Wednesday, 4 September 2013

Corporate Model for Corporate Entities

A snappy title I agree. It all came about after a meeting I had with a former client. It's quite a large charitable enterprise that used to be extremely well run (well of course I would think that since I helped!). Some poor leadership in in the last five years, however, has led to some re-thinking on the part of the Trustees and management board and that is where everything has gone wrong.

Running charities is difficult, if only because it is so different to running a commercial or corporate organisation. I know, I've done both and am currently Chair of a small charity in Berkshire.

If a charity has been run badly, Trustees and boards often ask their auditors for advice or, if they are feeling brave, seek advice from large consultancies. These sorts of bodies tend to understand their own worlds and so offer a corporate model of governance. This can, sometimes, work - but generally only in the very large national and international charities which look quite like corporate organisations. For most charities and not-for-profit organisations it can be a disaster.

The key difficulty is in understanding that charities operate because of good will. Good will from staff, members, volunteers. The good will exists because everyone understands and agrees with what the charity is doing and believes that they are helping. Staff will accept what is usually a lower wage, members will join and then engage in the activities of the charity and people will volunteer to help out.

So steaming in with a corporate model can wreck all of that. 'Outsource non essential costs' is often the first cry and this tends to be catering, security, cleaning etc. I'm not even going to argue whether these can be considered non essential or not. The point is that staff in these areas in charitable and not-for-profit organisations are often engaged beyond their remit. They are working in that organisation because they like it and support it - so that means that a member of the charity or a member of the public who is served a cup of coffee, or who is greeted by the security guard at the door or who bumps into the cleaner meets someone who cares about the organisation, who knows what is going on and who passes on a real enthusiasm about the visit.

This does not happen in corporates.

Another problem with the corporate model is the profit centre. New managers in charities love to establish cost and profit centres and to encourage staff to think about ways to show profit in their centre. It is a charity - there is no profit. Staff in charities should be encouraged to do their jobs as well as possible so that more resource - time, effort and money - goes into the core charitable purpose. Prices in cafes and shops should be pitched towards market values, in general, but buyers should be made aware of why the price is what the price is - and that surplus goes towards the charitable purpose. If the charity has members and one of the purposes of the charity is to support those members (an educational charity, for example) then why should the organisation try to 'maximise profit' from selling them things - these are the people you are supposed to be supporting.

So - if your job is to run a charity, please try to run it like a charity and not like an accounting firm or a consultancy. It really just won't work. Remember about good will and work with your staff, members, volunteers and the public to drive understanding of the core charitable purpose - but don't forget that it is the people in the organisation that make the difference. Treat them like corporate and commercial staff (i.e. reasonably badly) and your organisation will start to look and operate like a corporate organisation, but without the financial resources and profit available. In the end your organisation will, at best, just end up looking like a badly resourced and run firm.

That can't be good.

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