Fifteen years of benign conditions in the economy have embedded a growth paradigm in the governing class and in publicly funded institutions. It is not clear that the skills and mind sets exist to tackle the depths of the challenge we face. The biggest risk may be that we seek to carry on in the same old way

The recent words of an unattributable senior civil servant.

With the recession biting, how is it impacting on social enterprises? The evidence is mixed. Some suggest that in tough economic times social enterprises are well placed as they are mainly motivated by societal aims rather than profit. As George Leahy, Director of Research and Policy at the Social Enterprise Coalition comments:

It’s possible that, although they look to make profits, they are primarily driven by their social or environmental goals and have a more resilient structure in place to handle an economic downturn

One might add that social enterprises may be seen by consumers as having a more trustworthy brand, so while other businesses might face customer desertion, social enterprises are more likely to retain the client base. This might be true, for example, of ethical banks or microfinance institutions.

Others claim that social enterprises are primarily business (albeit with community goals), and hence suffer during credit crunch times. They are faced with the double-whammy of a lack of income through trading and other sources, coupled with a rising social need.

Some suggest the tough economic times have created a heightened social awareness, and a drive towards social innovation. There has been a ‘snowballing’ in Community Interest Company (CIC) applications during the economic downturn. Sara Burgess, the CIC regulator, has commented that CICs have been going from

Strength to strength…[because the form is an] inclusive brand…The Community Interest Company does what it says on the tin. The concept is straightforward. It has the interests of its community at heart and proves this by agreeing to regulatory oversight of the use of its assets and social purpose and by providing transparency in the way that it operates. It is this that provides confidence

The big challenge for social enterprises is how to fund the organisation during the period from infant startup to self-sustaining enterprise. At OxFizz, we pass the majority of profits generated through the trading activities of our three enterprises to charity. We’ve generated over £5,000 for charity since starting trading in November 2007 and only now are we moving towards financial sustainability. During this period we have had to rely on the generosity of our Friends of OxFizz, individual supporters who donate £5 a year, plus family handouts, in-kind support and the generosity of charitable trusts such as Coutts, HEACF, the Dragon School Sale and the Oxfordshire Community Foundation. The latter trusts have had the faith to support a social enterprise and have believed in what we do. Many others have turned us down because we’re a CIC rather than a charity, while others argue social enterprises need to be self-sufficient from day one. This isn’t feasible, and we would argue a greater maturity is needed by funders. Thanks to our supporters, we are on course to generate £30,000 for charity this year in addition to providing a wider social impact.

The other challenge social enterprises face is the funding relationship with the state. An increasing number of social enterprises are funded by the government to provide public services. To return to the quote at the start, a growth paradigm has existed within public services and the state. As today’s Prime Minister’s Questions demonstrated, the 2011 comprehensive spending review will inevitable mean cuts in statutory contracts, whichever hue of party is in power. Many social enterprises, and charities, have sought to diversify their income to become more ‘sustainable’ through winning public service contracts. The big challenge of the next fifteen years, or at least the next five, may well be how to cope with a contraction paradigm. Within this context, the prevailing interpretation of ‘sustainability’ may need to be reassessed.

OxFizz has been asked to pen a piece for the new UnLtd youth social enterprise newsletter, and we’ll link to the finished article once published.

In it, we tackle the issue of charity fundraising, and specifically street fundraising, which some critics term ‘chugging’ (‘charity mugging’).

OxFizz was set up to promote a new form of fundraising, challenging the funding fatigue which some people think exists in the UK, by bringing back the voluntary to philanthropy. Our primary focus is on being positive about the future possibilities of expansion within philanthropy, but we do also worry about the wider long-term damage to the third sector caused by over-zealous and pressurising fundraising methods some charities use in search of funds.

Yet there are some in the sector who mount a spirited defence of street fundraising. An ex-fundraiser gives a balanced and personalised account of his time in the industry (and with the increasing resources poured by charities into fundraising, it is an industry) here, as does another fundraiser here. And the official regulators of face-to-face fundraising, PFRA, note the reasons why charities use this method (which includes street-fundraising and door-to-door collections):

Every year, an incredible half a million plus people pledge their support to charities through face-to-face fundraisers they meet on the street or greet on their doorstep. Simply put, there’s no better way for deserving causes to enthuse people to become donors, campaigners or volunteers…

…Face to Face fundraising needs an organisation to promote and protect its interests because, despite much uninformed criticism, it remains demonstrably one of the most effective forms of supporter recruitment ever developed, generating huge numbers of donor pledges for charities and good causes from individuals who are not responsive to other media - for instance:
- around 230,000 on the High Street 2007/08 - around 280,000 on the Doorstep 2007/08
These pledges are potentially worth a minimum of £55m+ a year to charities, resources which they simply would not have if face-to-face were not used - meaning beneficiaries whose needs would be unmet if face-to-face were not used…
…We can say with certainty…that charities generally can expect to get at least a 3:1 return on their investment over the lifetime of the donor’s giving relationship with them

If the statistics are correct, it seems the economic rationale is sound - though it needs to be remembered that it can take several years of donor’s direct debits to accumulate before a charity recoups its initial investment. As Intelligent Giving suggest, speculating to accumulate within charity fundraising is a necessary evil, though it is important for charities to keep an eye on how they can reduce expenditure.

But the wider implications on public trust and confidence in the sector are potentially damaging, as mentioned in a previous OxFizz blog posting. Criticism of face-to-face fundraising is anecdotally rife - as one member of the public puts it:

I do not give to chuggers - the ones out in Central London, especially on High Holborn and Farringdon are rude and aggressive. Have reported them before and got an equally rude response (one guy bullied a little old lady to tears).
Last summer, I encountered a chugger on High Holborn, collecting for a cancer charity. I wouldn’t part with my card details (3 of my friends have had their bank accounts more of less cleared after doing so…), and the guy screamed a whole torrent of abuse at me as to how “people like me” were consigning 1000’s of people to an agonising cancer death, how “people like me” made him sick and how he hoped I got cancer, to “see how I liked it”.
At this point, I explained that my life was cancer research (I have a doctorate in the subject) and regularly gave my time FREE OF CHARGE (not for £7 an hour!) to a local hospice… I got a round of applause from the crowd which had gathered and unluckily for him, one guy at the back was in police uniform. Classic. I left them ‘having a chat’.
I also reported him. Saw him out chugging the same stretch a month later for a homeless charity. That’s how seriously his company took that kind of practice - i.e. not very.
It might sound harsh, but I go as far as refusing to support charities that use chuggers in favour of those who do not. The only way people are going to start realising that such practices are unwelcome is if people report them to local councils and companies employing them, but also speak with their wallet.
Rant over.

Herein lies the difficulty. If face-to-face fundraising brings in the cash for certain charities who can afford to fundraise in this way, the longer-term implications for the wider third sector - including many smaller, local charities - are potentially very damaging.

The Charities Aid Foundation reported last week that:

Charities in the UK may soon be permitted to compare themselves to others in a change to advertising regulations.

The Broadcast Committee of Advertising Practice (BCAP) could allow organisations to judge their efficiency against others after a consultation concluded that appropriate guidelines to prevent unfair or misleading claims are already in place.

Charity fundraising is highly competitive at the moment, with the big charities able to speculate to accumulate - ever-more professional funding teams are almost machine-like in their important quest to find the finds to run their charitable projects.

The BCAP consultation raises the intriguing possibility of charities battling against each other. Might NSPCC run an advertising campaign to state that they rely on the generosity of donations, gifts and legacies (which made up 77% of their £147m income in 2008). The message might be: don’t give money to Barnardo’s - they get most of their income from other sources, including the state, and only 24% of their funds are from voluntary income. Or could Dogs for the Disabled argue that Guide Dogs for the Blind don’t really need your money because they have 2 years worth of reserves in the bank?

Competition in the charity sector can be a good thing, improving performance and results. Some in the sector don’t respond well to criticism, so perhaps having charities air criticism of their competitors might be a good thing, leading to more open debate.

But criticism is only healthy when fair, and when there is no ulterior motive. Charities - and more important, the charity sector and civil society organisations as a whole - need to gain and keep the public’s trust. This can’t happen when charities use advertisements to criticise their rivals.

An advertising campaign from Enable Scotland

This leads into the wider debate of how much charities should be advertising, and how they do it. Anecdotally, many people I speak to criticise charities for their use of advertising. Their is a fine balance to be had - clearly charities wouldn’t use emotive adverts unless they generated financial returns or increased knowledge/debate of a particular issue the charity is campaigning on. And yet do some of the harrowing adverts, in particular ones run by children’s charities’ adverts, have any effect? New Philanthropy Capital noted that the NSPCC’s Full Stop Campaign raised £250m for the charity but suggested the logic behind it was flawed and perhaps naive, and that there is no evidence the campaigning leads to fewer beatings. My submission would be that advertisements along these lines tend to put off many members of the public, who query whether the money spent on these could be better spent on charitable activities. And that they can damage the faith and trust the public has in the charity sector as a whole.

The BCAP consultation has some other ideas:

Allowing charities to show advertisements back-to-back with community service announcements as long as they do not exploit vulnerable viewers.

And ensuring that:

Commercial advertisers who pledge money to charity will have to specifically state the proportion and recipient of their donation.

These look sensible. It will be interesting to see result of the consultation.

OxFizz attended the National Council for Voluntary Organisations Annual Conference a few weeks back in the plush surroundings of The Brewery in the heart of the city of London.

The conference marked the 90th anniversary of NCVO and rarely during these years has the charity sector faced a more worrying time. Indeed, while the theme was ‘Civil Society: Building trust in uncertain times’, much of the talk at the conference focused on the uncertain times rather than building trust.

The relationship between ‘trust’ and ‘uncertainty’ is an interesting one: given the economic times we live in, and in the midst of a barrage of criticism at big business and government, will faith in the third sector increase? nfpSynergy’s research late last year (though before the full impact of the recession) suggests:

65% of British adults trust charities, up from a nadir of 42% in July 2007

As keynote speaker Vincent Cable MP said at the conference, demand for services charities provide has increased substantially in the past year. ACEVO and CAF state:

72% of charities are experiencing a rise in demand for services>

Many of these people have never had to rely on these services before. Perhaps the increase in usage has led to an increase in recognition of the values of these services.

And yet at the same time as demand increases, resources are declining. PWC estimates that:

The sector could face a £2.3bn funding shortfall

Neil Parker, an Economist at RBS predicts:

Donations to charities will decline until 2011, 5% in 2009 and 3% in 2010

But perhaps it’s not all doom and gloom. Some critics such as Iain Duncan Smith MP at the excellent Centre for Social Justice think the sector, and in particular some bigger charities, have become too bloated. According to the Charity Commission, in 2008:

89% of the £48bn total UK charity income went to 5% of charities. 0.9% of charities attracted 65% of the total income

Perhaps this shock to the system will increase efficiency.

But there is a worry that the charities that will be hardest hit are the smaller community groups. 47% of registered charities (79,183 at the end of 2008) have an annual income below £10,000. Many of these are struggling. OxFizz is passionate about supporting these charities, and we encourage our volunteers to consider supporting smaller, local charities. Some, such as Geraldine Peacock, former Chair of the Charity Commission (who once reportedly said ‘You could get rid of 90,000 charities from the register. Less is more. Having that many confuses the public’) might think the death or merging of some of these charities is a good thing. But one of the beauties of the voluntary sector is its variety, and many charities provide grassroots solutions to local problems, something the Directory of Social Change agrees with.

There may be another benefit to this recession, and the final word goes to Stuart Etherington, Chief Executive of NCVO, who ended his conference speech by saying:

So, in summary, we have seen the age of the market, and we have seen the age of the expanded state. So what of this new millennium? We must see a new era that rebalances the role the third partner plays. It is after all an active civil society that makes our country the diverse and wonderful place it should be: inclusive, fair and steeped in opportunity.

More information on the conference can be found here.

One of the things we at OxFizz are passionate about is encouraging talented students to consider a career in the third sector - working for a charity or a social enterprise.

According to the Association of Chief Executives of Voluntary Organisations:

Fewer than 20% of third sector Chief Executives come from the sector

In other words, 4 out of 5 charity Chief Executives come in from the business or statutory sectors (I’ll muse in another blog post about other reasons why I think this is unsustainable). As Prospects has noted:

There is a lack of younger leaders coming through to replace the current generation of Chief Executives [in the sector]

In addition to this, there are skills gaps within the sector. As the UK Workforce Hub’s Voluntary Sector Skills Survey 2007 states:

• Around 30% of employers reported under-skilled staff
• Over 25% of employers reported skills gaps within marketing, strategic use of IT, legal knowledge and fundraising

A thriving charity sector needs talented people. I left university back in 2006, and many of my contemporaries might have been interested in working in the charity sector, but couldn’t see a way in.

There are a number of barriers and misconceptions surrounding a career in the sector, chiefly:

1) I want to be an astronaut or a fireman when I grow up
When at school, pupils aren’t aware of the opportunities of working for a charity. A survey was once done showing that young people think the main people who work for charities are celebrities or old people - these are the people they see on TV associated with charities.

2) Charities don’t pay you do they?
There are many terms bandied about when trying to define the charity sector: ‘third sector’, ‘civil society’, ‘voluntary sector’. The very diffuse nature of the sector makes it hard to define, but the most oft used term is the latter - ‘voluntary sector’. Understandably this suggests to many people that charities don’t pay, and that working for a charity means volunteering in your spare time around your day job. As the Voluntary Sector National Training Organisation has stated:

Recruitment…[is] hampered by potential candidates’ misperception of working in the sector

3) Charities are bad at recruiting young people
The number of paid internships in the charity sector can be counted on the fingers of two hands - such as the excellent Charities Advisory Trust one I did in 2006. Oxfam used to offer paid internships but stopped paying interns a few years back - no doubt having been flooded with applications they decided they could make the posts voluntary. The trouble is that doing unpaid internships becomes socially exclusive, with only the well-off being able to afford to work unpaid for several months.

Charities say they would like to recruit more young people, but usually the issue is resources: lack of finance and the time and money it takes to train up inexperienced people. But this is short-sighted. The impressive Teach First scheme has given a huge boost to the teaching profession by bringing in highly talented graduates and giving them fast-track training. The charity sector urgently needs a similar programme.

Part of the OxFizz team of interns 2007/8

So it’s pleasing that progress is being made. I sit on the advisory panel to Do More, an NCVO programme designed to create a structured graduate entry programme. The Clore Social Programme aims to support ‘the next generation of third sector leaders’. OxFizz, in a small way, is contributing with our unique internship programme for undergraduate students in Oxford. And we were pleased to hear today about Charity Works, an internship programme for graduates launched by five of the UK’s leading charities (Advance, RSPCA, Terrence Higgins Trust, Together Working for Wellbeing and The Children’s Society), where graduates are given a £20k salary and three 8-month placements with three of the charities.

More needs to be done, but it is encouraging that this is starting to be taken seriously.

Jamie is a Director of OxFizz