Political and economic events have raised enormous challenges for the charity sector over the past 10 years. The financial crisis of 2008 triggered grave long-term austerity measures which increased the workload of charities. The unknown outcome of Brexit raises uncertainty about the future of funding streams and employees’ rights.
Combine this with some funding scandals, an increasing volume of regulations and the need to keep up with developments in technology; the charity sector is arguably going through one of its most challenging times. Charities require direction from strong leadership and robust governance to overcome these challenges and arrive at a confident future.
The global financial crisis of 2008 had a material impact on the charity sector. According to a 2009 report by the Charities Aid Foundation (CAF), the total amount of charitable giving fell by 11 per cent from 2007/08. This decline was due to fewer people giving and smaller average donations as everyone found themselves with less disposable income. Combine less giving with severe austerity measures and suddenly charities had less funding, but more work. At the beginning of 2010, 59 per cent of UK charities reported that they had been affected by the recession.
The devastating impact continues today as cuts to public sector funding endure. The Office for Budget Responsibility found that all UK governments of the past 50 years increased public spending, but that trend was reversed by the last government and public spending will not return to growth until 2019-20.
The same report found that the UK has made more extreme cuts than its peers. While the G7 governments as a whole reduced their public spending by 9.6 per cent as a share of their GDP over this decade, the UK is set to reduce its spending by 19.5 per cent. Someone has to pick up the pieces left behind by the cuts to public sector funding and inevitably some of that responsibility falls with charities.
Brexit continues to raise more questions than answers and will do so for some time. This uncertainty does no sector any favours, but perhaps the charity sector least of all. Departure from the European Union could potentially cut UK charities’ funding by at least £258.4m and the rights of the sector’s international employees are at risk.
Many have already left as a report by the National Council for Voluntary Organisations found that the number of European staff fell by 20 per cent (or 7,800 individuals) between June 2016 and June 2017, as the voluntary sector’s workforce grew. In addition, the negotiations are fully occupying the UK government’s attention when it could otherwise focus on important social issues. Brexit is a considerable distraction.
The introduction of the General Data Protection Regulation in May this year will not have escaped anyone’s attention. The aim of the new regulation is very positive but implementation is undeniably expensive and time-consuming. However, non-compliance is not an option. The number of new regulations will only increase and charities will be forced to work harder to stay on top of them.
Developments in technology have changed the way people give. An increasing volume of donations are now made online and charities have to keep up. In 2017, CAF found that 26 per cent of donations in the UK were made online, up from 15 per cent in 2014. The sector’s technology has to be able to support the new ways in which donors want to give. Online platforms, contactless payments and apps require huge investment, but it is vital that charities keep up with these changes, or else potentially miss out on funding.
Some very public funding scandals have not supported the struggles faced by the charity sector either. The recent Oxfam scandal was the latest in a long line of defamations to hit the sector. These damaging reports affect funds raised across the whole sector and all charities become tarred with the same negative associations.
It was reported that Oxfam lost 7,000 donors in the weeks immediately after the Haiti scandal. The Guardian/ICM then conducted a poll which asked 2,000 people whether they were “less likely to donate to humanitarian charities such as Oxfam in the future”. 35 per cent said they were less likely, 24 per cent no less likely and 32 per cent said they did not donate anyway. Of those who said they already donated, 52 per cent said they would now be less likely to fund humanitarian causes. The reputation of the whole sector has been affected.
Charities will have to evolve and adapt to this changing environment. Strong leadership and governance will ensure the continued success of the sector, in these challenging times more than ever.
Good governance is fundamental to any organisation, but especially one which is trying to restore trust. The relationship between the charity sector and the public has been severely damaged by the recent, and very public scandals. Trust needs to be re-built and charities must show that they are deliberately changing their culture and the way they operate in order to do so.
Charities must set the highest of operating standards to restore and maintain public confidence. This requires transparency, governance and clear accountability from every single charity. Once best practice has been established, it should be shared. There is a moral obligation for bigger charities to convey their experience to smaller charities, but there is also something to be gained when smaller share with bigger.
The entire sector needs to work together to regain the public trust and establish the robust governance that is so important to the future of the industry. These challenging times make that work essential.
Strong leadership steers an entire organisation. The right culture at the top will enable the right culture to filter all the way through a charity.
Getting leadership right isn’t easy though and everyone’s definition of leadership differs enormously. However, experience shows that there are a few components which can create the right culture, strong relationships and a successful organisation.
Staff need to work together to achieve a charity’s aim. To move in a unified direction, all staff need to support the same strategy and want to realise it. Any lack of support will deviate from, or prevent success.
A strong leader will inspire and motivate their team to support their strategy. Bringing an entire organisation on board with one particular strategy may seem challenging, but clear, open and honest communication is the starting point. A leader with integrity is likely to be a respected leader. Once a strategy has been communicated clearly across an entire organisation and all questions answered with honesty and expertise, respect will have been won. It will then be time to start investing in staff and realising the vision.
A leader needs to invest in staff to create diversity, inspire talent and build loyalty. Care should then be taken to make sure that the right people are in the right roles in order to give them the best chance of success and earn the respect of their colleagues. Strong interpersonal relationships will develop and strengthen teams; staff will feel valued because they are valued.
Empowerment is next and enables staff to operate decisively. Micro-management is not empowering; leaders should trust their expert teams to make the right decisions. A couple of mistakes may be made along the way, but these mistakes will be learnt from and will not be made again. However, although some mistakes are natural, a strong leader must still have the courage to discipline where necessary.
Eventually leaders will find themselves with expert teams who support the same overarching strategy, have strong working relationships and are motivated to create a better outcome. That will be successful, as long as the leader doesn’t change their mind. Clear direction and a consistent vision is key to long-term success.
Successful leadership requires emotional intelligence over academic intelligence, although both are important. Strong leaders will understand the culture of their organisation and shape it to better suit the times. Challenging times necessitate a united staff all of whom are highly motivated towards achieving the same goal, no matter the type of organisation.
Andy Pitt is head of charities - London at Rathbone Investment Management.
Civil Society Media would like to thank Rathbones for its support with this article.