Marketing the charity sector’s spending on marketing

A brief survey of public attitudes towards charity makes for interesting reading. The poll, conducted by the Free Postcode Lottery website, which had a decent sample size of 2,000 people, found that one in four of us think we don’t give enough to charity. 25% isn’t a vast amount, but it would be 15 million people in the UK if the figures were representative (no one is saying they are….) but even if that over-estimated the proportion by 100% it would still mean there were over 7 million people in the UK who might – under the right circumstances give more to charity.

It’s perhaps not surprising to find that over three-quarters of respondents said they were put off from giving money to charity by the marketing practices used by fundraisers. Recent public scandals over fundraising and the very public collapse of Kids Company having received almost £50m of public money have damaged the sector’s reputation. Something I am not convinced that the Etherington Review or NCVO’s and ACEVO’s plans to tackle negative stories will address. This is not just a question of perception – that people see the headlines and need to be reassured that these stories of poor financial management and unethical fundraising are the exception to the rule. People have also experienced first-hand some of the pressurised selling that some charities – and the private companies they contact to fundraise – employ. If we regard this solely as an issue of perception we will never restore confidence and trust in charity.

The third, and final, finding from the survey is that nearly half of respondents say they would give more to charity if they spent less on marketing. Part of me wants to focus on the question’s methodological limitations – we know already of course that three-quarters of people have said they think they give enough to charity already. So it’s difficult to infer too much from this question. Are the half who say they would give more made up of the 25% of respondents who say they don’t give enough – and here is an excuse for them to justify why they don’t? However, even if we assume that half the half (a quarter in total) are inclined to give more anyway. The other 25% are saying that, though they feel they give enough already, they would give more if charities spent less on marketing.

I wonder though how well informed respondents are? Do they know what charities spend on marketing? Which charities? The fact is that the amounts spend vary as wildly as the budgets of charities themselves do – both in actual terms and as a proportion of their budgets. Apparently total charity spending on advertising was £394m in 2013 – a mere 2% of the total of the advertising market worth almost £14bn that year. In the same year the total expenditure of the charity sector was £38bn. So the figures suggest the charity sector as a whole spent around 10% of its money on marketing. That doesn’t sound tremendously excessive.

In that sense I do think it’s a question of addressing perception. I suspect that if people thought charities were spending around 10% of their money on marketing the public might be more sympathetic. Whether or not they would give more to charity is quite another matter though.

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Takeaways from the Kids Company Select Committee car-crash

While all and sundry are having their say over the lessons from the demise of Kids Company, anyone who saw the spectacle of former CEO, Camila Batmanghelidjh and Chair Alan Yentob ‘giving evidence’ (I use the term loosely) can’t help to have opinions.

So, at the risk of depressing Nick Temple by adding to the noise, here are my takeaways from the whole affair:

takeawaysignwebsite

  1. Two sides of the same coin

Camila’s charisma, passion and ‘JFDI’ attitude charmed successive Prime Ministers and hypnotised a large band of celebrity supporters. It is precisely the same characteristics which meant strong governance and effective management were neglected at Kids Company. They are, in effect two sides of the same coin and that is just Camila. What attracted so many to the charity also became its Achilles heel. 

  1. Charismatic leaders need good teams around them

Able deputies are essential to fill in the gaps that those with a tendency to focus on the big picture overlook. Detail does matter and whilst there are huge benefits of strategic thinking, you can’t forget the small stuff. You also need people that can challenge leaders when needed and stand up to them if required. A team of acolytes is not healthy for long term sustainability. 

  1. Governance matters

We overlook the importance of strong and effective governance at our peril. We’ve seen this in the private sector and in the charity sector.  The board of RBS was roundly criticised for not having a clue what the company was up to and the risk they were exposed to until it was far too late. Charity governance – like corporate governance and even democratic governance – is patchy. Some are excellent. Some are poor. We need more consistently higher quality governance. Ten years ago (a bygone era) charity governance was considered important and investment made in providing support. That investment – along with much funding for VCS infrastructure – has now gone and that cut comes with a price. 

  1. Kids Company aren’t typical but they aren’t unique

Some have been quick to point out that Kids Company are unusual – a maverick among the hundreds of thousands of charities out there. And indeed they are unusual. But I’d caution those so keen to this sort of thing would never happen elsewhere. Are we really sure that governance is so strong throughout the sector? I’m not saying it’s not, I’m saying I’m not sure. I’m not a betting man, but if pressed I’d probably say there is another Kids Company out there waiting to happen. Suggesting this is a unique, one off never to happen again set of circumstances could backfire terribly. 

  1. A little bit of contrition goes a long way

The self-important posturing and defensiveness of Batmanghelidjh’s and Yentob’s display was unseemly and appeared almost disdainful towards the MPs on the Select Committee. The exasperation of the Committee Chair, Bernard Jenkin was obvious, telling Batmanghelidjh to ‘hurry up’ and ‘stop talking’. Paul Flynn was even more robust, saying ‘we’ve had a lot of psychobabble…can you just answer the question’. Sometimes – and I’d say when appearing before a Select Committee is one of those times – it pays to be sincere, courteous and contrite. You’re not Rupert Murdoch and nor, would I suggest, should you want to be. 

  1. The sector must rebuild trust

Trust in charities has been damaged by a succession of scandals and exposés. I suspect any members of the general public watching these high profile charity sector representatives’ car-crash performance couldn’t help thinking ‘if this is the best you’ve got, what’s the rest of the sector is like?’

It might be unfair and untrue but the impression will have been made in some people’s minds. The die is cast and the sector needs to respond. In my view the response should not be simply to say ‘oh we’re not like that at all’, we need to listen harder take on board the concerns people have and be seen to act. 

  1. Government has been let off the hook

The performance of Kids Company’s senior leaders before MPs has completely deflected attention away from the actions of Prime Ministers (Blair and Brown both courted Camila before Cameron did), their Ministerial colleagues and Whitehall officials. No one should come out of this sorry affair with any credit, but the shocking spectacle of the Select Committee has shifted the focus almost entirely away from the Government. 

  1. Charity is about beneficiaries

The only reason we have charities is to help beneficiaries (normally – but not always – people). We shouldn’t forget that Kids Company did help a large number of extremely vulnerable young people and their families. We should never forget the children who are still in need and aren’t helped by the circus show playing out before our eyes.

Who wants a government funded fundraiser?

The Public Administration and Constitutional Select Committee questioning of Kids Company CEO, Camila Batmanghelidjh and Chair of Trustees, Alan Yentob was excruciating but compelling viewing. There are a large number of issues that were raised that deserve proper scrutiny and discussion – and I am sure they will get that attention. But one thing to have emerged from the questioning shocked and surprised me, even in the context of the circus that has been the Kids Company debacle. It was a brief comment made by Alan Yentob in response to questioning about Kids Company’s relationship with Government.

kids company

He said – as proof of the charity’s good relationship with government – that two civil servants had ‘sat in Kids Company for a year to help the charity find statutory funding’.

I’m intrigued and slightly surprised that the government decided to spend public money by placing its staff in a charity to help them raise money from, errrr, the government.

I would love to know who sanctioned that decision as it strikes me as a wholly inappropriate use of public funds and one which someone in government ought to be held accountable for.

I’m no expert but I also can’t help wondering whether this might breach EU laws on State Aid…but I might be wrong.

Where I am more certain is that a great many charities and community groups would love to have fundraisers offered by the government to come at work for them. Unfortunately they lack the ear of the Prime Minister and Ministers, they don’t have a senior BBC executive as their Chair and are not awash with a host of celebrity supporters.

I would love to know which department these fundraising civil servants came from – was it the Department for Education or the Cabinet Office, or somewhere else?

I’d also like to know who authorised their secondment?

Anyone who knows anything about this, I’d love to hear from you.

The actions of a few do not mean the charity sector is rotten

I blogged yesterday about what I perceive to be a growing neo-liberal attack on the charity sector. Then I read an article by Michael White on the Guardian Society blog calling for increased charity regulation, reform of Britain’s ‘ramshackle charity laws’, ‘mergers of tiny bodies’ and a cull of charities, among other things.

Clearly it is not just libertarians that believe something is rotten in the charity sector.

There are of course legitimate questions arising from the recent collapse of Kids Company and before that the expose of some very unethical practice going on in big charity fundraising. But it’s worth bearing a few things in mind as we seek answers to the important questions surrounding these events:

There are hundreds of thousands of charities and smaller community groups that do amazing work supporting the vulnerable and most marginalised in society. They do so, in the main, because of state or market failure – picking up the pieces of an inability or unwillingness of others to help those in need.

The vast majority of these are small, local organisations that operate on a shoestring – with turnover below £20,000 – and are run by volunteers who give their time freely to help others. They are not – despite the sweeping generalisations of commentators – awash with lavishly paid executives or frittering buckets of taxpayers’ cash. They are delivering essential support to those in need for a pittance. Having supported grass roots community groups for 20 years – much of it as a grant maker – I can say with some confidence that you would be hard pressed to find a better example of value for money than in Britain’s community sector.

The questionable practices of a tiny number of large high profile charities should not be allowed to taint the entire voluntary and community sector.

Next let’s take the issue of mergers and consolidation. Since 2010 there have been huge pressures on the not for profit sector which was the first place many public bodies looked to cut their budgets in the face of central government austerity measures. That resulted in numerous closures, mergers – where they made sense, though shotgun weddings are generally a bad place to start – strategic alliances and consolidation. I myself saw the start of a slow and painful decline of the organisation I was running, Urban Forum, which was wound up last year.

The diversity of Britain’s not for profit sector is something that is rightly admired by the rest of the world. The US may have its culture of philanthropy – and UK efforts to replicate it have had only modest success – but that has developed in the absence of a welfare state and social inequality that anyone concerned with social justice would find abhorrent. We have a vast array of small, local community groups and charities that reflects the complex social mix which makes Britain great.

Should it really matter if a group running on a few thousand pounds in one neighbourhood is doing similar work to another group in another neighbourhood? Whatever their similarities they are also doing something different – and that is working in their own neighbourhood for their own community.

In fact I think one of the lessons to be learned from Kids Company is that the desirability of growth and expansion – a mantra that has sadly been appropriated from the private sector – can have disastrous consequences. Expanding from their South London base to Bristol and Liverpool increased the charity’s exposure to risks, but it also ran the risk of disconnecting the organisation from its beneficiaries. Any perception that small local groups are inefficiently duplicating services and support disregards the added value that a connection with a place brings. Merger should be approached with extreme caution.

A lack of transparency over how charities raise and spend their money that some have complained of is underpinned by one of the most heavily regulated statutory frameworks we have in this country. Charities are required not just to comply with company law but also with a separate, additional set of regulations set out by the charity commission. The Charity SORP (Statement of Recommended Practice) sets out very precisely how charities must report on their financial activity – and places a very high administrative burden on charities. I remember some years ago the Treasurer of the charity I ran, who was an experienced insolvency practitioner at a very large accountancy firm, expressed amazement at what was required – saying it was ‘more work than a million pound company’. If it’s not working for people then it should be changed, but don’t blame the charities that are already complying with some of the strictest regulation any corporate bodies face.

There is a need for proportionality in regulation – and this already happens to an extent with a threshold for increased statutory reporting of financial accounts. However, if there is an argument for greater regulation and administrative burden being placed on charities (and I remain unconvinced) then it should be highly targeted.

Sweeping generalisations attacking the charity sector do not help the poorest and most vulnerable that rely on their support.

The advocates for austerity now have charities in their sights

Recent scandals engulfing large fundraising charities dubious ethics and the collapse of Kids Company following the withdrawal of government funds have put the charity sector in the spotlight. However, things have quickly moved on from the legitimate questions around these affairs to more fundamental – and unwarranted – questioning of charity and charities.

the battle lines have been drawn

Take this Petition calling on the government to end funding for all charities. https://petition.parliament.uk/petitions/105732

No matter that it has only 300-odd signatures, the fact is someone thinks this.

The proposer’s thinking (I use the term loosely) is elaborated in this post on the Libertarian Home website. Let’s start with this for an opening gambit:

“If a “charity” receives public funding, it’s not a charity, it’s quango.  That may just be semantics…”

Excuse me? Semantics? Hello!!!!

I have sat on quangos and I have run charities and they are very different. There are similarities in that the principles of good governance and standards in public life apply equally to both, but one is answerable to a Minister, the other (notwithstanding the need to operate within the regulatory requirements) should be accountable to its beneficiaries.

Now it’s not clear whether the author is talking about grants and contracts. But even if we assume that it’s just grants, the receipt of government funds does not turn an independent organisation into an agent of the state. Does that apply principle apply equally to subsidies given to private sector companies to run railways, or for research and development grants or a whole host of other purposes?

And the argument is even more absurd if you take in funding awarded for contracts. Are the many private sector companies that thrive off the back of public sector contracts merely ‘quangos’ too? I don’t hear that argument too often, even from libertarians.

Successive governments have pushed the delivery of public services by charities and social enterprises for many years. For nearly 20 years the mantra from Whitehall has been: grants bad, contracts good. Charities should not rely on handouts, but should earn their income by delivering services.

That’s fine….to an extent. I certainly have no opposition to charities being more entrepreneurial. But the implicit suggestion here that charities are ‘dependent on the state’ is just neo-liberal claptrap.

Now the charity sector is seen as fair game for the ideologues intent on cutting back the state to unfathomable levels, that would have ever more dire consequences on the most vulnerable.

I believe that with confidence imbued from a Conservative general election victory the government’s real puppets are now attacking the charity sector, emboldened by the spotlight shone on Kids Company.

We’ve seen these ideas before from the likes of the IEA and other free market zealots and they were utter nonsense then. They haven’t improved with age.

trust in professionsSo there is something quite galling to see journalists lining up to criticise charities over how the conduct themselves. I am not for one second suggesting that charities should not be subject to scrutiny – far from it, I welcome the highest levels of accountability and transparency – but some of the criticism now being directed at the sector is as unwarranted as it is hypocritical.

Research conducted by Ipsos MORI shows that only around one in five of us trust journalists and Government Ministers to tell the truth.

trust in charities

Charities on the other hand have much greater levels of public trust and confidence – only doctors and the police are more trusted professions. As the figure (left) shows only 12% of the public think that charities cannot be trusted.

So when it comes to trust. There’s simply no contest.

That is not an argument against scrutiny of charities or their practice, but it does rather fly in the face of much of the rabid attack that seems to be a growing part of the current political and media discourse.

Some charity sector leaders have been defending Kids Company and the growing number of attacks on the charity sector. But fewer than I would have expected and less vociferously than I would have imagined. Perhaps they do not yet feel that their interests and values are – yet – in the firing line. But it is my firmly held believe that this is the beginning of a major offensive against charity and charities.

The battle lines are being drawn.

The attacks on Kids Company are becoming an attack on the charity sector

The Mail’s latest Kids Company exposé attacks the charity for employing two children of one of their trustees – the former WH Smith CEO, Richard Handover.

Coming on the back of all the other questions and very public implosion of the charity, I have to admit it doesn’t look great, but the Mail have certainly done all they can to present it in a very negative light.

That’s what the Mail do, so I am not surprised they’ve got their hatchet out. To my mind what started as a solid piece of investigative journalism – exposing the nasty politicking going on between Government and the Charity’s senior leadership – has become something more sinister: a concerted attack on the charity sector.

Employing relatives or – to use the formal term – ‘related parties’ by charities is governed by clear guidelines, in much the same way as public bodies are governed. It is not illegal but it must be fully disclosed, there should (clearly) be no preferential treatment given – for example awarding a contract to a family member just because they are family. In short they should be the right person for the job and the beneficiaries interests best served by their appointment.

Looking at the Mail’s report, it appears to me – at least on the face of it – that Miss Handover is suitably qualified for the role, has done a good job fundraising and organising events and her salary seems entirely consistent with that sort of work.

There doesn’t seem to be any suggestion that the employment hasn’t been properly disclosed – indeed it was from the accounts that the Mail has drawn the facts for their article.

The language of ‘expensive foreign trips’ and ‘taxpayer subsidised charity’ suggests jaunts paid for at the public’s expense, rather than someone travelling as part of their job to raise funds for the charity.

This is becoming an attack on charities, how they operate and what they stand for.

Kids Company and its flamboyant chief executive has long divided opinion within the sector. The marmite effect. Their ability to raise huge amounts of money from high profile supporters, to schmooze successive Prime Ministers (I remember first meeting Camila at a reception that Gordon Brown hosted in Downing Street when he was Chancellor in the late 90s) has raised an eyebrow or two. Coupled with a suggestion that their claims of impact went some way beyond the reality – something many other successful fundraising charities are complicit in. Kids Company did good work. But they did not make many friends in the sector by overstating their impact.

Now, when they fell out with their Ministerial supporters and the bottom fell out of their over-extended business model, the sector has not been rallying round in their defence in quite the way it might.

We need to put aside our concerns about the rights and wrongs of Kids Company and recognise the credibility and reputation of the charity sector as a whole is under attack. The Mail – which is merely the vanguard of charity sector attacker – has charities and not for profit groups in its sights. I suspect they are happily playing ‘bad cop’ to the government’s agenda of cutting any and every state supported charity back to the bone.

This is a politically and philosophically motivated attack. Like the public sector cuts that have decimated our public services since 2010, now the charity sector – which has picked up much of the slack arising from public service cuts – is under attack.

Those in the charity sector and all concerned with social justice would do well to remember Martin Niemöller’s famous quote reminding us of the importance of solidarity.

First they came for the Kids Company, and I did not speak out—
Because I was not Kids Company.

Thankfully we are not facing genocide – and I do not wish to compare the attacks on the charity sector with the Holocaust, but I think that Niemöller’s words are equally applicable to a less horrific attack that is now underway.

 

UPDATE

I thought it was bad. I just realised it’s worse.

If you don’t believe the attack on charities that is underway, have a look at this petition calling for an end to government funding of all charities: https://petition.parliament.uk/petitions/105732

and this article in the Financial Times calling for charity tax reliefs to be abolished: http://www.ft.com/cms/s/0/01c7a2b0-3ce3-11e5-bbd1-b37bc06f590c.html?siteedition=uk#axzz3iW80OUjh

Don’t say I didn’t warn you

In defence of Camila Batmanghelidjh

The criticism and personal attack now being directed at the Kids Company CEO is both shocking and unpleasant. The mood changed noticeably when the announcement of the charity’s closure came – with a sudden shift away from a balanced critique of the role of government and the charity, to an outright attack on Camila. I can only think the clamour of sector commentators to stick the boot is was driven by a fear of finding themselves being on ‘the wrong side of history’ now that Government has emerged as the victor of this particular skirmish.

I believe the governance at Kids Company was weak and the trustees were unable or unwilling to hold the staff to account or adequately steer the organisation’s strategy and direction. Did Kids Company make mistakes?

Yes, I am sure they did. Much as you would find if you investigated in forensic detail the actions (or inactions) of almost any large institution – be it a charity, company or government department. [RBS shares anyone?]

We will see whether this was criminal – or as I suspect is more likely, some less than ideal practice that goes on occasionally when you work with people with chaotic lifestyles.

The auditors, regulators, government and the many many well-informed and experienced funders that supported the organisation should all be looking carefully at their own roles in this affair and what they could or should have done to prevent it.

The biggest mistake Kids Company made from what I can see was pursuing unsustainable growth over a period of years. The charity’s turnover grew every year from around £13m in 2009 to over £23m in 2013, as this chart shows.

Screen Shot 2015-08-06 at 15.54.54

In general their income exceeded their spending – which rather flies in the face of some of the criticism I have seen levelled at them – but as they grew their liabilities grew too and the amount of reserves they were able to build up did not keep pace.

Another criticism I have seen is that they were not holding millions of pounds of reserves. And whilst they were clearly not holding enough cash to withstand financial shocks (which sounds a bit like the financial crash of 2008), we should be careful not to legitimise the hoarding of huge amounts of cash that provide no benefit to charity beneficiaries. And if you think this is not an issue have a look at the reserves of some of Britain’s largest charities.

We should be careful that we do not put off young people from becoming social innovators, charity leaders and community activists by demonising Camila over the collapse of Kids Company. She had her foibles but she cared. I don’t think anyone has yet said that she didn’t care (I’ll look forward to that character assassination!) about the kids they were working with or the many others who she wanted to provide support and care for.

Camila challenged the orthodoxy and was attacked for it.

She shamed the politicians that have overseen swingeing cuts to the support of the most vulnerable.

She was prepared to put herself on the line, put her head above the parapet and stand up for what she believed in.

We need more people like Camila even if they are fallible and come with warts and all.