The corporate ethos driving charities

Charities are looking to the business world for inspiration to maximise their resources, as Michael Millar reports

The large, staring eyes are all too familiar, whether they belong to a starving child or an abused animal.

They look out from television adverts, magazines, and from billboards.

They - and many other images like them - are the public face of charities that need help so they can save these victims.

But to help those in need, charities are having to work increasingly hard to help themselves.

They are often vying for shrinking funds in a highly competitive market place.

The global economic downturn has altered the way people across the world think about charity.

Shrinking pot

Between 2010 and 2011 the proportion of people around the world who said they were taking more time to "help a stranger" rose from 45% to 47%.

The figures from the Charities Aid Foundation also showed the proportion of people "volunteering time" rose one percentage point to 21%.

Start Quote

The really successful charities combine raw passion for their cause with a clear-eyed view of where they will get the greatest return”

End Quote James Whiting Malaria No More

The only statistic that dropped was donating money, which fell from 30% to 29%.

A single percentage point might not sound like much, but on a global scale, and combined with inflation, it amounts to billions in lost revenue.

"I had to make substantial cuts in expenditure to a previous charity where I worked and there is no doubt that the upheaval hobbled the effectiveness of the charity for well over a year," says James Whiting, executive director of Malaria No More UK.

"However, having made the cuts early in 2008-09 that charity is now recovering and is financially strong."

Business time

To be successful, an ethos of "all hands on deck to help raise a bit of money" is no longer enough for most charities. This is business.

"Over the last 20 years the voluntary sector has really professionalised," says Sue Porto, chief executive of the Volunteer Reading Help charity.

Schoolchildren in Africa The Peas charity focuses on showing how sustainable its projects are

"That's not to denigrate what has gone before. We wouldn't be here without the people who set up charities 20, 40, 60, 100 years ago, but now it is vital to have proper business plans, set clear objectives, and understand what your deliverables are," she says.

James Whiting says there is much to be gained from unbridled passion for the cause, but this is no longer enough.

"The really successful charities combine raw passion for their cause with a clear-eyed view of where they will get the greatest return on their fund-raising investment over the long term," he says.

On target

If charities want the edge, they need to slice, dice, segment and analyse their target markets like any other business.

"We really focus on our supporters according to the type of proposition we want to go to them with," says Lizzie Lleshi, community events manager at Save the Children.

"We'll look at what stage they are in life, what propensity they have to give, what attitudes they have to giving, whether they have an affiliation with a particular cause - whether that's children or international work or emergencies," she says.

Charities' clients - their donors - are becoming more demanding.

Gina Miller, founder of charitable foundation Miller Philanthropy, explains what she looks for in organisations she donates to.

Business of Giving

The rich are getting ever richer, big companies are getting bigger, while new fortunes are being created faster.

However, some of the super-rich are discovering that with a lot of money comes a lot of responsibility.

In a new series we will be looking at how companies and rich individuals are discovering their social responsibility and are using their wealth to change society and the wider world.

"Our message is one of smarter giving where all donors give to efficient, effective transparent charities who are not duplicating services or have horrendous administrative and overhead costs," she says.

This means charities have to work hard to show they are making an impact, whether it is through stories of changed lives, or money that has been saved by, for example, keeping an ex-offender out of jail.

"Smarter giving" is the catchphrase, particularly among governments, corporations and philanthropists.

Katie Cross, director of development at Promoting Equality in African Schools (Peas), says it is not enough simply to draw on the heart strings.

"Too often, traditional structures have not been designed with long-term sustainability in mind and do not give enough thought to how the projects they invest in will sustain themselves in the long term," she says.

"For example, providing one-off investments to build a school or sponsor a child through a year of education is not enough.

"It reinforces dependency and means that when funds dry up, or are diverted elsewhere, schools shut down and children cannot complete their education."

Investment choices

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The third sector is now a business sector with some of the biggest egos I have ever come across”

End Quote Gina Miller Miller Philanthropy

Having worked out who they are going to target and how, like any good business a charity needs to make sure the money it pulls in goes as far as possible.

For an increasing number that means more than plunging it all into good works; it means turning to places like the stock market, despite the inherent risks.

James Pike, head of charities at J O Hambro Investment Management, says making such an investment is not just an option for big charities with lots of cash to spare.

"We have a lot of small charities that have very small asset bases, such as a daycare centre looking after old people in a village," he says.

"They still need to make their assets work hard, particularly with interest rates where they are, so it's not just big charities that come to investment specialists.

"You've got to remember that these are charities that want to be operating in perpetuity - so in some ways they are the supreme long-term investor."

But adopting corporate models and values isn't without dangers.

Charities have to watch out for some of the more unsavoury aspects of commerce.

"The third sector is now a business sector with some of the biggest egos I have ever come across," says Gina Miller.

"We need to go back to the origins of philanthropy and charity, which was a love of man not money."

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