Over the past few months, Richard Gutch, an Associate at Prospectus, the third sector recruitment agency, has interviewed 100 chief executives of third sector organisations about the challenges and opportunities they are facing. Not surprisingly, funding featured as their major challenge.
‘Our aim is to have one third contracted income, one third voluntary income and one third earned income’. Martin Holcombe’s summary of Birmingham Settlement’s funding strategy reflects the message most of the chief executives I interviewed gave me- and that was before the global financial crisis broke, further emphasising the importance of having a balanced fundraising strategy.
Those who are heavily dependent on contract income like Mencap, Rethink and Rainer Crime Concern, want to grow their voluntary income to support innovative service development and independent campaigning. Those who are heavily dependent on voluntary income, like CLIC Sargent, Rainbow Trust and the Stroke Association want to grow their contract income to enable them to expand their services. Both sets of interviewees want to grow other earned income through training, conferences, publications and other social enterprise activity, so as to generate valuable, unrestricted income.
Their aim is to avoid the dangers of having all their eggs in one basket, to maintain flexibility and not to become ‘agents of the state’. A sustainable funding strategy also helps them respond to the two big challenges they see ahead- the financial crisis and a probable change of government. The financial crisis is likely to reduce both contract and voluntary income, as well as increasing costs through rising prices and staff costs and increased demand for their services, whilst a change of Government will create uncertainty, could reduce public spending further and could mean less influence for those used to having direct access to Ministers.
Contracting
Although the chief executives I interviewed were mostly negative about their experiences of commissioning, they remained optimistic about the future. For some, such as Paul Jenkins, chief executive of Rethink, and Kevin Williams, chief executive of KIDS, there are new funding programmes, such as the NHS Talking Therapies and the DCSF short breaks for disabled children, which they plan to help deliver. For others, like Nick Partridge, chief executive of Terrence Higgins Trust, the increased emphasis on commissioning in the NHS could provide opportunities to secure major contracts , eg to run all the sexual health services for a Primary Care Trust, which could be worth £15m pa.
For some third sector organisations, the challenge is how to get to the starting line and make commissioners aware of how their services could help address local needs. For organisations like Changing Faces (work with people with facial disfigurement) or MOVE- part of the Disability Partnership (meeting the mobility needs of disabled children), there is no tradition of commissioning their services; their challenge is to find the right commissioner to talk to about the potential for contracting. For others, like CLIC Sargent and Rainbow Trust, the NHS are well aware of the work they do; their challenge is how to move to a mixed economy of provision in which they could expand their services through contracts , whilst continuing to raise voluntary income to sustain their existing services.
Many organisations require investment to develop the capacity to provide public services on a bigger scale. Funds like Futurebuilders England are enabling Organisations like TACT to take on more staff to make them better placed to win contracts. Kevin Williams, chief executive of TACT, says they are facing increasing competition from the commercial sector, where private equity firms see the fostering field as one where significant profits can be made, because of the imperatives placed on local authorities to meet needs in their areas
Voluntary Income
Voluntary fundraising is set to become an increasingly crowded and competitive field. The NSPCC lead the way with nearly 400 fundraisers raising £130m pa. including £70m pa from a database of one million donors. According to Mary Marsh, their former chief executive, this costs them £40m pa; their aim is to achieve a ratio of £1 invested for every £3.50 raised.
Meanwhile, others like Citizens Advice and the National Autistic Society, are considering getting into direct mail, whilst Mencap and Elizabeth Finn Care are focussing on regional fundraising, working with local groups and volunteers. Susan Daniels, chief executive of the National Deaf Children’s Society, says they are now focussing on street and door to door collections rather than direct mail. The ‘new’ philanthropists featured strongly in some people’s plans, particularly those working with young people and ex-offenders where the potential social return on investment can be particularly appealing to those interested is seeing their money make a significant and measurable difference.
Earning
The development of social enterprises featured in many chief executives’ plans. Sometimes, as in the Muscular Dystrophy Campaign’s design and print service, this has a dual role of providing employment for people with the condition and covering costs through sales. Other examples include ICAN’s plans to develop training and consultancy services in children’s communication needs to public sector agencies and Counsel and Care’s successful programme of conferences and events. Simon Gillespie, chief executive of the MS Society, is looking to generate income through negotiating profit share clauses in some of their research contracts so they would benefit from any products developed as a result of the research.
Traditionally, one of the main ways the larger charities have generated income is through charity shops. However, as Jon Sparkes, chief executive of Scope, points out, the environment for charity shops is now very different with the arrival of Ebay, Primemark and cheap clothes in supermarkets. He believes charity shops have to respond to these changes by emphasising their brand and making sure they have the right location. Carole Easton, chief executive of CLIC Sargent, said they are planning to make more use of Ebay in the future as a retail outlet.
At the local level, one of the main ways which some councils for voluntary service are looking to earn income is through the establishment of third sector resource centres with office premises for local groups, as well as conference and training facilities for hire. Voluntary Action Sheffield recently opened the Circle, a new £5m centre for the sector, where VAS is based along with 10 tenants. Similar centres exist or are planned in York, Nottingham, Leicester, Liverpool, Birmingham and Leeds. As well as providing a tangible focal point for the sector in the city, these centres have the potential, over time, to generate valuable unrestricted income.
As the financial implications of continuing social care become harder for government to sustain for an ageing population, charities are beginning to look at charging those clients who can afford to pay for their services. WRVS have a growing number of ‘self-payers’ and KIDS are proposing to charge fees for their services for disabled children where parents can afford to pay.
Conclusion
All these plans are going to be harder to realise in the current financial climate, but, by pursuing a balanced approach, the 100 chief executives I spoke to are preparing themselves for all eventualities.
Richard Gutch is an Associate at the third sector recruitment agency, Prospectus.
10 November 2008
