NEWS & VIEWS
Understanding the Organisation: A Brief Guide to Philanthropic Giving
I am often asked by philanthropists how it is that I am able to decide, so quickly, if an organisation is strong, effective and worthy of support. I realise that this is largely intuitive, an ability I have honed over the last 20 years, during which time I have invested hundreds of millions of pounds (albeit of other people’s money) into thousands of small and medium sized charities, NGOs and social enterprises across the developing and developed world. I have often done this very successfully, but sometimes not – with the lessons coming more often from the failures.
This is what I say:
1. The Chief Executive is the most important indicator of whether an organisation is effective or not…. Not only must the CEO be able to clearly define the organisation’s theory of change (about which, more later), she or he should also be able to inspire others, engage meaningfully and humbly with all the stakeholders, and, most importantly and often overlooked, manage an organisation. (This would be critical to any private sector investment; why it is not in the non-profit sector eludes me). The larger the organisation, the more important the management capability of the CEO – to lead, deliver and manage change. Clearly CEOs from all sectors have weaknesses, so the question becomes, what are they, and how are they balanced.
2. This leads me onto the Board. The role of chair and his or her working relationship with the CEO is critical. Strong, strategic governance, diversity of skill and perspective, an open and transparent relationship between board and staff is vital. If the board, and particularly the chair, are hands-off, or to be cruel, more interested in the charity box tick for their CV, my little red flag goes up. It also goes up if the board are all best friends, or have been on the board for more than 10 years. Philanthropists giving substantial amounts should meet the board, and ask about governance, risk, motivation, financial overview, succession planning, successes, partnerships, failures and lessons learnt.
3. Then there is the senior management team, another vital component in any effective organisation. (Private sector investors, doesn’t this feel familiar?) Has the CEO balanced out his or her own weaknesses by hiring a strong management team? The most important roles being the finance director (are they credible?) and programmes director (or someone with knowledge and experience of the sector where they are supporting). Is this management team delegated to, given space to operate effectively, and is there effective succession planning (often overlooked in the non-profit sector, where CEOs may also be visionary founders).
At this point I would like to bear my bug – administrative costs. Yes, they need to be proportionate, yes, there should not be waste, but good staff need to be paid (and happy), even in the non-profit sector, and higher administration percentage can sometimes mean better staff and greater effectiveness. Or a commitment to change policy, which takes time and resource, but if it happens, can be transformational.
4. So, if the management and governance is effective, what about the work the charity is actually doing (in charity speak – this is often called the programmes, or operations)? This is usually the starting point for philanthropists, but also the area of greatest risk – where the heart likely trumps the head.
At The Philanthropy Workshop, we help philanthropists to understand an organisation’s theory of change. At its most simple, there should be a logical flow from identifying the cause of the problem, to the problem’s physical manifestation, to the organisation’s activities to reduce and ideally to solve the original problem. I would recommend investing time to clarify this. Does it make sense? Get beneath the PR and fundraising spin to seek evidence of impact, speak to other organisations and experts. Meet a beneficiary: have they experienced meaningful change? And is this change sustainable? Sometimes, charities just put a plaster on an issue (this is fine) but it doesn’t reduce the flow of people needing a plaster.
A classic example of this is humanitarian aid; never, ever wrong, but the need for it will continue until the root cause is addressed. What is the root cause of this or any other issue? Is the organisation addressing this? Is someone else? Are they working in partnership with others (for those that don’t, my little red flag goes up again). Are there unintended consequences of their work (there will be)? Ultimately, is a policy change required? Is anyone working to change the policy? Should they be?
5. Finally, and probably most importantly, there is the question of impact. What change has been achieved? Can this change be demonstrated in numbers as well as words? Is the change meaningful, transformational? Is it cost-effective and sustainable? What are the successes? And, equally importantly, what are the failures? What lessons have been learnt? Speak to staff at different levels in the organisation, speak to other donors and ask the same question. Does the change feel good? Is it enough? Ask yourself the “so, what?” question.
6. If you have a good sense of all of these things, then I would suggest you know your organisation. Make a donation, consider a small one at first, and if you like what you see, make a multi-year commitment. It’s not just your money that can make a difference, but your expertise and networks as well.