The scale debate: should charities be forced to grow?
Should commissioners only focus on charities that 'can scale up'? Policy and development officer at NPC David Bull analyses whether charities need to actually be big in order to think big when it comes to social impact.
If you want to provoke an argument in the charity sector, just start talking about scale.
Minister for civil society Rob Wilson’s recent comments that public sector commissioners should "focus on charities that can scale up" were quickly condemned by a number of commentators. Among those most vocal was Locality – the national network for community organisations – CEO Tony Armstrong who continues to argue that what matters is not size but knowledge of context.
So why is scale such a contentious topic? Firstly, ‘scale’ tends to be equated with ‘growth’, and telling charities that ‘bigger is better’ implies that most of them are doing something wrong.
Around 84% of charities (135,000 in total) have an income of less than £100,000 per year, accounting for just 5.3% of the sector’s income between them – meaning that the majority of charities are very small indeed.
Secondly, growth isn’t easy. It’s all very well saying that charities should grow, but the reality is that the charity sector simply isn’t built to support organisational growth. Investors have few financial incentives to encourage growth, and in the absence of clear metrics to measure success (akin to profits and share prices in the private sector) it is difficult to assess whether growth is having a positive impact.
Lastly, growth can have negative effects. The public sector provides a perfect example of how significant size can lead to a whole host of problems in delivering services – from a lack of coordination to losing touch with the people that services are supposed to benefit. Charities are careful to protect their close relationships with beneficiaries, on the basis that this is a large part of their added value.
Missing the point
But jumping into a discussion about organisational growth obscures the real issue. The question that sits at the heart of the scale debate is not ‘Should charities aim to grow?’, but rather ‘Are charities doing their best to address social problems in their totality?’
Take the example of a charity that works with ten beneficiaries and significantly improves their lives. Having a proven and positive impact on anybody’s life is a great achievement, but what if you consider that the people affected by this problem number 10 million?
Meeting the needs of all those affected would require 1 million charities to provide the same service. If you assume that these charities neither talk to one another nor share their resources, you are looking at a situation where one million charities spend time and money, in parallel, on developing their service and evaluating their approach.
Clearly, this is not the most efficient way to solve a problem, and it misses the opportunity to harness charities’ collective strength. Where charities have a well-evidenced, effective approach, they need to consider its reach as well as its impact in order to make a dent in big and fast-growing social problems.
Growth has its place in the debate because it is one way to solve this problem. Where there is a high-level of need and a low level of provision, organisational growth is one way for a charity to expand its reach and take on a larger portion of addressable need.
But aside from growth, there are many other means to the same end. Charities can make use of existing infrastructures to expand their reach—without expanding their own operations—by developing open source software, encouraging government adoption of proven approaches, making use of commercial partners’ delivery networks or by simply helping others to adopt their approach.
Creating the right conditions
Charities have a responsibility here, to question whether they could be doing more in relation to the magnitude of the problem they are trying to address, rather than simply delivering services in perpetuity. This is about thinking big, not necessarily being big.
But others have a role too, in creating the conditions that allow a culture of sharing and collaboration to thrive. At present, looking to those outside your organisation to help spread good ideas can be difficult. Funding mechanisms often require charities to act competitively, rather than sharing good ideas with each other. Whilst handing over service delivery to external actors may mean that some charities are no longer able to survive.
Ultimately, we need to create an environment that rewards not only evidence of impact for particular programmes, but also efforts to share those insights and efforts to mount a strategy with a focus on the big picture – retaining incentives for charities to innovate, but also creating incentives for them to share their insights.
Building on their paper on scale, NPC is currently working on a project designed to support charities to adopt informal routes to scale outside organisational growth – drawing on the principles of licensing and franchising. If this is a topic that interests you, please get in touch with the NPC team.
Photo credit: Ciocci