In this article Shona Buchanan, 2015 Charityworks Trainee at the Enham Trust, explores how charities are increasingly acting in ways previously associated with businesses, but considers how this could help organisations work effectively and efficiently for their purpose.
Charities are organisations whose main purpose is to assist people and serve individuals with a need, whereas businesses’ primary purpose is commercial activity. It’s often presumed that this means that they also operate very differently, with businesses being efficient, driven and productive, and charities all together more relaxed in approach, discussing the colour of posters over their tea or how to bake the best sponges for their cake sales.
The idea of charities operating as businesses can jar with how the public believes they should be conducting their endeavours, with a sense that it somehow lacks the values that they have invested in the charity, which can be seen in this year’s Chief Executive salary debates and criticism of charity-government links. Unrealistic expectations of charities as volunteer-led organisations giving all funds directly to the cause still exist. This ignores the vital business structure needed to maximise efficiency and productivity behind every charity. This is essential for achieving the best consequences for the causes they are aiming to help.
But this can often ignore the business methods that are driving productivity, efficiency, innovation and change for the charities and those they serve.
This isn’t to say that the two types of organisations are identical, and it is important to recognise some of the key differences between charities and businesses which raise important opportunities and challenges for the third sector.
One key asset for charities is their volunteers. Without the contribution and commitment of volunteers, estimated to be delivering 2.1 billion hours in 2011/12, most charities would collapse. The importance of volunteers definitely does not stop at their labour time: they often offer unrivalled enthusiasm and support for a cause, which converts in to positive organisation attitudes. In order to continue to attract enthusiastic people willing to offer their time charities must offer support and an environment that welcomes them and encourages giving.
Businesses continue to attract thousands of sharp brains through high salaries which charities cannot offer. The third sector would gain more of this talent if public perception better understood the reality of charities’ professional operations and the challenging and rewarding careers it has to offer.
But charities can operate in a similar fashion to businesses. And they will benefit from it like we all benefit from a cup of TEA…
Charities attract people who want a fulfilling career directed by more than just their bank balance, and they have the aspirations and skills to match this: the sector’s movers-and-shakers are talented and ambitious people who are driving impact by increasing influence, efficiency and accountability. The third sector greatly benefits from these abilities, which are the same key skills that all businesses desire.
Charities, like all businesses, must work as efficiently as possible. 40% of UK charities have an annual income of less than £10,000 and 74% less than £100,000. Based on these relatively small budgets, it is crucial for charities to maximise their resources to create as much surplus as possible. Charities can utilise volunteer and fundraising resources, but still need to be transparent and financially savvy to be able to deliver.
Charities, like all businesses, must be accountable for their governance, decisions and funds and uphold this for their clients, staff and the public. Beyond this, charities additionally have to be accountable to the government and to their trustees. This is even more important now following the charity sector’s negative press this year in terms of fundraising and charity accountability with reference to trusteeship and government connections.
It can be greatly beneficial for charities’ efficiency and productivity if they operate like businesses, despite general public perception of what the sector should look like. My recent experience in the sector has taught me that charities do have differences separating them from the private sector, but by embracing their similarities to businesses whilst continuing to act according to their values, they can achieve the best consequences for the causes they are working for.