Tuesday, 18 April 2017

Tweaking Governance Incentives

Societies’ need for the work of charities is complex. It is affected by the social and political systems, the economy, population growth, government policy, private sector’s social responsibility, and climate & environment, to name a few. 

Charitable endeavour is likewise affected by need itself, as well as levels of donations, professionalism, governance, public opinion, government policy & relations, voluntarism, and philanthropy. 

There are lively debates in the third sector on fundraising practices, on the use of Randomised Control Trials, the best ways to demonstrate impact, and the nature and practice of individual altruism.  There has also been some focus on governance itself, as displayed in the House of Lords Select Committee on Charities’ recent report: Stronger Charities for a Stronger Society.

Rather than propose a big shock-and-awe intervention in governance, this blog is an attempt to think through the incentives and disincentives that affect those engaged in it. There is no silver bullet for fixing charity governance, no easy-to-follow formula. A board can have a diverse set of talented people who meet at appropriate intervals with adequate information – they can look  perfect on paper – and still fail the charity they are meant to steward. Likewise a board that by description sounds chaotic can, with devotion and passion, steer a charity to robust growth. As we know from experience, governance is both about good process and strong dynamics in the organisation. 

We know that weak governance can cause serious problems for charities, and that boards which just keep a charity ticking along, without effectively challenging and stimulating the executive team, fail in their duty to help their charge be the best it can be for beneficiaries. We also know that if the relationship between a Chair and a CEO is bad then this will affect delivery and effectiveness. 

One way to think about this is to go back to basics, at least so far as management studies and behavioural economics would say: what are the incentives and disincentives for people becoming trustees and doing their duty as well as possible? 

Once we’ve established those, we can look at suggesting tweaks to the system to minimise the deterrents and boost the encouraging factors.

The list below is far from exhaustive and we’d welcome more suggestions. The list does not assign weight to each factor, so more items in a column doesn’t mean we think that column is overall more compelling. The factors certainly don’t all apply to all boards equally, or at all.

-         Belief in charity’s purpose, goals and work
-         Interpersonal reasons (favour for friend/family)
-         Warm glow/ advancement of spiritual enlightenment/ faith 
-         Enjoyment of the trustee role
-         Social status/acclaim
-         Social expectation (those of high standing; religious obligation)
-         Career advancement (looks good on CV; builds experience; contacts & prestige)
-         Good relationship between board and senior team

-         Time commitment (including holiday days taken up, evenings reading, fundraising events; opportunity cost over leisure or earning)
-         Weight of responsibility and tough board choices (even if you vote against)
-         Pecuniary liability if things go wrong
-         Legal and regulatory scrutiny (and related stress)
-         Risk of media and moral hazard, community distrust
-         Costs of travel, sundry expenses
-         Learning strain (trusteeship training or self-education) or feeling out of depth
-         Boredom/diverts from passion of frontline volunteering
-         Competition from other non executive posts that offer remuneration

This prompts a few simple ideas to minimise the latter column. They would not revolutionise charity governance by any stretch, but taken together, could increase diversity, attendance, enthusiasm and confidence.

A. Volunteer days in law
If the state made employers offer 3-4 days, or even half-days, as paid leave specifically for volunteering this would free up countless individuals who would like to join boards but cannot justify taking so much time off. The third sector often discusses the personal growth benefits to serving on a board – these could be useful to the trustee’s main employer too, so volunteer time should not be seen simply as holiday, but as a form of constructive training. 
The flip side would be: hold all board meetings outside work/study hours. This presents travel problems but is often the easiest solution…

B. Normalise travel costs being paid by the charity
The cost of travelling to and from board meetings is a barrier to entry for some potential trustees. Charities are already encouraged to expand their capacity for holding meetings using digital communications technology, but this too presents affordability challenges (laptop, microphone, broadband line). Charities that can should consider normalising the cost of travel (and other similar expenses) to and from board meetings – many already do.

C. Recruiting and paying trustees
As discussed by New Philanthropy Capitalit may be appropriate to consider paying trustees in more cases than we currently see. Recruitment should also be open (at least on the charity’s website and social media if not through an HR firm) to avoid any accusation of bubble-headedness or cronyism. Payment need not be shockingly high or comparable to a salary, but could compensate those who really can’t give up working time, however much they’d like.  This is often a constraint for having proper beneficiary/service user representation on a board and should be considered deeply as a matter of diversity – only with genuine diversity rather than tokenism can a board fulfil its proper function of testing and challenging the executive. Modest payment also allows a charity to demand adequate time from its board to take appropriate reading and training/development steps if available.

Some argue that this changes the dynamic of what volunteering is about, what board service means. Is this really a problem? Are we willing to accept less-than-optimal governance for the sake of a vague Victorian sense that voluntarism is inherently noble, to the detriment of those unable to work for free?

Of course there are myriad other suggestions that would affect governance, and hopefully have a knock-on effect in charities’ impact – reform and support for and from the Commission; a public better educated in the realities of fundraising and charity action; better training and resources for boards of all stripes – but these are fuzzy, indistinct. The improvements suggested above are simple, and B & C can be done by charities tomorrow, without any long legislative process. Idea A can be supported by individual employers tomorrow, again, if the private sector sees what it can do to help (and to promote its employees’ responsibility and skills). The ideas explored here could apply equally to social enterprise directors, small charity boards or global research foundations.

Sir Stephen Bubb

Wednesday, 22 February 2017

The fantasy of a well-supported charity: Spontaneous Combustion Support

Imagine a fictional charity, Spontaneous Combustion Support (SCS). This charity, as the name implies, provides advice, preventative care services, and post combustion family counselling, for sufferers of the grave affliction. The most visible work it does is sending volunteers and medical professionals to identify suspected sufferers displaying early symptoms (wisps of smoke escaping from the nostrils, high fever, insatiable desire for curry) and chill their cores, then monitor their ongoing progress.

SCS operates along typical charity lines. Its workforce and volunteer pool are highly motivated, well intentioned, and generally good at what they do. The charity is always struggling for funds and often has to dip into reserves to keep delivering its vital services. Its IT systems are nearly a decade old and often freeze, while the scanners that their volunteers used to identify especially hot individuals in public places tend to break down or identify those puffing tobacco.

The charity has a couple of good researchers but their efforts to develop better cures and diagnosis tools are limited by the need for them to also act as coordinators for SCS personnel on the ground. The company’s logistics a poor: emergency teams often scramble to rescue those who are either already piles of ash, or perfectly healthy but standing near radiators. Staff salaries are below those of the public sector and completely out of sight of comparable private sector positions.

The charity has no budget to train its senior leaders, to help its board bond and learn to support and challenge the executives appropriately, nor does it have nonrestricted money for raising funds. Its efforts to alert people to the dangers and early warning signs of spontaneous combustion are limited to free social media platforms and simple infographics on its website. In some areas the NHS welcomes its help, in others the reception is frosty.

In short it is a worthy charity providing an important service, surviving but not thriving.
One day tragedy strikes. The daughter of a prominent businessman taking a refreshing walk along the Thames is healthy one moment then seen with smoke billowing from her ears the next. When the affliction hits she is a mere 20 minutes from a trained SCS volunteer who could help. However, the public is not aware either of the disease or of the charity’s ability to cure it. She is first ignored, assumed to be a poor example of performance art, then finally an ambulance is called, but it takes her to a general hospital without dampening and chilling facilities. By the time a staff nurse alerts SCS, Alicia Postlethwaite is alight. A charity volunteer team exerts themselves to put out the blaze but is too late.

Alicia’s father, once recovered from his grief, decides to hold a fundraiser for SCS with the vow that nobody else should perish from such a preventable disease. Mr Postlethwaite consequently holds The Businesspeople’s Big Bucks for Back Office Bash, inviting all of his besuited friends for a glitzy four course meal and auction of pledges. His associates and colleagues are well aware of the importance of supply chain, upstream facilitation, quality logistics and coordination, and proactive governance. They see an opportunity not only to help SCS and make something good of Mr Postlethwaite’s grief, but to provide a new model for the charity sector. This fundraiser is unique: not a penny raised is ringfenced for the front line. The businesspeople compete in largesse to support all aspects of the SCS engine room.

The charity is turned around in a matter of months. It becomes the Google/Twitter/John Lewis of the charity world, with fantastic facilities, state of the art technology, trendsetting best practice project management. A chief executive is brought in from a FTSE 100 outsourcing conglomerate. SCS offers fun diversions for staff, great pay and CV potential, training and development budgets. The best of the best compete to work there - even if not all are strictly motivated by altruism or charitable feeling. Its comms are efficient, frontline staff are sent where they need to go when they need to be there, research is joined up and coordinates with other charities and the private sector & universities.

Writers from the FT and Economist run articles on SCS’ innovative restructuring. Management finds it can collaborate with local spontaneous combustion charities such as Cornwall Against Combustion and Burnley Burn-Not, combining its medical expertise with their greater knowledge and links with chronic sufferers. The public learn how to spot the first signs of the disease and know who to call. Soon spontaneous combustion is little more than a myth used to scare naughty children.

In summary, far more SC sufferers are treated and saved than would have been if Mr Postlethwaite had demanded that all the money he raised be spent on paramedics and body-fridges.

The question is: would this be bad? From the description above Spontaneous Combustion Support no longer sounds much like a charity – it sounds like a typical private sector company that happens to run on donations. 
Is that a problem? It is very much meeting its charitable purposes after all.
More to the point, why is the story above so unbelievable? Fictional disease aside, it does not seem unrealistic that those many in society who understand the importance of back-office and business process should be motivated to donate to charities in a sophisticated manner.

They should frankly be annoyed by calls for every penny to go on the front line, for overheads to be minimised, for accounting acrobatics or actual austerity to create misleading ratios between giving and direct charitable effect spending. It is understandable that many in the public view charities with suspicion, but given the sector’s progress in transparency and accounting openness, why is there no support among those whose own businesses are run with proper infrastructure, for the voluntary sector to have the same bedrock?


Thursday, 19 January 2017

Is there a science of charity, and would we want one?

A few months ago Joe Saxton, Driver of Ideas at nfpSynergy, wrote a thought-provoking blog challenging our sector’s enthusiasm for randomised control trials. Joe’s article and the debate started in the comments, were fascinating and deserve a read. But it prompted consideration of the question one step removed – before we look at charities borrowing science’s tools, is it appropriate to compare charitable and scientific worlds?

Randomised control trials are the current highest point of evidence collection in the scientific method, a method whose genesis is hundreds of years old and whose structure is supported by countless examples of error, trial, error, improvement. When scientists operate, their experiments rest not just on the shoulders of giants, but on the backs of a pyramid of giants, trolls, charlatans and visionaries. Science learns from itself, from its mistakes, around the globe and across the centuries.

The scientific method demands that results be replicable, and expects an important experiment will be run by entirely different people time and again. Science has operated for decades within the infrastructure of the academic world, with a host of peer review journals and challenging conventions, allowing distant practitioners to test the validity of claims and build on success. Rivals and successors pore over datasets, read failed experiments and negative results, perfect techniques. The world has far more STEM graduates than experts in charitable operation or social policy research. The sector’s main notable academic journal is that of the Wellcome Trust, Wellcome Open Research. It is excellent, and it is, of course, a science journal.
This is not the only difference. Science and technology are wedded more firmly to economic progress. 

Shareholders, government, hospital directors and the public take note of new drugs, stem cell breakthroughs, rumours of groundbreaking green energy generators. Charity practitioners have nowhere near this level of awareness – not because we are lazy or intellectually inferior, but because we have no such support structure or history of sharing. Too often in the charity sector, it is not just a case of one hand not knowing what the other hand is doing: it is two fingers on the same hand each reaching out to grasp the same object and still failing join up.

In the corporate world, certainly in the boardrooms of pharmaceutical and tech companies, directors are inquisitive and acquisitive. There are aware of all their competitors’ projects, what newcomers try, innovation springing up in far-flung corners, blossoming SMEs. They are not only concerned with keeping their own company afloat but with exploring expansion on the frontier. They have teams of researchers comparing clusters of studies and meta-analyses to scope opportunity. They are supported by both the academic literature and by business media – the Financial Times and rolling TV news. Likewise they have a worldwide network of business schools, economics departments, management courses, decades of theories on effective leadership and proactive governance.

There are of course a great number of collaboration efforts in the charity sector, from the Good Exchange to the concept of “generous leadership”, from joint initiatives between funder organisations and umbrella bodies to local projects in the same town or village. One of Charity Futures’ ambitions is to compile a directory of these, listing free and paid resources on charity academia, leadership and governance training, and emergency support. Hopefully by signposting both collaborations and smaller ventures, even more efficient partnerships can be forged. This could grow in utility by adding neutral reviews and learning aids, so a bewildered new board member could easily find out the different tools available to help her.

The other difference between science and voluntary worlds is simply that a lot of charities do not operate in a manner with quantifiable results. The goal of some is to enable a sport to be played, or to make a group’s life more tolerable, hopefully enjoyable. There are sector activities which suit social science measurements, like helping ex-prisoners reintegrate or educating children, but a host of important charitable activities are little to do with numbers. Has enough thought been devoted to testing an ethical component, are quality-adjusted life years enough?

Trying to get a picture of impact by asking beneficiaries to rate their experiences feels like missing the point, even if methodologies were sound enough that they could be compared across location and type – which they aren’t. Some of the largest management consultancies have been trying for years to set out a standardised system to rate charity effectiveness and each model sinks on its flaws. What the voluntary sector does brilliantly is use hard science evidence in campaigning – against smoking near children for example – and funds investigation of this type. But that does not contribute to a central corpus on how charities themselves campaign.

The question of randomised control trials speaks to the charity bubble’s current focus on, possibly even obsession with, transparency and impact. You get the sense that many charity leaders believe that if we could only display our accounts and give hard numbers on how many people we’re helping, then the public and press would return to treating all charities as angelic.

This is a limp hope. Few people have the time or inclination to check the accounts and annual statements that charities painstakingly polished, even fewer compare different possible donations in such detail. Even if they do, they may not have the statistical grounding to make informed decisions, or may leave with the wrong message, that all the charities they compared spend too much on staffing, premises, IT and training. Certainly the sector should not retreat on transparency, but nor should it slog on under the delusion that once we reach a certain crystal-clear level, the public will fall in love.

Another difference charities may be more happy about. The sector is far less regulated, and while the Charity Commission comes down hard on some charities and may be seen as too bureaucratic, it pales in comparison to pharmaceutical watchdogs. We have nothing that functions like the FDA/MHRA testing and delaying new drugs for years. The Charity Commission does not review every new project, grant or intervention that a charity plans, not even very large experiments. Likewise most donors or funders would not be able to block a charity functioning.

Try as we might we cannot create a ready-made academic milieu for the voluntary sector, with the centuries of history, the international network of journals, the expectation of challenge, refinement and peer review. Multi-institutional multi-national collaborations do not spring up overnight, but after years of relationship building, sharing techniques and ethics, agreeing shared goals. But this is certainly a goal to have in mind: through thought leadership, debate, seminars and working with the university sector across disciplines, we must strive to introduce higher standards of intellectual rigour and collective progress.

This article first appeared in Third Sector magazine, here

Sir Stephen Bubb is Director of Charity Futures. Jonathan Lindsell is the Research & Programme Manager of Charity Futures.