When people in high profile positions argue that there are too many charities, as everyone from NCVO chair Peter Kellner to His Royal Highness Prince William have this year, it is guaranteed to raise hackles in the charity sector. Such critiques question the independence and fundamental effectiveness of the charity sector, and appear condescending when coming from people who do not work every day in charities.
I’m inclined to agree with those that say the messy, diverse nature of the charity sector is what makes it special. Although the sector can be “inefficient”, it offers benefits such as services tailored to meet very specific needs and innovative new thinking.
Also, the sector is built on social relationships and human generosity. It is not necessarily true that these can be efficiently transplanted into a larger organisation without important characteristics and motivations being lost.
A good example of how mergers can lead to poorer outcomes was given by Mandy Johnson, chief executive of the Small Charities Coalition, in an article on LinkedIn recently.
She highlighted the merger of three lunch clubs for older people. The decision was taken that rather than three separate lunches happening each week, one larger one would take place in a central location. The charity may have been more “efficient”, but some people were no longer able to travel to the venue, the intimacy of the lunches had been lost and the standard of the food went down.
Benefits of merger
However, mergers have their place. Where charities are engaging in similar services or activities, they might benefit from the economies of scale that come with being a larger, combined organisation. They might be able to fundraise more effectively as a result or they might be able to campaign with a louder, more authoritative voice.
A practical example of this was recently drawn to my attention by someone I met at a charity event. It concerns a popular UK heritage attraction which has five separate charities all responsible for either specific aspects of the attraction or for individual exhibits within it.
The five charities have four different postcodes, an array of different trustees and, it was claimed, substantial duplication of administration.
As an outsider, it is hard to see how all these separate entities can be performing distinct roles that couldn’t be better performed by one charity.
Mission and merger
It is presumably stories like this that inspired the think tank NPC to produce its report titled Let’s talk mission and merger. Released in April, the report relies on 30 interviews with UK-based charities, funders and sector experts, so its fairly obvious pro-merger leaning is backed up by a wealth of charity expertise.
Most of the examples given in the report are of charities that have undertaken successful merger, rather than an analysis of what still needs to be done. It is to be hoped that the experts who informed the report did so on the basis of first-hand experience of duplication of effort still existing across the charity sector, rather than because of more instinctive desires such as orderliness and simplicity.
Where the report does hit the nail on the head is when urging charity leaders to think broadly about the ecosystem of charities working on their particular cause.
Some sub-sectors are splintered and risk duplication, it says. Some have specific funding pressures which may militate towards merger. And crucially, some causes need scale, whereas others need localised or specialist responses. All these factors should be considered when deciding whether to pursue a merger.
Unfortunately, the importance of considering the nature of the cause is not embedded throughout the rest of the report. Nowhere else does it acknowledge the possibility that merging may simply not be in beneficiaries’ interests, or that at the very least measures may need to be in place to protect the quality of services after merger.
That’s a shame as the report is ultimately a useful tool. But if the sector’s hackles are not to be raised, then a balanced approach with a focus on beneficiaries is required.
Gareth Jones is editor of Charity Finance