneficiaries. The subject that really interests me is whether we are getting the best outcome per pound.

Now is a time when it's particularly important to think in terms of rates of return when deciding on your goals. When charities are forced to reduce their budgets in times of cuts, that's when they really need to focus on which activities provide the greatest outcome per pound.

It's the holy grail of performance indicators for a finance director at budget time, but it's a slippery character. We've got better at measuring it, but we're still a long way from knowing all the answers.

I am now wondering if I might extend it in future to encompass risk and return. Do we want to prioritise services with the highest outcome per pound based on today's measures, or do we try to fund better outcomes in 10 years' time? Should we fund a risky intervention that we think will bring higher total benefits to our beneficiaries, or look at safer outcomes? Do we know the distribution of our beneficiaries?

A charity often provides different services to individuals at different times. A health charity, for example, might ask if it is providing the right balance of information, early intervention, lifestyle support and palliative care. The question then to ask is: once we have it, how do we best feed it into the budgeting process? Answers on a postcard, please.

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