Charities and the Profit Motive
07 Feb 2011
My local muddy bike playground and scenic commute route “Wendover Woods” made it into The Economist this week, in an interesting article about “Big Society”.
Since our change of government and the increasing reach of cuts, there’s been much talk of the Big Society which has been variously hailed as a welcome handover in the ownership of local socially important services to the local people who use them but also derided as a government cop-out cost-cutting exercise. In Wendover, just a few miles from Baigent Digital’s 16th Century Chiltern home, the local forestry commission runs a busy cafe, a popular car park serving trails and barbecue areas, a Christmas Tree business (whose satisfied customers include yours truly) and though a partnership with a commercial operator, a ropes-in-the-trees adventure playground called Go Ape. With all of this activity in the woods there’s plenty of money flowing in and the area is well manned and well maintained through forestry commission staff and volunteers, and manages to turn a small profit for the local operation, which is fed back into the forestry commission’s coffers.
So why, when the government talks about effectively privatising the woodland (whilst presumably maintaining its protected status in line with other privately held land adjacent and around it) should local residents be concerned. The woodland already turns a profit, and this way the money would remain local rather than being used to support other locations around the country.
The answer, unfortunately, speaks to the heart of a difficult area for the charity sector, that of profit. If a charity runs a profitable trading operation (many do) and all the proceeds go to support the charity, then we’re pretty comfortable with that – and like those featured in the article, we’re happy to add our volunteer time to the enterprise. If the same charity uses an external company to directly engage in fundraising and taking a percentage as their charge (JustGiving) we’re much less comfortable, and there’s a lot more unease about this.
What worries me the most, is that this unease continues even when the involvement of the commercial organisation is successful in vastly increasing the charity’s performance (as JustGiving does for many charities) and the act of keeping “profitable” operations in-house means that they actually remain pretty inefficient.
It’s as if we’d rather have something inefficient and ineffective, but cheap rather than see specialist organisations making a modest profit whilst building huge value for a charity – and perhaps it’s partly about valuing low cost over best value.
A healthy degree of caution of the sector in engaging with commercial organisations overall is well placed, as there are plenty of commercial organisations whose general practice isn’t correctly priced or targeted for the sector, but when charities spend money on the right things, the value specialists can bring is significant. The senior teams of charities are a great example of this – inside every charity it’s clear where the strong leadership and clear vision are delivering results and where ineffective thinking slows an organisation down. There’s a (sometimes grudging) acknowledgement that we have to pay people in charities a competitive salary in order for them to deliver the right results – and even if the individuals concerned are “making a profit”, this is worth doing – so let’s hope that this thinking can extend right across the charity sector – it’s about doing the most good for the lowest cost, and if other peopled get paid along the way in order to make that happen, then maybe the Big Society stands a chance of being able to finance itself long enough to make a difference.
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I think the focus should be on how a charity stewards its funds rather than its expenditure. As you say, sometimes spending less means paying twice through the inefficencies that may arise. If spending more brings a better return for a charity, then this is good stewardship. If spending less, i.e. low salaries, means more re-advertising and training due to high attrition rates, then this is bad stewardship. If ‘profits’ benefit charitable aims without undermining the values of that charity, then more power to your elbow!
Comment by sara tindall — 07 Feb 2011 @ 11:47