The voluntary sector – run by volunteers or big business?

From my Saturday paper, out dropped a glossy brochure from a charity wanting to raise £52M per month (£642M per year). It got me thinking.. So how was this charity hoping to raise £52M per month? Usually by a large marketing spend, like this expensive brochure. A company that spends too much on marketing will eventually go bust as the extra cash generated will not cover the marketing costs, extra stock, debtors etc, but for a charity as long as a pound spent produces more than a pound in donations, it will grow. The glossy was from WaterAid, a charity that specialises in providing clean water and sanitation across the developing world, a cause I whole heartedly support. Unclean drinking water is a major cause of illness and death in the developing world. I am a trustee of the charity Osiligi Charity Projects and we repair broken hand pumps and supply clean water as part of our support of a Maasai area in Kenya, so I know just how important clean water is.

“We are small, everyone is a volunteer and every penny goes to Africa.”

We are just a small charity. Last year, our income was £192,000. By comparison, WaterAid’s income was £48.1M. We have a commitment that every penny received by Osiligi is spent in Kenya. This allows nothing for any marketing, wages, expenses or even stamps. WaterAid spends 22p in every pound on marketing (source 2011 accounts). In addition, it has 191 UK employees. I don’t know how much these employees are paid, but the accounts show that 8 of them received more than £60,000 each per year with the boss (CEO) receiving £110,188, plus pensions and expenses. If Wateraid reaches its £642M income target and continues spending 22% on marketing, that’s £141M a year on marketing. With just a tiny part of this marketing spend, we could build many schools and water-holes to make a huge difference in the corner of Kenya where we operate.

We are a very different beast to WaterAid, although both of us are called charities. We both supply clean water to developing countries. We are small, everyone is a volunteer and every penny goes to Africa. Wateraid is big, has salaried employees but only a small part goes to the developing countries. We are both called ‘charities’ so unless you delve into the accounts, you would never see the difference. Perhaps we need a different word to differentiate the two types? We call ourselves a “100% charity”, because 100% of any donation goes to the cause. You may think that I am having a go at WaterAid, but I am not. It is the same for any large charity; to become large they have to spend a lot on wages and marketing. As a general rule, small charities are run by volunteers who spend little on costs, large charities spend a lot. This is how they become large.

 ”If the boss supports a cause, does he need a high salary to motivate him?”

Not all the employees of large charities are in marketing. Many are in charity governance or project management and engineering. These people try to ensure that the money spent is used wisely. Engineers try to hone the process so that the charity’s end product or service is better, i.e. finding better ways to drill a bore-hole. Small charities have to rely on the principle skills of their volunteers; large charities can develop these skills and buy-in skills where needed.

Small charities tend to be run by an unpaid volunteer, larger ones by a paid CEO. As the banks are quick to tell us, in order to recruit the right people, you have to pay high salaries, but is this so with charities? If the boss supports a cause, does he need a high salary to motivate him? Perhaps there are fat cats in both businesses and charities.

The Olympic games makers have taught us that there is a great pool of volunteer talent wanting and waiting to help. The charity sector’s challenge is how to harness this for the greater public good.

So how do we differentiate between those lean and efficient charities run by volunteers and those that are run more like businesses with big marketing budgets? When I give to charity, I like to feel that the money ends up at the cause and is not paying for the next mail-shot or CEO’s salary but I really don’t want to churn through pages of accounts. Come on regulators; please give us an easy way to see the wood for the trees.

Do we need to distinguish between volunteer and business charities? What do you think?

[Update from 2014/15 accounts. The CEO is now paid £144,638 including pensions]

Roger Pannell is a trustee of Osiligi Charity Projects

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3 thoughts on “The voluntary sector – run by volunteers or big business?”

  1. Thank you for this. I honestly have to agree with you on the need to differentiate between the charities and ‘charities’ running itself like a profit centre. Every X’mas in Europe/UK, we see glossy TV adverts asking for money and the mentions of how many kids will die if we don’t donate. One, this is obviously skewing the truth. Two, how easily charities objectify the people they claimed to help to get more donations.

    Big NGOs/charities get all the hype and publicity, while small ones have to work really hard to fund what’s is actually needed. I work for a development agency in Sudan and I volunteer for a small charity working in water and sanitation in Malawi. No one is paid to do anything. 98% of our money goes to the projects. But we do it because there is a cause and people’s lives are at stake. Sadly the fact is, the public likes big causes – WaterAid, World Vision, ActionAid, Cafod, – and they ACTUALLY believe their money will go to the community. So they will continue to give their £2 a month. It’s super frustrating for small charities. And I noted Osiligi also repairs broken pumps installed by others – we do the same. And it’s unbecoming that big charities installed fancy pumps that can’t be sustained and afforded by the locals.

    I guess my point is: development assistance shouldn’t be forever, CEOs of charities shouldn’t be paid more than the UK Prime Minister really and big charities should stop misleading the public with their glossy adverts.

    I wish you and your team the best of luck for 2014.

  2. Hi,

    I came across your blog whilst searching the internet for an essay I’m writing as a part of my MSc in NGO Management. I think you would find it very interesting to watch this TED talk by Dan Pallotta, it really changed the way I thought about salaries in charities and volunteer vs professional NGOS.

    The premis is, it’s better to spend £100 on “admin” and raise £1,000 for projects, than to spend nothing and raise £100, as a very simple example. I have to say I agree. I run a charity myself (also working in Kenya, coincidence!) with a team of other volunteers, we all do this in our spare time and with what little resources we have – I know that by employing a member of staff to work for us full time, we would increase efficiency, impact and value for money for our donors – even if it meant spending some of their money on a salary.

    The idea that people who work for charities should do so purely based on their passion for the cause, is dangerous and will result in a sector full of well-meaning people, who don’t have the expertise to run an organisation effectively.

    The comment above states that people give to “WaterAid, World Vision, ActionAid, Cafod, – and they ACTUALLY believe their money will go to the community”. The truth is their money WILL go to the community, but not all of it. But this is how it must be to be a sustainable international development organisation. Small, voluntary led organisations are doing fantastic work in the developing world, but the reality is, large INGOs are doing it often better and on a much bigger scale.

    Dan Pallotta articulates it much better than me – watch his TED talk.

    Good luck with your work in the future.

    1. Thanks for taking the time to comment. I watched Dan Pallotta eloquent presentation some time ago. There is room for both types of charities; ones where say 50% goes to the causes and ones where near 100% is used on the cause. My main complaint is that unless a person is prepared (and skilled enough) to go delving into the accounts of charities, there is no way to easily differentiate between the two. A person who donates should have an easy route to help them decide which charity to support. I give a fixed amount to charities each year, thus I do not want this amount to be spent on marketeers – it just dilutes the money going to good causes. Some other people put their hand into their pocket only if a tin in jingled under their nose. These people help the type of charities that Don describes.

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