11 April 2017 by Louise Thomson
There are characteristics and behaviours that can indicate problems with a charity’s culture
Whichever way you look at it, the charity sector has not had a good time of it in the media in recent years. Whether it is executive pay, fundraising practices, administration costs, or the ‘incompetence’ of trustees, there is a perception that the public’s affection for the sector is being strained. However, despite a few high-profile cases attracting poor publicity, there are many other charities quietly and solidly delivering real change for their beneficiaries.
Furthermore, the environment in which charities now operate can also be challenging. Austerity, a shift in funding from grants to contracts, multiple demands on the time of prospective and serving trustees and volunteers, and increased regulatory requirements and oversight, combined with overwhelming demand and diminishing resources have all taken a toll on the sector. Some have managed to cut their cloth accordingly, others struggle to meet evident needs by using dwindling reserves. It certainly has been, and continues to be, tough for the sector.
“A rules-based approach can only influence the behaviour of some within the sector and it cannot eradicate poor culture and practices completely”
In hard times, boards can inadvertently get absorbed by the figures, to the detriment of equally fundamental matters such as quality of service provision, the delivery of public benefit, and the way in which the charity operates. In short, a microclimate exists where hard decisions are taken to ensure the ongoing sustainability of a charity, while neglecting the things that really matter at the front line: ethics, respect, integrity, openness and trust or, sometimes, vice versa. In short, the culture of certain charities, and by association the whole sector, has gone awry.
The high-profile mismatch between words and deeds appears far harsher in the glare of media reporting. If words and actions are not aligned, there is a danger that declining public trust, support and confidence will erode the potential positive impact of the sector on wider society. That is why culture is important.
Initial reactions to this disconnect included a sector-led review of fundraising practices, with the introduction of a new regulator and, by accident or design, new powers for the Charity Commission. However, as other sectors have learned, a rules-based approach can only influence the behaviour of some within the sector and it cannot eradicate poor culture and practices completely. This is because behaviour is determined not only by rules but by the culture of the entity concerned – and in the worst cases, of course, the culture can be one of wilfully ignoring and seeking to bypass rules.
Having a strong positive culture protects people and teams from making bad choices when the going gets tough. Culture is therefore a core task for boards, not just a public relations add-on. Boards need to understand and shape the forces that drive the behaviour of people throughout their charities.
This cannot be done in isolation and, where senior managers are in place, there needs to be a strong understanding and respect for the roles of each one in ensuring an appropriate culture is evident and supported by corresponding values and ethics throughout the charity’s operations.
A flawed culture may develop incrementally, over a sustained period. As the Public Administration and Constitutional Affairs Committee reports detailed, the warning signs about Kids Company were evident long before its final, sad demise. The answer to such scandals – and the loss of trust in charity they engender – is not necessarily to add more regulation. Rather it should be to identify weaknesses in the sector’s and individual charities’ culture, and seek to address them before disaster strikes. The important questions are: why these scandals happened and how do we prevent them from recurring?
A round table discussion on these issues took place at ICSA last November, well attended by trustees, senior leaders, regulators and governance experts. Participants identified several characteristics and behaviours that could be viewed as ‘red flags’ for a charity’s culture.
This is where a charity is unable to develop and/or deliver a sustainable plan for its continuing viability, an aspect of poor governance that could lead to a weak organisational culture. For instance, a charity that lurches from one crisis to another, with little or no time for reflection, may communicate mixed messages as one emergency overtakes another, with different responses required in order to resolve the matter straight away. A lack of consistency and a ‘sticking plaster’ approach does not foster a positive culture that contributes to the survival of the organisation, or the quality of the services offered.
When determining pay levels for senior and front-line staff or contractors, a range of factors come into play. Getting remuneration levels right can contribute to a happy, productive and stable workforce. Making the wrong decisions can lead to inappropriate behaviours that are rewarded simply because the full impact of agreed targets have not been thought-through. Furthermore, where pay appears to be out of step with that of the average worker – who may well be a committed donor – this can lead to some thinking the priorities of the charity have gone askew and adversely affect public support.
“A strong personality may unduly influence and overpower the better instincts of those around them”
Charismatic leaders, at board and senior manager level, can be a mixed blessing. A visionary with warmth and charm may well be able to inspire funders, staff, influencers and volunteers to support the charity in its aims. Similarly, a strong personality may unduly influence and overpower the better instincts of those around them. This has been a major focus of governance codes for many years.
Where charities have departments that delineate priority between front line and support functions, different cultures can emerge that challenge the one agreed by the board. For example, fundraising teams may be focused on meeting challenging income targets, which will be used for the charity’s beneficiaries, but which encourage behaviour that undermines the work of supporter care teams and could consequently drive supporters away.
Those involved in the work of a charity will usually believe the cause is a valid one. As such there may be an overarching desire to generate as much income as possible to help achieve the charity’s purposes. This can lead to a mentality that the end-result justifies the means, as the charity is there to ‘do good’. Others may see such behaviour as unduly neglectful of the wider ethos of the charity and the sector, and may view its activities as harmful to others trying to make a positive impact on society.
In addition there are some ‘green flags’ that indicate a positive culture within a charity. These include:
A board and senior management team that reviews and reflects on their organisational culture is likely to be more attuned to any deviation from agreed standards. Furthermore, a leadership team that embodies and displays the agreed culture, values and behaviours of the organisation is more likely to lead staff that adopt the same mindset. Leading by example can therefore have a profound impact on the culture of the charity.
For some in the sector, there can be such an inherent belief that they are ‘doing good’, that they forget to weigh up decisions in the round. Focusing on what’s legal and ethical is likely to lead to a greater organisational appreciation of the wider impact of their work, culture and how they operate.
A charity that adopts proportionate and effective governance arrangements is better positioned to spot behaviours and activities that undermine the culture of the charity and may affect public confidence.
History is littered with examples of good intentions not always leading to good outcomes. However, the central importance of delivering public benefit predisposes the sector to be more able to articulate and evidence the positive impact it delivers. A charity that can tell that story and provide evidence to support it will be aware of the dangers of hubris, and not only take its ethics, values and behaviours seriously but also protect them.
“Leading by example can therefore have a profound impact on the culture of the charity”
Strong, considered and ethical leadership can, and should, come from every level of the charity and in any situation. A charity that empowers all staff and volunteers to be ethical leaders is better able to demonstrate and live the values it espouses and deliver the culture it desires.
A charity that has evolved from a particular philosophical or religious perspective may be more likely to carry the seed of original intention with greater fervour than some other types of organisation. Any evolutionary changes that continue to reflect those founding principles are likely to reinforce a culture that is appropriate to the charity and the people around it.
A charity with an active and engaged membership may demonstrate a stronger culture that listens to and values their opinions. This requires a trustee board that understands its legal powers and duties and appreciates and respects the powers of the membership. A charity that has an effective and continuing dialogue with its members may be better able to cultivate and nourish a healthy culture, especially where accountability is clear, proportionate and meaningful.
A funder’s explicit commitment to funding charities with good governance can have a positive effect. Linking funding to sound governance is one way that positive behaviours and thoughtful decision-making can be promoted throughout an organisation, especially where impact is also measured.
Like the corporate sector, the charity world has been blighted by a number of governance stories that do not show the sector in the best light. Public trust in the way organisations are run and governed has been challenged and cynicism is gaining ground.
A small number of charities may have exhibited a belief that the end justifies the means and these isolated examples have wreaked havoc on the sector’s reputation and ability to make the positive impact it so desperately wants to make. It is also why a considered, planned and positive culture is so important to charities.
Red flags report
The full report ‘Red flags in charities’ will be released on 4 May at ICSA’s Charity Governance Update. For more information, visit the ICSA website