Can bank funds boost Big Society?

The Big Society Bank has been in the news again this month. Much of this attention focuses on concern that the government is taking longer than expected to get the bank up and running ready for launch. Original plans aimed to have it ready for April. However, the latest we hear now is a quote from Oliver Letwin saying it would start in the ‘not too far distant future’.

A more intriguing issue, though, comes from the on going Merlin talks between Barclays, HSBC, Lloyds and RBS, aimed at securing concessions over pay, taxes and a lending commitment for small businesses. Part of this agreement could include a collective injection of £1bn into the Big Society Bank.

The principal aim of these talks seems to be an attempt to refresh the sector’s image. The banks hope that by making a number of positive sounding commitments, they can reduce the ill feeling coming their way both from within government and around the country. A pledge to support the social enterprise sector through a high profile capital injection to the flagship Big Society Bank would seem to be an excellent start.

The social enterprise sector may instinctively welcome such a move. However, we have to seriously ask ourselves, would this move provide long lasting benefit to social enterprise – or would it be a simple short term panacea to help everyone feel a little better?

On the one hand it would undoubtedly provide extra funding for the bank, which would be welcomed. However, in the slightly longer term taking these funds now could work to the detriment of the sector.

I would wholeheartedly welcome participation in social enterprise from the banks, but it would be far preferable if they engaged in this sector on their own terms. I would ideally like to see the banks investing in social enterprises as part of their mainstream activities. If that were the case investments would be backed by commercial acumen and free from any political strings.

As it stands the deal does little more than offer the banks a way to feel a little better about themselves without achieving anything tangible. There is a real danger that they may simply view any allocation of funds as representing a penance paid. They have done their bit, they would say, and simply walk away. There would be little planning or oversight to ensure funds were directed in the most effective way.

It is important that the banks engage in the social enterprise sector in a proactive manner – not simply because they believe they should. If they did, they would realise the benefits of engaging in what is one of the most vibrant and upwardly mobile sectors in the economy.

One can understand why there would be immense political will in securing participation from the banks in the Big Society. However, while it might offer everyone a distinctly fuzzy glow it may prove to be an opportunity missed.

First Published in Third Sector in March 2011.

Should charities know when to call it a day?

In the recent 15th March 2011 issue of Third Sector I read a remarkable story (In the Chair: A smack of firm leadership). It concerned the closure of a charity Chaired by Ashley Mitchell (the Otto Schiff Housing Association) and his decision to do so without any external impetus. He decided to take this decision because, in his words, “Our first objective is to the victims of Nazi persecution, and that client group is dying off. In 10 to 15 years’ time, there will be none left, so we decided to give them as much help as possible immediately, by funding the charities that are best placed to help them.”

Few organisations I am aware of take such dramatic action without the “encouragement” of creditors and the inability to make ends meet. That Mitchell took this decision on his own is unusual; that he gave away the proceeds of the winding up to other charities is extraordinary. Most see it as their ultimate responsibility to keep their charity operating; there exists a blanket presumption that this is always the best thing to do from the perspective of beneficiaries–but is it?

I was once involved in a charity which was very successful at hoovering up money for a particular cause. It was, unfortunately, not cost effective when it came to service delivery. By remaining in existence it was actually doing more harm than good as it was taking in money which others could have used more effectively. Suggestions to outsource services to the more efficient charities were met with scorn. The notion that we were not putting beneficiaries first caused murderous and self-righteous rage.

Such blatant neglect of client interest by some charities will become increasingly hard to justify in a resource constrained environment. Boards should and will be challenged as to whether their continued existence is in the public interest and/or in the interest of their beneficiaries. Trustees are frequently unwilling to take on these questions. I have seen incredibly bright and competent individuals leave their brains at the door when they come to Trustee meetings. Mitchell speaks of how “trustees saw it as a networking thing and weren’t doing anything useful for the charity.” He replaced them.

Readers may rightly point out that the case of Holocaust survivors is an extreme and emotive one–and they would be right. Yet I have had personal experience with those who use even this client group to further their career and institutional aims, at the expense of those who have suffered greatly, and whose lives are shortly coming to an end.

Of course, the process of closure needs to take the interest of staff and other stakeholder groups into account and any charity taking this route needs to act properly. However, private sector firms which act in such disregard of core stakeholder interests (shareholders) find their leaders booted out or are closed down. It is right that charities meet a similar test, although unlike private firms their core stakeholders rarely have a vote–and few have an Ashley Mitchell.

First Published in Third Sector in March 2011.