Investing in capacity will improve the quality of services charities can deliver

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I recently saw Ben Page of MORI present fascinating polling on public perception of charities. Amongst the findings that trust in charities remains high, and despite their fact that most people seem unclear about how charities operate and what they actually do, I noticed that 61% of adults polled felt  that ‘charities spend too much on salaries and administration’.

This ‘gut feeling’ isn’t new or unknown to those of us who work in the sector – we know that people want to feel the money they donate goes directly to ‘the cause’ and they’d rather it didn’t get spent on PCs, salaries, or light bulbs for the office. As Gina Miller of Miller Philanthropy says in a recent article, “when people drop their money in a collection bucket they don’t expect it to be spent paying the collector or buying the buckets.” Perhaps they don’t expect it, but maybe they should.

We know the financial crisis is squeezing charity incomes as funding sources dwindle – and at the same time, the pressures on the rest of society are driving up demand for charities’ services. Although it’s sensible to apply a smidge of scepticism to fundraising campaigns, a refusal to acknowledge the true cost of operating a charity is a naive approach to giving. The quality of a charities’ infrastructure can actually be its most important selling point.

To make the maximum impact on the problem it wants to solve, a charity needs to provide a well-structured and focused service, supported by the right staff, who are making strategic decisions when it comes to spending their money. Crucially, these decisions should be data-driven – that is based on evidence about what does or doesn’t work when serving beneficiaries, and designed to continually improve outcomes. Great staff, effective services, and impact management don’t come for free, but if you care about helping the worst-off, they are an essential investment.

At Impetus we are proud that we do what some won’t, and that the funding we provide is unrestricted – meaning charities can spend it on salaries for non-front-line staff (like a brilliant Chief Operating Officer), capital costs, or better IT. Part of our package is also securing pro bono services from top city firms; not as a nice-to-have extra, but because we believe that if a charity does not have a strategic plan, and the internal resources and systems in place to realise that plan, it has no chance of expanding and taking its services to more people – it won’t even know whether its services work. Our intensive management support also focuses on getting the internal factors in place for success, and ensuring that out portfolio organisations are efficient, well-run, and focused on impact.

When charities invest in capacity, they can be more efficient in terms of cost-per-outcome, and are in a better position to quality assure and to innovate. That means donors actually get more value for the money they drop in the bucket. It is essential that overheads are a reasonable proportion of expenditure and that funds to the front-line are maximised. But fear (the public’s, funders’, and charities’ themselves) of investing in capacity has left us with a sector that is rich in innovation and potential, but operating well short of the scale that could really make a difference to the disadvantaged and vulnerable.

Impetus − The Private Equity Foundation
About The Author
Jenny North is Director of Policy and Strategy at Impetus-PEF. Jenny joined Impetus-PEF from Relate, where she served as Head of Public Policy for six years. Prior to this she held policy positions with Maternity Alliance and New Policy Institute. Her experience also includes working at the Home Office as a Crime and Policing Analyst. Jenny holds a degree in Philosophy and Theology from Oxford University. Follow Jenny on Twitter: @JayEeeEnn

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