We need more mergers, but not for the reasons proposed by the 'too many charities' lobby

03 Feb 2015 Voices

We need to provide more support for mergers in the charity sector, but not because it would be more efficient to have fewer charities, says David Ainsworth.

We need to provide more support for mergers in the charity sector, but not because it would be more efficient to have fewer charities, says David Ainsworth.

Late last week Andrew O’Brien of CFG and Sir Stephen Bubb of Acevo found themselves debating, on stage, whether there should be more mergers in the charity sector.

It’s an old argument, and the two men encapsulated, rather neatly, the opposing sides.

Bubb said yes, there were too many charities, and that many should manage themselves out of existence. He even told the individual who asked the question that his charity needed to merge.

O’Brien, on the other hand, said that getting rid of charities just for the sake of it, working towards some optimal level of charities, was not a good idea.

The truth, as ever, is likely to lie somewhere in the middle. Bubb is correct that there are probably not enough charity mergers, but O’Brien is right that it can be harmful to take this thinking too far, and work to a kind of hegemony, where each sub-sector of civil society has only one voice, or a handful.

Bubb’s vision is also espoused by Lesley-Anne Alexander, chief executive of RNIB, who until recently chaired Acevo. She is on record as saying that there should be far fewer than the seven hundred-odd blindness charities which currently exists. Alexander described Guide Dogs, for example, as offering “excuses that simply aren’t true” for not wanting to merge with RNIB.

This approach is clearly driven by the idea that if we organised the sector more logically, in a way which is easier to understand, it would avoid duplication and make it easier for beneficiaries to understand what is offered them.

This is no doubt true, but it harks back to the “one big factory” thinking of Karl Marx and the Soviet Union. Good in theory, but when tried in practice, the costs outweigh the benefits.

Practical problems

One problem is that many charities which appear very similar are actually very different. Charities can appear to have similar aims and objectives, but have very different areas of expertise, methodologies and funding structures. One will focus on lobbying, another on service delivery. One will be funded by grants and contracts, another by a small number of major donors.

Plurality of voice and vision and action is absolutely key to the success of the sector. If you want monoliths, look to the state.

Then there’s the more nebulous issue of culture. Even charities which look like a good match may have very different organisational structures, and very different ways of doing things. Those problems can be harder to overcome than differences in funding or activity.

Another problem is that small charities have different strengths to large ones. They certainly lack economies of scale, but they can have nimbleness, responsiveness, and in-depth knowledge of a small beneficiary group. Combining all those little charities into larger ones will gain something, but also lose something.

Finally, and perhaps most importantly, those who think we should all merge tend to ignore the galvanising effect of competition.

Even in this sector, where we’re all supposed to get on, it’s vital to have other people trying to solve problems better than you, or at least in a different way to you, who can remind you when you get it wrong.

As a journalist, I get a salutary lesson in this daily. Each day we read what our competitors have written, and can tell, almost instantly, if we did not do our jobs as well as we could that day. This is a highly motivating factor, and it benefits everyone, but particularly our readers, who (hopefully) receive a much higher standard of journalism than if there was only one enormous source of news for the voluntary sector.

I like having competitors, and I like them to be good at their jobs, because it makes sure I stay good at mine. The charity sector suffers because it lacks the competitive edge, and the ruthless necessity to get better or go out of business.

But we do need fewer charities

You would think, reading all of the above, that I do not think there should be more mergers in the charity sector, but of course there should.

I write a lot of news stories about mergers, and it’s easy to see a pattern emerging. In almost every story of charities merging, one of the two chief executives was ready to step down anyway, or one charity was about to run out of money. In most of these cases, the mergers make clear sense, and could have happened long before.

This leads to two clear conclusions: a lot of charities could benefit from amalgamation, but aren’t doing it because the drivers aren’t right. And that leaders of charities usually agree to mergers when they personally are not damaged by the decision.

And no wonder. Pushing through a merger is a lot of work for the chief executives and the boards of both charities. It would show extraordinary humility for a chief executive to undertake all that extra work, and to volunteer to potentially surrender a role he or she probably loves and is well-recompensed for, with no benefit to his or her own status and career.

And it’s not just chief executives, either. The trustees and other senior directors may well face the same issues.

So if the great and the good of the sector really want to encourage more mergers, they need to pull the right levers. Chief executives and boards need more encouragement and support to carry out mergers.

I sometimes think the best way to encourage more mergers in the charity sector would be to set up a free recruitment and support programme to provide specialist help to the senior management teams and board members who will carry the brunt of the work in a merger. I suspect this is not really feasible, but it would grow the merger rate in the sector overnight.