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Posted by Sarah Brown on 20 Aug '15

Why Kids Company should make you question everything

Running any type of organisation in the 21st century is complex. It's not just enough to focus on money if you're a business or changing the world if you're a charity, for sustainable success you have to think across all the elements of the organisation

Kids Company seemed such a success. It was lead by an inspirational leader, had a vision to change the world for young people in real need and seemed to be working really well. It grew and grew as everyone from prime ministers to youngsters were inspired by the story of what it could and was, apparently, achieving.

Thinking beyond the obvious

To some people it is 'obvious' that charities are about changing the world and business is about making money.

I would argue that it is not that simple in the 21st century and probably never was.

I have tried to capture this complexity in a new organisational monitoring tool that I have developed, the Responsible Organisation Charter(c) because I believe every organisation be it charity or business has to think holistically to be successful. The Responsible Organisation Charter identifies five key areas of focus for any organisation be it charity or business.

  • Leadership - Creating an organisation that will succeed with the leader: ensuring behaviour is driven by shared values; having a clear vision; being action focused
  • Culture - How we do things round here: Creating a culture which is adaptable; pioneering learning; collaborative
  • Relationships - Developing a win-win attitude: Treating staff well; Treating suppliers fairly; being a Good Citizen
  • Product Offering - Making your vision and values real: Offering products or services that are life changing; Being reliably consistent; Minimising your environmental impact
  • Financial Success - Ensuring a long-term future: Having an identifiable market niche; Ensuring you have innovative growth; Looking for sustainable profit

Monitoring how an organisation is performing in each area highlights issues to address and opportunities to capitalise on.

The temptation particularly when under stress is to focus on what you think is key to an organisation, profit for a business and social impact for a charity but both are equally flawed. As the banks and Kids Company each show. In both cases the end result has been financial failure but for very different reasons.

The banks v Kids Company

If Kids Company had been using the Responsible Organisation Charter (c) (ROC) then maybe the trustees might have identified some issues to address earlier. For example, Kids Company would have scored high on the leadership section for vision, but reports suggest that the other key parts of leadership wouldn't have scored so well, behaviour wasn't driven by shared values consistently across the organisation as the concerns on child safeguarding suggest, and there was insufficient focus on action, particularly as problems started to surface. It might have scored high on changing lives except the rigour of the ROC is that evidence is needed and exactly how Kids Company changed lives is unclear; it is not known how many young people used the service, or how many got qualifications, jobs or avoided prison because of its work.

Without knowing the detail it is hard to know how Kids Company would have scored across all the areas. Obviously at the end it has failed totally in the relationships section, letting down staff, suppliers, users and funders and the wider community i.e. in being a good citizen.

If banks had been using the ROC, they would have scored high on collaborative, almost too much, and particularly low on behaviour driven by shared values under my meaning of values i.e. being positive. The end result was the same staff, investors and the wider community let down.

Avoiding a knee jerk reaction

Unfortunately the media and politicians and sometimes the general public want simple answers. NCVO has given guidance to trustees, talk in the media has been of merging children's charities as there are too many and increasing the red tape and governance. Lots of the press are blaming the trustees.

The worry is that funders will become risk averse and good charities will suffer. Some charities maybe do need to merge but where it has been forced on charities it has not got a good record.

If trustees are crucified the job of recruiting trustees will become even harder.

Three areas for charities to focus on to avoid following Kids Company

While all the areas of the Responsible Organisation Charter(c) are important I think three can really be helpful for charities at this time, as each faces questions because of the Kids Company closure.

1) Reliable consistency

2) Collaborative

3) Sustainable Profit

1 Reliable consistency

Assuming a charity has a vision that is still relevant and values driven behaviour then the red flag for the outside world will be when a charity doesn't seem to be consistent. When it's not fair or seems to even be lying!

You claim to help thousands and only a few hundred are documented. There are complaints or rumours, these are all danger signs that however great the main vision is, the implementation has cracks.

Once this begins to happen, trust goes and money follows shortly afterwards.

Trust is the foundation of every relationship that works and is critical to success. Consistency is not enough as that does not imply quality – people can expect you to fail consistently “it was late again”.

Reliable means meets expectations of the customer or user, the staff, the supplier, the community, the government, the funder, investor or anyone else.

It is particularly important in the field of customer experience, and the people getting services from a charity are some of its customer base even if the term is rarely used.

Reliable consistency will make you more money because you will achieve consistent results which attract funds or donations. It will also save you money as consistency is linked to systems, and systems tend to maximise efficiency.

Ways to increase your consistency as a charity

Understanding

First consider how do you ensure consistency? Does everyone in the organisation know what level of consistency you seek to provide?

Systems

Do you have systems in place to encourage consistency? For example, checklists. This can be a particular issue in charities reliant on volunteers to deliver services.

Delegated power

Do staff know they have the authority to address problems or issues to ensure people get a consistent service?

Feedback

How do you capture feedback and issues? Are you defensive about criticism? Do you respond to people letting them know their feedback has been heard? In the business world research[1] indicates that 70% of the best in customer experience management use customer feedback to make strategic decision compared to 50% of industry-average organisations and 29% of laggards.

Are your systems designed for your ease or the people you serve?

Phone answering

Can people get through on the phone and speak to one person who can solve their issue? Again research in business indicates 94% of customers do not want to be transferred to another representative more than once and 84% of customers are frustrated when a representative does not have immediate access to their account information.[2] The people who charities serve may or may not be paying, but they deserve to be treated well.

But it costs money

I can hear the cry that it is too costly and not relevant but you will have 'sold' a vision of a level of support to donors or funders and they will believe that everyone gets that service, every time.

If as trustees or managers you can't be certain that they do get a reliably good and consistent service then you are vulnerable. If what you provide depends on the quality of the worker on that day, you are vulnerable, if sometimes it is good , but other times poor and you use the excuse that it is because funds are low, then you are vulnerable.

Many of the elements of consistency don't cost money, they are reliant on systems, attitude and ensuring all the behaviour is driven by shared values.

It's a service, everyone is different

Even providing a service designed to meet the differing needs of individuals can be done consistently. The service may be totally tailored to the individual but it will be delivered more effectively if the framework within which the service is delivered is consistent.

A bespoke tailor makes each suit individually but uses the same tape measure, lets people choose from a specific set of materials which he knows will make a good product, provides the service in a set order so he doesn't have to remeasure or write down the measurements several times.

How often in a charity does the information that is recorded depend on who you talk to first. If you come one route this happens, another it is different. How often do people have to repeat themselves? How often is information lacking and not recorded consistently so you don't have the answers to respond to how you change lives.

Going forward, and, in fact, for some time, the good funders have wanted evidence and evidence which is reliably consistent. If you want to survive and thrive that's what you need to be, reliably consistent.

2 Collaborative

I think part of the fall out of Kids Company will be that charities will need to justify why they need to exist when another similar charity is down the road.

If however you can show that you are strategically collaborating to achieve efficiency and maximum impact then this argument about closing one down is undermined.

There are three fundamental strategic reasons to collaborate:

  • to save money, generally by sharing resources and reducing overheads
  • to improve your service
  • to attract more users or income

Collaboration does not mean you have to merge or even set up a joint project in fact I have been involved with several partnerships of charities where the collaboration has led to service improvement without anything more than collaborative working and sharing of knowledge.

It's not as common as you think

Effective collaboration is built on trust and generally the charity sector has competed for funding and donors so much that the trust is often missing.

Being collaborative starts at the top and often staff are willing but trustees are not. They see their role as protecting the charity and collaboration and sharing can be seen as exposing the charity.

Back to fundamentals - your why

My initial interest in collaboration was sparked when I was approached by a charity which has been told it had to collaborate with a neighbouring charity doing similar work. They had been talking fruitlessly for seven months – could I help?

Up for a challenge I looked at existing work on collaboration and found there was a lot on how to collaborate and nothing on why. You can read about what happened here.

To be collaborative you not only need to have a culture which will help you collaborate and can fit with your fellow collaborator(s) but you also need to have clear objectives which both sides understand. In the case of the charities when I used a specialised decision making tool which I had developed it became clear that the other charity had no goals that a collaboration could achieve for them.

Maybe if they had thought about the fundamental reason they existed to help the people they served then the 'ego' of protecting 'our' charity might have been replaced by the evident benefits that collaboration would have provided. In the case I mentioned, one charity was much more skilled, with more staff but had limited premises while the other had limited staff so they opened only one day a week and limited skills but a large building. To an outsider collaboration was an obvious win-win but one of the charities was fiercely independent. The funder observed the meeting and realised that collaboration wouldn't happen.

A couple of years later, the funder forced the issue and a single body ended up serving a much larger area and both charities ceased to exist.

Don't wait to be forced into an arranged marriage

Forced collaboration I suspect has no greater success rate than arranged marriage but funders and donors will ask questions if charities don't show they are working together to be more effective and often force the situation.

Identify why and what you might get from collaboration, it might be with a charity in a totally different sector who can complement what you do and then go for it. But do use some strategy, don't waste months in talks because you haven't established the fundamentals early on.

Charities that collaborate or even merge will potentially thrive assuming you have a love match, a marriage of convenience may be less successful.

If you don't become collaborative, you may be forced or you may just find you are left behind by those that can appear bigger or more innovative because they do collaborate.

3 Sustainable Profit

The obvious fall out from Kids Company is the financial management issues, particularly the lack of reserves.

In the ROC I use the term sustainable profit which I know will have people saying but we don't make profit in charities. Profit to many is a dirty word and why business is 'bad' because it just chases it.

In fact, I agree that a business just chasing profit without having values and vision will be as much of a failure as a charity just chasing social impact without having a care for the money that funds it.

How does an organisation build reserves? Whether it is a business or a charity or a social enterprise it does it by getting more money than it spends and saving the excess. In a business that is a profit, in a charity it is a surplus, whatever you call it, it has to be sustainable.

What does sustainable mean?

When I talk about sustainable profit I am not referring to the environment but to the need to be able to consistently make profit or surplus over the long term so that the organisation is sustainable over time. It is important because it funds every other aspect of the ROC allowing you to pay suppliers fairly, compensate staff, support your community, develop new products and provide a good service to the people you want to help or to effectively address the issue you want to solve. Losing money and closing down does not help anyone as Kids Company so eloquently has shown.

Sustainability is about income and also cost control to ensure efficiency.

How to be more sustainable
Technology and innovation

In the business world and in good charities the use of technology is helping to reduce costs and support financial sustainability. Innovation is something charities have a variable record on, particularly in comparison to the commercial sector.

Charities generally don't have the luxury of a new product development department or the money to invest in research and development unless that is the reason they exist such as Cancer UK. But thinking about new models of service delivery and products is an essential part of continuing to be sustainable.

It fulfils three roles, one it may save costs, two it may improve services and be more attractive to current users and three it will attract funders who are constantly asking for innovation.

Innovation does not have to be scary

Most innovation is based on existing ideas that are improved or applied in a different setting.

If we take a simple example - a community cafe, innovation could be a good coffee machine that can serve a latte and will generate more income and attract more customers who instead are going to Costa. But the innovation could also be that like some commercial cafes they could ask paying customers to buy a second coffee to donate to someone in need (see my blog on this). The innovation could also be that like many other brands such as Shell maybe the coffee could be from Costa! and maybe the coffee comes with biscuits made by people you help or donated by volunteers. You see how an idea can grow, even as simple as a cup fo coffee.

Stop doing what you're not good at

To be sustainably profitable many businesses have stopped doing what is not their core business and this can be a good model for charities.

As I heard the tale of the massive expansion of Kids Company I wondered, for example, whether some of the problem was they started doing things that they weren't skilled at like running sites in lots of places across different cities. Did they have the skills to run lots of buildings, to minimise costs, to negotiate good leases, to run a workforce spread around the country, to cost effectively for tenders?

The collaboration you might need as a charity might not be with another charity but within a company that has skills which will minimise your costs and your risks. No one can be expert at everything, yet too often it feels cheaper to muddle through.

Have the numbers to know

Being charitable, we have to hope the trustees didn't know how parlous the financial situation of Kids Company was until too late.

That really isn't an excuse but going forward it definitely won't be acceptable.

An annual audit is great but that is just like a car MOT it says the vehicle at that point is sound but it can't be used as the justification for not checking safety features for the rest of the year.

Charities vary in size from a peddle car to a juggernaut but they all need to have information to ensure they are being driven safely and complying with the law. Ignorance is no excuse, just as not looking at the speedo is no excuse if you are speeding.

Conclusion

It's been a tough few years for the charity sector and particularly the last few months as the media have questioned fund raising techniques and now this, the failure of a charity which appeared so good and the distressing sight of children looking for help.

I don't know the detail of what went wrong but what I do know is that for every other charity it is important that they think beyond surviving day to day to the wider issues and thinking about consistency, collaboration and money are good places to start.

Tags: charity csr responsible organisation charter

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