We all know the challenges in continuing to grow in the current funding environment are immense. Contracts are getting bigger and will often be on a delayed Payment by Results basis, meaning small charities without a firm financial base can easily get left behind, beaten in competition by large corporates. Only one of the Ministry of Justice’s 21 ‘Transforming Rehabilitation’ probation contracts was won by a socially-led consortium, for example.
There is a simple truth that cuts right to the heart of what is currently wrong with charity governance. More organisations need to pursue mergers and in so doing cut out pointless duplication and better enable the scale-up of services, which in turn improves services for beneficiaries. The recent move by Breakthrough Breast Cancer and the Breast Cancer Campaign to form the largest dedicated breast cancer research charity in the UK is an inspiring example of this. On the other hand, we also have the sad case of the recently-liquidated BeatBullying. We cannot help wonder that maybe a more pro-active approach to looking earlier at joining up with others in the youth sector could have created a different future.
But mergers can be controversial. Some of the objections can be easily dispensed with, like those that have more to do with the egos of certain charity leaders and trustee boards, or cases where the desire to protect an existing ‘brand’ seems to be stronger than the drive to improve the life-changing services that it actually represents. Others are more complicated. Are larger charities likely to become too ‘corporate’ and unresponsive to local needs? And even if ‘bigger is better’, do we measure that by the staff or turnover of the organisation, or by the depth of its social impact (and if it’s the second one, how do we measure that?)
It’s certainly not black and white but the Charity Commission as our regulator does need to do more. A view I discussed at the recent Good Deals Social Investment Conference with the CEO of one of the major Social Investors was that the Charity Commission should change the risk-evaluation of trustees from ‘are we compliant’ to ‘are we maximising the interests of our beneficiaries’. If they did it could be a transformative step. The strong arm option is to find ways to force charities to look at mergers, but I’m not sure if this approach is one I support…not yet anyway.
It is clear that “urban myths” and unwanted scare stories are profligate within the sector. Our research for the Good Merger Index, a study of charity mergers in 2013-4 revealed many of these do not hold water. Views such as charity missions will be watered down, organisations will be “swallowed up” and mergers cost more than they save are often far from true. What we found is that if a charity is in a reasonably healthy position, delivering a good service in a niche area and is looking for a larger partner, they have a lot more negotiating power to hold on to control over their own destiny than they might think and larger partners are happy to find the best way for them to grow. Social housing providers such as The Trident Group, The Calico Group and SBHG can all point to great success stories of charities joining a group structure and flourishing.
Another example of a social enterprise growing successfully through merger is Groupe SOS in France, a 30-year old group of over 45 social organisations. This model allows Groupe SOS to help 1 million direct beneficiaries a year with youth, employment, housing, health and old-age services. However, vice-chairman Nicholas Hazard has explained to UK audiences that the strength of Groupe SOS’s model has been to combine its overall size and experience as an organisation with tailored services that avoid standardisation. For example, Groupe SOS has partnered with local authorities to deliver youth services, replicating previously-successful programmes in new areas with local input.
I want to challenge charity leaders to remember that ultimately their ‘shareholders’ are the beneficiaries. We all work for them. Just surviving is letting them down. There is the opportunity to thrive if petty self-interest, ego and fear can be left at the door. A new culture of enterprise including taking on social finance and mergers needs to be embraced. Those that do I sense will be the ones we are talking about in ten years’ time. Those that don’t will follow the likes of BeatBullying and become the cautionary tales.
‘Matt Knopp is Director at Eastside Primetimers – originally posted as a guest blog for CAF Venturesome on January 7th 2015.