When a bigger bang requires bigger bucks: why charities should stop short changing themselves

How often do funders ask their charities to spend more money? We’re willing to bet it hasn’t happened that often. Everyone knows in theory that the lowest price doesn’t necessarily mean the best value. But in practice it’s unusual for funders to actively encourage their charity partners to increase their costs.

We think that we should be asking that question more. And we wanted to show you why, from both the perspective of someone that funds and supports charities, Impetus-PEF, and a charity, Action Tutoring, that has seen the benefits of spending more to achieve greater impact and sustainability.

The funder view: Andy Ratcliffe, CEO, Impetus-PEF

At Impetus-PEF we work to build the best charities that help disadvantaged young people to get jobs and qualifications. We provide around 20 charities with unrestricted funding to strengthen the organisation and hands-on support to increase their impact.

In my role I’m lucky enough to get the chance to see at first hand the difference that our charities make to young peoples’ lives using our funding and support. But how does funding relate to impact? This leads me to another question: what does the concept of impact even mean? We all know the textbook response around being strategic, the importance of top-down accountability, and the need to be constantly learning and improving our work – whilst keeping one eye on the cash. The reality is much tougher because it requires CEOs of charities taking a long hard look at their organisation to identify if what they do and how they do it really is the best way of achieving their aims. Funding does play a huge role but often charities allow it to dictate the shape of their organisation, to their detriment. The relationship between funding and outcomes can actually be improved by focusing first and foremost on impact.

At Impetus-PEF we have developed our own unique approach to the issue. Our Driving Impact model puts impact at the heart of everything we and our charities do, and in the last few years it’s enabled us to help more charities grow their own impact. We don’t just practice what we preach, we live our model: so we’ve taken on board all the learnings we’ve gained from our work with our charities to improve it. We’ve set this out in our Driving Impact report, which you can find here.

By defining impact, an organisation is in a much better place to reassess funding. It may surprise people to learn that a lot of the time when we work with charities in our portfolio we recommend spending more to improve or to develop their impact. There are two main reasons for this.

First, where spending more will get better results. Often, as we work with a charity to get a deep understanding of their model (or ‘theory of change’ in the jargon) we find that the ‘dosage’ young people are getting just isn’t enough. The quest to keep costs down means young people are simply not getting enough hours of contact with, say a tutor, to get them the qualification they need. Or an intervention stops too soon, say mentoring stopping when someone gets a job rather than continuing until the evidence says that job will last. In either case, spending more may be better value. The challenge is to test how much more is needed – where is the line separating strengthening an intervention to get better value and gold-plating it? Far too often charities err far too closely on the side of the bare minimum rather than getting anywhere near to gold plating.

Second, the cost might need to go up to make sure a charity is strong enough to consistently and reliably deliver outcomes and think about growing. That means investing in institutional capacity. It can mean capacity in terms of people – a strong leadership team, an impact specialist to measure and drive performance, a rock solid finance director and so on. It can mean capacity in terms of systems, like a codified model for how the programme should work so that you can train new staff and keep the quality up, or an IT system that helps the team get on with delivering a programme and helps them keep track of how well it’s working. Or it can mean financial capacity: are there enough reserves to absorb shocks and manage financial risk.

The charity view: Susannah Hardyman, CEO, Action Tutoring

At Action Tutoring it was a very different experience for us to come across a funder like Impetus-PEF. In part this was because of the wider support they offer beyond funding, not least hours and hours of incredibly valuable pro bono and management support. However, their approach to funding is also, I believe, unique. The difference is that they are a ‘thorough’ funder, willing to encourage you to think about what it will really take to run your organisation to a very high standard, which will ensure it’s as impactful as possible. This means not being afraid - within reason - to encourage their organisations to think about adding new roles and new systems, which in turn they know will mean increased costs. The fact that they will fund these costs for several years, gives their charities the stability they need to take on increased costs whilst managing the risk responsibly.

For us, we’ve been able to add the role of data and evaluation officer, a position that initially felt like a total luxury, but that we’ve rapidly come to see as essential to what we do. We have a far better handle on our data, enabling us to dig deep to drive improvements. We’re capturing a lot more data from partner schools, because someone has the time to chase it all up, so we know we’re getting an accurate picture. We’re providing regular impact reports to schools on what we’ve delivered – strengthening how professional our service comes across to them, demonstrating our added value and securing their longer term commitment. In a climate where budgets are increasingly tight in schools, demonstrating the value of what you do and being able to prove it, has never been more essential.

We’ve also been able to drastically improve our ratio of staff to schools, pupils and teachers. We’ve seen some fantastic results from this already just a year in – increased pupil attendance on the programme, stronger school retention term on term, higher rates of volunteers repeating and overall increased satisfaction from all parties in our surveys.

Other costs supported have included developing our tutoring curriculum, using professional consultants, to ensure it’s as relevant as possible to the needs of our schools and pupils. We’ve also invested in consultancy support to develop our systems, enabling us to automate processes and streamline operating at scale.

Impetus-PEF left no stone unturned in helping us think through carefully the areas we might need to invest in over a 3 year period. They see the bigger picture and understand the need to apply business like principles to the charity sector. They recognise it’s not just about delivery, but also about the core costs that drive delivery than can often be so difficult to fundraise for. For us, the opportunity to have such thorough funding for a sustained period of time has been transformative. It’s giving us the opportunity to develop, strengthen and prove our model, setting us on a strong path for the future, in a safe context of not needing to constantly worry about finances.

Think about the bang not just the buck

It’s understandable that budgets are tight everywhere and every funder and organisation is asking itself how it can get the best value for money. But the experience of both Impetus-PEF and its wider portfolio of 20 charities, not just Action Tutoring, suggests that the funding sector needs to think hard about the bang as well as the buck. Sometimes a big bang takes more bucks and if the focus is only on keeping the bucks down, we might end up with more of a whimper. Ultimately, that’s not going to help charities, or more importantly, the beneficiaries that they exist to serve.

Impetus-PEF are a partner in the new Impact Management Programme, funded by the Access Foundation and Power to change and led by NPC. Impetus-PEF will be drawing on their Driving Impact work to deliver a series of impact management workshops for charities and social enterprises in 2017. Find out more at www.AccessImpact.org

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