On the 18th September I spoke at an Institute of Chartered Accountants event on the Future of Charities. This is a mildly edited version of my script, tweaked to make it more comprehensible without the slides and my hand-waving. You can see the full slide deck by following this link: The Future of Charities. The title is a little facetious: it’s about more than viral fundraising campaigns. I hope you find it worth a read.
Today I’m going to start with a quick video. Forgive me if you’re sick of these. I don’t expect you’ll have seen this one before.
This tells you something about me. But it also sets the scene for what I want to talk about today.
The ice bucket challenge raised over $90m for the ALS association. It’s UK equivalent, the MND association, raised one year’s donations in one week.
Today I want to talk about why this happened — and keeps happening. Whether it’s sustainable and what it and other technology-driven changes mean for charities, their reach and their incomes.
My professional engagement with charities started just under a year ago with a call from the Scottish Council for Voluntary Organisations. They asked me to give the keynote talk at their annual conference. In it I raised three key issues for them to consider, and I believe these remain the key issues for charities today.
Firstly, the nature of power is changing, destabilising the relationships that charities rely on for influence, awarding and fundraising.
Secondly, the traditional support base of charities, the middle class, is being eroded and reshaped.
Thirdly, technology is driving more direct, accelerated connection between people and causes.
These are the themes I would like to talk about today.
The Decay of Power
There’s a wonderful book about power by a former Venezuelan minister and global economist called Moises Naim. At least I’m told its wonderful. He did such a good talk at the RSA that I haven’t felt the need to read the rest of it yet.
His thesis is that power is decaying. It is harder to win, harder to hold on to, and less valuable when you have it. Power is being dissipated from the traditional cores and spread around.
The evidence for this is all around us. You can see it in the conflict in Ukraine.
The last pope gave up power because he found that it was too unwieldy. Even he, with divine right, couldn’t push through the changes that he wanted to without resistance.
In Iraq and Syria we have a self-declared Islamic state, almost immune it seems from the traditional, national forces and boundaries
Closer to home we have both sides of the political divide talking about the ‘big society’, or about handing power to patients and parents.
Most topically of all we have the referendum debate happening today.
This decay of power is happening even inside organisations — because it has to. This model is one that we created during some work in local government, looking at how you would restructure councils and their partners if you had a blank sheet of paper.
What you see is a loosely coupled set of networked functions, interacting largely through data. Decentralised, flexible, efficient.
How does this all affect charities?
Scale used to be a defence for charities. There was an element of respect and deference to those that had been campaigning on an issue for some time. The longer they existed and the larger they grew, the more ‘official’ they became and the more entrenched their positions. If you wanted to raise money for a cause, or campaign on an issue, you did it through that charity.
The power that a charity may have held, to own a cause or an issue is ebbing away. The power of commissioning authorities to unilaterally hand over contracts, is ebbing away. The future will see a more diverse range of funders and stakeholders, and greater power in the hands of individuals to determine who they fund, how they access services, and how they participate as volunteers.
Middle Class Collapse
The second issue I want to talk about is the hourglass economy. The potential collapse of the middle order, the source of so much of charities’ fund raising and so many of their volunteers.
Automation and augmentation are familiar themes to us now, after hundreds years of rolling technological revolution. But as the exponential pace of Moore’s Law and its parallels continue, the impact of automation and augmentation is hitting new heights.
We’re used to robots on the factory floor. Machines have been allowing more people to do less for hundreds of years. But until recently — at least in our minds — this automation was largely limited to manual work. It’s over a hundred years since the first IBM machines allowed census clerks to process ten times the number of returns they could manually, yet we’re still caught unawares when machines start to take more white collar jobs.
What were the tube strikes about in London recently? Robots in a retail environment.
When HMV went under a few years ago, it employed over 3,000 people in high street stores up and down the country. It was turning over £900m a year. Meanwhile in an office just off Regent Street, 15 people were running the European arm of iTunes and turning over twice that.
Now machines are entering the professional services world. Half of all law firms (with more than 10 partners) merged last year. And what happened when they did?
They kept some of the admin staff and most of the local offices. It looks good to have a presence on the grond. Some of the partners went off to play golf and some stuck around. The big losers were in the middle, the young and newly qualified lawyers doing largely administrative work. Why? Because the acquiring firm had a very efficient, computer-assisted cubicle farm with capacity to spare.
These companies become hourglass shaped.
Accountancy isn’t immune from this change. With software like Freeagent I technically don’t need my accountant. I keep them because I suck at administration and I’m terrified of screwing up on the rules. Not everyone is as scared as me.
If you want a really scary picture of where computer-augmented efficiency can take an organisation, just look at the number of multi-billion dollar companies growing up in the US with fewer than 100 staff. You can argue with the valuations of WhatsApp etc but you can’t argue with real revenues.
While most businesses turn over around £100k per head of full time staff, Google and Facebook turn over ten times that.
What does this mean for charities?
Well to start with, there’s an opportunity. It may not sit well with many, who may see employment as part of their mission. But just as PLCs have a responsibility to return the maximum returns to their shareholders, do charities not have a mandate to deliver the maximum amount of their funds raised to its intended targets?
Note that this is not the same as suggesting that charities shouldn’t pay competitive wages.
If you look at the CAF figures, you see that donations to charity map roughly against a country’s wealth. Unfortunately the very wealthy give proportionately little once you exclude Bill Gates, Warren Buffett and our own Neil McArthur. That means it is the middle classes on whom we rely for donations.
The possible silver lining to this cloud: if the middle-class collapse continues, we may have a lot of skilled, intelligent people available with time on their hands.
The third topic I talked about was digital engagement. This brings us back to the Ice Bucket challenge.
This wasn’t the first viral campaign to hit the headlines this year, albeit it was the largest to date.
The No MakeUp Selfie raised £8m for Cancer Research in six days. Yet the charity had no role in starting it. In fact no-one knows where it actually started. There was a similar BBC campaign a year earlier. Something like it was happening in Canada and New Zealand. Then it started growing over here and some bright spark had the idea of piggybacking it for charity.
Stephen Sutton used social media to great effect to fund raise for the Teenage Cancer Trust as his life was coming to an end. He raised almost five million pounds, the plans for spending which were just announced yesterday.
And then of course you have the ice bucket challenge. Which as I said, raised a year’s income for the UK charity in a single week.
Each of these campaigns has a number of factors in common. They weren’t started or controlled by charities. They had a participatory element. Their reach was boosted by celebrities. And they used chain letter mechanics to spread.
I believe the chances of any charity being able to deliberately replicate the success of any of these campaigns is minimal.
Campaigns and Cash
It’s not just in fund raising that charities have increasing competition. Campaign organisations like Avaaz have mastered the art of digital and social media marketing in order to rapidly scale pressure on companies and politicians.
Has anyone here heard the term Growth Hacking?
A growth hacker is halfway between a scientist and a marketer. They work out how to make things grow by testing everything.
Avaaz tests which issues are going to be popular and then campaigns on those. This isn’t about ideology, it’s about impact: what can they win. That doesn’t play well with some people.
The problem is one of cannibalisation. There does appear to be a limited pot of both money and willingness to support causes and charities. There is even perhaps a crossover in our minds between signing a petition and giving a donation: both trigger activities in the same area of the brain. Dopamine is released. The area around the sub-genual gland, associated with social interaction, is activated.
If we are constantly flooded with viral campaigns to support and participate in, the other issues might get squeezed out.
There is a huge challenge for charities to move with the times before they are overtaken. I don’t see many moving fast enough. Some are moving backwards, failing to invest in new channels and instead retrenching to old, rapidly eroding, platforms.
Are You Ready for Tomorrow?
Change is required because none of these issues is passing. They are accelerating along the exponential curve driven in large part by the continuing progress of technology, getting faster, cheaper, and more human all the time.
Which brings me back to the question I ask all my clients: are you ready for tomorrow? I don’t believe that most charities are. But as their business advisors, I hope you can help them.