Charities bow to culture where efficiency is not voluntary

MORE businesses now believe that to flourish they must be seen to put something back into the community. Ironically, charities and voluntary groups are being told that to survive they must behave more like businesses. Value for money, effective staff management and maximising income have become key concepts in the not-for-profit sector.

It is becoming increasingly hard to distinguish between the operations of business and voluntary groups. This reflects the 'contract culture' that has swept through the public sector. Charities that once expected to receive annual grants from a government department or local council are now told that income is strictly related to measurable outcomes.

Community care has led to direct competition between charities and businesses. Local authorities must place 85 per cent of care provision budgets in the hands of the private and voluntary sectors, enabling them to run day care centres and residential centres. Voluntary groups only gain the contracts if they can win them on price and efficiency. Meanwhile, the Charities Act requires groups to make accounts easier to understand and gives the Charity Commissioners more powers to intervene if poor management is suspected.

Voluntary groups must learn to manage as effectively as businesses, argues the National Council for Voluntary Organisations. Naomi Eisenstadt, assistant director for resource development, senses a new mood in the sector. 'The old voluntary ethos has gone, especially in the big national bodies,' she says. 'Doing good is not enough, though obviously that is what motivates people.'

All organisations, whether they exist to create profits or not, have to ask similar questions, says Ms Eisenstadt. 'How do you know you are meeting people's needs, that you are reaching people, that you are providing value for money?'

The NCVO is completing a three-year development programme, funded by the Home Office, to improve management skills in voluntary groups. Ross Willmott, a consultant, is working with the NCVO. 'Part of the programme is designed to recognise the need for better general management skills, such as bookkeeping, staff management and forward and strategic management, while also looking at the shift to contracts and the changing expectations that funders now have,' he said.

'Some organisations have taken these issues on board, others have not,' he added. 'New groups are starting all the time and they move into service delivery very quickly. That's what they are funded to do, and good management has never been a priority in these circumstances. But funders now expect more.'

There is a danger charities could lose their distinctive character. Mr Willmott stresses that not-for-profit organisations must sift out what to take on board from commercial management and what to reject. 'There can be an over-emphasis on performance indicators: quantitative measures are not appropriate for value-driven and small organisations,' he explained.

'Voluntary groups often just have one and a half members of staff, and they can't borrow wholesale from large organisations with expensive training programmes - it is not appropriate. Performance-related pay would not fit in very well with the fixed budgets of many voluntary organisations. With many moving to income-raising budgets, that could fit, but whether it conforms to the culture is a different matter. Equal opportunities, language, accountability and democracy are all very important to the voluntary sector, and a lot of standard management theory doesn't have that in, or just touches it.'

Ms Eisenstadt believes voluntary groups must learn the right lessons quickly. 'There is a danger about the competition for funds, and about groups becoming resource-led,' she said. 'That is what competitive tendering is about. The private sector can win some contracts and voluntary groups risk being much less realistic in seeking contracts and will under-price themselves. Big voluntary groups can wind up supplementing the contract price with their own resources.

'A lot of organisations will go to the wall,' she added. 'In a market economy there are winners and losers - and I think that is a tragedy.'