Is there an obsession with failing charities and the need for governance?
Many years ago, when I was involved in small firms’ advice work, the common saying was ‘three out of five small firms fail in the first three years’. This quotation was widely repeated and appeared frequently in articles or speeches whenever small firms were discussed. It painted a picture of small firms ‘failing’ like nine pins with all the attendant stress and sorrow of spoilt dreams.
The only problem was – it wasn’t true. It all hinged on what we meant by ‘failure’. The word implies bankruptcy and financial loss. When someone tried to find the source of the quote it turned out to be on very shaky ground. They used VAT statistics for example and tracked firms deregistering which could be for a variety of reasons and did not automatically mean failure, just that they were getting smaller and fell below the limit. Also, there were many people who went into business and simply stopped trading after a year or two because they found it wasn’t for them or there wasn’t the demand. Would you call someone who went into a job and then left soon after a ‘failure’ simply because they decided it didn’t suit them?
I recount this because I came across a charity site claiming huge numbers of failed charities. I think partly it was to shock people into coming on their courses. But I also notice everywhere I read about this subject something of an obsession with governance and its bedfellow, failure. Governance is important. Being legal is important. But the reason charities succeed or fail in my view is to do with their relevance to the cause they are pursuing, their ability to raise funds, their ability to find and keep supporters, volunteers and trustees and their ability to ‘put the message across’ to those that need to hear it. If you look at the statistics the numbers falling foul of broadly governance issues and being taken off the register is quite small.
There is in my view something of an obsession with governance issues which risks crowding out other more usual issues to do with a charity being successful or not. I suggest that charities and not for profits should consider carefully the strategy points and issues of communication because these are the big things that will cause them to sink or swim. It risks directing people into process issues and neglecting the rather more important matters which will make their endeavour a success.
Author of How to be a Successful Trustee ISBN 978-1-913012-61-8