Shutting down: the greatest measure of success?

Charities have a curious feature that sets them apart from other organisations: they exist to put themselves out of business.

Charities are created in response to a perceived problem or injustice, and strive to get rid of it. So, if a cure for cancer was discovered, for example, there would be thousands of organisations without a cause left to fight for.

Surprisingly, not many charities acknowledge this possibility. In NPC’s experience of analysing charities, it is a very rare occurrence to find a strategic plan that explicitly considers what might happen if the problem they exist to tackle ceased to exist.

Although ridding the world of cancer seems a distant hope, we never really know how close we are to a solution. After all, who could have predicted the dramatic decline in the number of homeless people sleeping on streets in the UK over the last ten years? And who can second-guess advances in technology?

Earlier this year, a crime prevention charity in Wales decided to shut because it claimed that the problem it sought to address had gone away. A trustee of the charity was quoted as saying the closure as excellent news. ‘Would it be a problem if we needed fewer lifeguards?’ he said. ‘Of course not: it would mean fewer people needed to be rescued. This is the way we have looked at it. It is important that charities remember they exist for the benefit of others, not themselves.’

Asking the question ‘what would happen if the problem went away?’ reminds us of why charities exist - to find solution to a problem or injustice. It shows us that without a community to serve, charity has no purpose. Given this, in a perverse way, reaching a point where it is able to close down is perhaps a charity's greatest measure of success.

Scotinform are misinformed about administration costs

I just had a minor heart attack while reading an article on the Third Sector magazine website reporting that the Office of the Scottish Charity Regulator should publish charities' administration costs. Apparently a market research company Scotinform made the suggestion in an independent report, after surveying members of the public about their views on charity regulation.

As I've blogged before, and as has been eloquently spelled out elsewhere recently, administration costs do not help donors to find the best charities. The best charities are those that use their resources wisely in order to maximise their impact: the number of homeless people who find long-term jobs, children who are happier and more successful, or families who are freed from unaffordable debt. The amount of 'administration' involved in achieving these aims will vary wildly. Donors should look for the impact their money buys, rather than the amount 'wasted' in support costs. (There is also a more pragmatic point: each charity records its administration costs in different ways, so comparisons aren't even possible.)

And OSCR doesn't even publish charities accounts online (unlike the Charity Commission for England and Wales). Reporting on misleading figures like administration costs without publishing the full accounts would do much more damage to the public's perception of charities, and could have devastating impact on excellent charities, achieving great results, which happen to cost a lot money to run.

The impact of bullying on well-being

Yesterday a teenage boy was convicted of racial harassment for the serious and systematic bullying of another young person. Emma-Jane Cross, CEO of Beatbullying, a UK charity, said a 'critical and long overdue precedent has been set by this conviction'.

Beatbullying is one of the charities with which NPC is piloting its charity well-being questionnaire, the interim results of which are recently published in the report Feelings Count. Bullying is a serious issue in schools, is closely linked to low-self esteem and can result in children missing school and getting poor exam results.

Beatbullying works with victims and perpetrators in schools to tackle bullying. Until now they have used feedback forms to evaluate whether incidents of bullying have decreased, but have found it hard to put a number on the less tangible outcomes of their work like improving self-esteem or friendships.

We now have the data back from about 100 children in four schools where Beatbullying has worked, and it is being inputted. I am hoping that the results will be really useful to Beatbullying and other campaigners.

The baseline could show the full impact of bullying on different areas of well-being like self-esteem and emotional well-being, providing further evidence of how serious an issues this is. The follow-up questionnaire could prove how Beatbullying has helped these children, by building resilience or improving relationships, providing a case for further funding. It may also show who Beatbullying is working best with, who it is working less well with, and help it to adapt and improve its services.

A 'de-averaged' world

A friend of mine works in the music industry. It is an industry in crisis due to the rise of downloads and digital piracy (when was the last time you bought a CD?), and is desperately seeking ways to remain profitable.

The solution being talked about is to create lots of different versions of the same product to cater for different consumers. This would see the death of the standard CD, replacing it with a suite of other differently-priced products: the £6.99 download, the £19.99 special collectors edition, the £200 gold version signed by the band, and the £3,000 dinner-included deluxe experience. This is a recognition that even fans of the same band have different preferences and purchasing power.

To describe this phenomenon my friend uses the term ‘de-averaging’. The message is simple: the Henry Ford adage ‘any colour as long as it’s black’ is no longer a viable strategy.

We could see de-averaging as echoing other trends towards greater choice and variety in our lives – for example personalisation in public services, the rhetoric of choice in politics, and even the bewildering variety of niche cable TV channels.

I think there is a lesson in this for everyone, including charities. In a de-averaged world charities are already learning that they must work harder and harder to engage with clients. People no longer respond to a standard product and are beginning to expect to be greeted with a more individual offering. The same is true for donors. We want to hear about the things that we care about, and get grumpy when we don’t.

De-averaging may be a profoundly unappealing word but as a concept expect it to run. You heard it here first.

NPC’s well-being project - Helping charities put a number on happiness

Our report launched today, Feelings count, shares early findings from two of the charities testing our new well-being questionnaire. The questionnaire aims to help organisations working with children measure their impact on children’s subjective well-being.

The aim of many children’s charities is to increase the happiness of the children they work with. This might be through boosting self-esteem or helping to them to build better relationships with friends and family.

Yet many charities working to improve children’s well-being say that it is impossible to put a number on the work they do.

At NPC we say that while it may seem strange to try and put a number on a feeling, it is certainly not impossible. And we argue that children’s charities should not shy away from measuring their impact just because it is challenging.

NPC wants to challenge charities to achieve impressive results and to raise their accountability to funders and to themselves. We believe that charities need to work harder to measure their impact. Only in this way can funding be channelled to the most successful interventions and away from ineffective or even damaging interventions.

Which is why we have developed this questionnaire so that charities will have the right tools at their fingertips to do this. The questionnaire is designed to evaluate the impact of services on seven aspects of 11 to 16 year old children’s subjective well-being, including self-esteem, resilience and relationships with friends and family. The report Feelings Count reports the early findings from two of the five charities piloting the questionnaire, and proves its potential as a highly useful tool for charities, funders and schools.

NPC plan to continue refining the questionnaire before launching it online in October 2009. It will be freely available for registered charities to download and we hope many children’s charities will jump at the opportunity to finally articulate their full impact in a way never possible before. We welcome your comments and suggestions on any aspect of the well-being project.

Networks aren't the answer for boards: get some fresh blood for a change

An interesting post here in response to David Walker's review of governance in financial institutions in the UK. Walker suggested that non-executive directors of finance firms should double the amount of time they spend on the role, which would reduce the number of such positions they could hold. The FT is concerned that there might not be enough skilled professionals to fill the resulting vacancies: The Gingerbread Girl suggests that there are thousands of suitable people out there, they just don't happen to be in the same networks as existing board members, which is how most new recruits are found.

Trustee boards in the charity sector in the UK face remarkably similar problems. Most (around 80%) recruit new board members from their networks. 'Word of mouth' is great for getting people who you know and trust, but it means that you are looking in a very small pool of people. It means that boards are often full of people from similar backgrounds: nearly half are over 60. Homogenous boards risk falling into certain habits, and may find it hard to challenge themselves and change their behaviours. (click here to read NPC's report on the issue.)

Furthermore, as Gingerbread Girl points out, board members don't have to have years of experience of whatever sector they are governing. However,

"they must be able to formulate questions, drive for answers and resist the temptation to cosy up to the CEO and other members of the board. Above all, the Western virtue of courage is what is required: courage to admit when you don't understand something and to make sure you get the answers you need before you take decisions."

Ditto to charity trustees.

So come on boards, be a bit more adventurous and look beyond your usual suspects, and get some bright young things on board. A step into the unknown it may be; but it will help you to modernise, reenergise yourselves and, hopefully, be more effective.

We found this post through Bloggers Circle, a new initiative being spearheaded by Matthew Taylor at the RSA, to make sure that interesting posts get a wider audience.

What it takes to be a successful charity entrepreneur

Sir Alan Sugar, Britain’s best known businessman and boss on the hit TV show ‘The Apprentice’, claimed on its final episode that it was ‘impossible’ to describe what makes an entrepreneur.

Much has been written and said about entrepreneurship. As far as there is consensus, it seems that successful entrepreneurs share similar characteristics: they are highly motivated, do not give up easily, and enjoy at least some element of risk-taking (even though it is usually with someone else’s money). Surprisingly, personality traits do not seem to be very significant.

Financial incentives are important to explaining entrepreneurship in business. But this is lacking in the non-profit world. So what drives social entrepreneurs?

Together with other NPC’s analysts, I’ve spent six years meeting chief executives from a range of different charities up and down the UK. I’ve noticed that all the best CEOs share the same trait. They get up in the morning and go to work because there is something that they want to see change. This might be the disabled children that grow up without the same opportunities as their peers, it might be the tens of thousands of children whose childhood is made miserable by bullying, or it might be the way that homeless people seem to have become an accepted part of the street furniture. Very often this desire for change stems from direct experience.

When in doubt, the literature on entrepreneurship resorts to the word ‘passion’ to describe what makes somebody stand out. I think it is useful to be a bit more specific than that. To be a successful entrepreneur, alongside lots of other qualities, I think that you need to be angry about something.

I’m no expert in psychology but I’m told that anger is one of the most basic of human emotions – a strong feeling caused by a person or thing that opposes, displeases, or hurts one. And it has been shown that it can be a very powerful motivator, even more so than ambition, curiosity or self-interest.

So far from being soft and cuddly, surely an effective charitable sector has to be an angry one. Accurately capturing what makes a successful social entrepreneur may always remain elusive but I think a good measure of anger must be thrown into the mix.

83p in every £1 you donate to us goes directly towards saving children's lives

This was in an email I just received from Save the Children: "We're committed to ensuring as much money as possible goes to where it is needed most. In fact, 83p in every £1 you donate to us goes directly towards saving children's lives."

At NPC we steer well clear of using efficiency measures such as these as we think that they are misleading and miss the point. (This isn't a criticism of Save the Children, it's a marketing tool used by many many charities.)

Dan Pallotta has been writing a great series on his Harvard Business blog laying out the many reasons why efficiency measures are misleading. Worth a read: http://blogs.harvardbusiness.org/pallotta/

Wasted research

Margaret McCartney's regular health column in the Financial Times likes evidence-based medicine. Her column this week says that 'to pretend there is no need for evidence—or to ignore it—means ignoring the duty to ensure patients get the best possible care.' This is something that New Philanthropy Capital appreciates; substitute 'patients' for 'beneficiaries' and we could have made that statement.

This week, Ms McCartney wrote about the duty of researchers to publish the research that they gather. She calls it a scandal that fewer than one in five studies in cancer that had been registered on the website http://www.clinicaltrials.gov (a global register that ensures that current trials are in the public domain) was subsequently published. This means that people are making decisions without knowing all the information, and that research design is too often wasteful.

The same is true in the non-profit world where charities and grant-making trusts have lots of research which is not published. Grant-makers have reviews of what worked in their grants, and charities have evaluations of their interventions that are not available to everyone. The result of this is that other funders make decisions about funding interventions without knowing all the information; charities start new activities without knowing whether or not they will work; and research is repeated because it is not shared properly.

In the medical world, some pharmaceutical companies have now pledged to publish all their research, but the non-profit sector still does not have this commitment to public information. Without a similar pledge from grant-makers and charities, the scandal of research not being used to improve services will continue. And beneficiaries will not be getting the best possible care.

Can you put a number on a child's happiness?

We think you can. Our report, Feelings Count, launched next week, reports the exciting early results of a pilot project developing a questionnaire to help children’s charities measure their impact on children’s well-being.

The report will be freely available to download on our website from Monday. We welcome any comments on the well-being project and the report.

Rumours and regulators

This week, a report on the finances and management of a prominent UK homelessness charity, Novas Scarman, will be released. The auditors BDO Stoy Haward have been investigating the organisation—which was formed from the merger of Novas Group, Scarman Trust and PATH in 2008—for the past nine months. According to the Telegraph, the draft report raised concerns of ‘cronyism, nepotism, bullying and mismanagement at the heart of Novas, and questioned Mr Wake's [the founder and chief executive’s] professional relationship with three female executives at the charity’.

NPC researched the homelessness charity sector a couple of years ago. Our judgement was that the charities working in this difficult field are, as a whole, well-run. They care about important issues such as results-measurement, increasing people’s independence and user-involvement. They invest a lot of time and effort into ensuring that they are delivering high quality services for vulnerable people. They take governance seriously.

However, our judgement does not tell the whole picture: we only had time to see 40 or so charities, so we concentrated on those that appeared to be particularly effective or innovative. We did not look at Novas (as it was then), because we’d already seen lots of large London homelessness charities.

But even then, back in 2007, we’d been hearing concerns about Novas from some of the experts and charities that we’d consulted as part of our research. Without knowing the organisation, and before the report has been released, we cannot say whether those rumours (which did not imply anything as serious as is being alleged now and did not concern financial impropriety) were correct. But should they have prompted us to ask questions? Or were we right to treat them as irrelevant gossip? And what about the other charities who knew Novas well? As Jeremy Swain, Chief Executive of another UK homelessness charity Thames Reach, asks in a guest article in our newsletter, do charities have a collective responsibility for underperforming organisations? (I must note that Jeremy is discussing the issue in general, and is not referring to Novas in his article.)

Novas is not a registered charity, it is a housing association (like some of the other charities mentioned in our report). Its regulator is the Tenants Services Authority (formerly the Housing Corporation), who ordered the inquiry. We’re not saying that the TSA acted late, and we recognise that regulators have a difficult job to do. But it’s likely that other players in the field—funders, local authorities, charities—have inside knowledge that can take a while to reach the regulators. Should we be using this knowledge more forcefully?

In Defence of Gates

An interesting recent piece from Forbes India puts the boot in to the Gates Foundation’s $283 million prevention programme for HIV/AIDs on the subcontinent, Avahan. It says that the programme hasn’t worked and is being scaled back. It claims that money has been wasted on travel costs and expensive salaries for its ex-McKinsey staff. It accuses the programme of insensitivity (for instance, relying too much on English to be able to engage properly with NGOs and people they are trying to reach, like women in prostitution).

What to make of all this?

For the past year NPC has been working on the ground in a pilot project in Delhi so has learned one or two lessons about the Indian NGO sector. We’ve not had much direct contact with the Gates Foundation because we’ve been looking at a different set of issues. But some of the points the article makes do sound like common mistakes make by funders overseas. For instance:

• creating a Rolls Royce programme won’t work if your expectation is that government will ultimately take over.
• starting in many different geographies at the same time is creating a rod for your own back – better to pilot, and then scale.
• cultural sensitivity does matter. There’s a nice example in the article of Avahan introducing sleek mobile vans to bring health clinics directly to brothels, but the vehicles were so expensive looking they put the women off. The workers thought they must be from government or the police.

So far so good. But what is most telling about the piece is not the strength of its criticisms of the Gates Foundation’s activities. Rather it is the underlying suspicion of the kinds of approach the Foundation uses: analytical, well-resourced, bringing in skills from outside the NGO sector.

In India, but not uniquely there, NPC has identified at least two major structural problems affecting NGOs.

The first is a deep-rooted belief that NGOs should be run on a shoe-string. The second is that most NGOs don’t measure their impact in meaningful ways. Unfortunately both of these problems undermine the effectiveness of Indian social organisations. Unable to pay decent wages, organisations struggle to retain staff (this was probably the number one challenge NPC heard about talking to charities on the ground). Failing to understand their impact, they can’t say what they are and aren’t achieving.

I don’t know the rights and wrongs of the Avahan programme. But I do know that the kind of approach pioneered by the Gates Foundation has brought a welcome rigour to the activities of the NGOs it supports. One notable irony is that the article uses Gates’ own evaluations to criticise its programmes. But this transparency is precisely the organisation’s best defence: in general, funders and NGOs in India don’t measure and don’t publish this kind of data. For that at least, Foundations like Gates deserve our gratitude.

Business doesn't always know best

A year ago, I did an (excellent) short course at London Business School. It gave me some exposure to corporate culture and the workings of big business, and provided an interesting source of comparison between the for-profit and not-for-profit sectors.

I learnt a lot from my fellow participants but equally they also learnt a lot from me. To them, that was a surprise. As the only person who worked in a non-profit, they arrived to the course with certain assumptions about what I knew, and what I didn’t know.

Received wisdom – that business knows best – promotes the view that big companies can teach charities a lesson or two about how to do things. Whilst this is undoubtedly the case it ignores the point that the reverse is also true.

Companies learning from charities can’t be a new idea, but very little has been written on the subject. It’s something that I think would be worth exploring further. Here are just three areas where I think that business could learn from charities:

• Marketing and PR – Charities are masters at getting people to give and loyally lend their support. Touching the emotions is something that charities do better than anyone. Are there techniques and skills that companies could learn?
• Lobbying – Government policy is crucial to how companies do business, how profitable an industry is and what strategy is appropriate for the future. Yet companies lag behind charities when it comes to lobbying, even though they often have vastly greater resources. In a survey in 2008, 76% of MPs in the UK parliament agreed or strongly agreed that charities are more effective at campaigning amongst MPs than companies.
• Culture and ethos – Motivating employees is something that charities often do very well, even when they work for very little financial reward. Can companies learn from charities about creating loyalty and getting that bit extra out of employees?

The present financial crisis, precipitated by calamitous mistakes in some of the world’s most trusted corporations, should make companies more open to new ideas than ever before. There has surely never been a better time to challenge received wisdom.

I think that a greater appreciation of the mutual learning that could take place could benefit both businesses and charities, and especially give the latter access to more opportunities to learn how to improve. Charities should be welcome in business schools - for what they can learn and what they can teach.

What do you think? What else could businesses learn from charities? Comments are welcome.