At risk of growing up

At risk of growing up

At risk of growing up

Finance | Daniel Phelan | 5 Oct 2010

Trustees will have to pay heed to entrepreneurs from other sectors and take risks if they wish to improve results, says Daniel Phelan.

Business school academics and school-of-hard-knocks entrepreneurs will confirm that most expanding enterprises experience broadly similar growing pains. There are clearly identifiable staging posts on the growth pathway relating to staff composition and numbers, management structures and systems, capital requirements and cash flow, etc. These all need to be negotiated for an enterprise to expand without stalling or crashing. But crucial to everything is strong leadership with a vision of the longer-term future for the organisation and a passion for delivering that.

Lack of passion isn’t usually a problem for charity leaders. More likely, they will be so convinced of their causes that they will struggle to understand why the rest of the world isn’t queuing up to provide the contracts or resources necessary for immediate universal delivery.

Unfortunately life isn’t like that and small charities with great ideas, like those reviewed in our scaling up feature, are at least as subject to the usual growth problems as any other small business.

In the commercial world, the classic entrepreneur is prepared to take substantial risks. Often their home is on the line along with the shirt on their back. It’s not for everyone and it takes a certain type of individual to cope with the inevitable stress this causes.

Establishing new ideas and ways of doing things is extremely difficult. Breaking down established buying patterns, vested interests and institutional inertia often takes the kind of sheer determination, stubbornness and never-say-die attitude that the risk-all entrepreneur displays. This is not an approach likely to be found among many trustee boards, even those boards populated by entrepreneurs in their own fields.

If charities are to be more enterprising, to earn more of their income, to be paid more by results, then trustees will have to learn to take more risks. Without doing so, many small charities with big ideas may never grow into the society-changing national organisations they need to be.

Phoney war

As the phoney war over spending cuts draws to a close and the noisy rhetoric of threats and tough talking is dissipated by the real announcements of action expected later this month, it still remains to be seen how and where the axe will fall.

Doubtless few charities will escape completely unscathed. Even those earning most of their money from enterprise activities could be affected by any slowdown in the economy caused by reduced public spending.

It is as good to hear the Prime Minister exhorting local authorities not to cut budgets for voluntary bodies as it is to hear the minister for civil society reiterating that our sector may still yet get a larger slice of a smaller pot. But it is probably a little premature to base any business plans on either outcome coming to fruition.

It is also obvious that more work needs to be done on new forms of investment into the sector and the progress that organisations like Social Finance has made with social impact bonds could not be coming at a better time. With so many excellent projects requiring resources to scale up in order to deliver substantial benefits, not least in terms of relieving the public purse, any capital investment of this kind is most welcome.

Daniel Phelan is editor-in-chief of Civil Society Media Ltd







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