The Inefficiency Myth – debunking a damaging small charity stereotype

June 15, 2023

The inefficiency myth - debunking small charity stereotypes

The Fore’s CEO and Founder Mary Rose Gunn shares her thoughts.

“It is a common misconception that small charities are inefficient. They, supposedly, replicate services and make poor use of resources.  But these accusations, heard from business, government and even some charity sector figures alike, are damaging misconceptions that strangle innovation and hurt a sector already struggling. Here are seven of the most common myths about inefficiency in small charities and the reasons why we must all dig a bit deeper to understand where the real issues lie.

#1: Small charities waste money

In 15 years in the sector, I have never met a small charity that spends too much on post-it notes. Why? Because they know how hard it is to raise money.  Small charities can’t afford experienced fundraisers or tv campaigns, and their already tight budgets have all been hit – local government spending reduced by half between 2008 and 2013, and the pandemic and the cost-of-living crisis have all affected donations. Small charities spend wisely because they can’t afford to do anything else.

#2: There are too many small charities doing the same thing

Replication does not necessarily mean inefficiency, especially when it is about meeting demand. Just as in the private sector, we need the variation to enable innovation. Small charities often have deep insight into what local communities need and offer unique versions of similar solutions. You only need to look at the rise in GP referrals and social prescribing to see this. Instead of laying blame at the door of charities, if there is unnecessary replication, the onus must be on funders to do better research. Those distributing resources must make sure they are supporting the best small charities that are having the greatest impact – not artificially propping up ones that aren’t needed.

#3: Small charities should collaborate

For outsiders it can often seem crazy that there is not more collaboration when small charities seem to be doing similar things.  But what is rarely acknowledged is that while collaboration can save in the long term, in the short to medium term, it costs.  It takes time and money to build strong partnerships. Relationships must be nurtured and strategies must be carefully aligned so that every side is pulling in the same direction. When you have charities with part-time or volunteer staff fighting to keep the lights on, there isn’t the resource and funders, despite calling for collaboration, run processes that encourage competition not collaboration between applicants.

#4: Small charities should centralise back-end operations  

It is often suggested that small charities could save a lot if only there was a central service providing back-office support. Firstly, for those that want it, these services already exist through private sector companies.  Secondly if small charities are choosing not to outsource administrative services, it’s generally because there’s a good reason. A huge amount of back-office provision is done by people offering their time on a pro-bono or low-bono basis – no small charity leader is going to increase overhead costs by transferring to an external provider if it’s being done cheaper in house.

Myth 5: Small charities are governed poorly

We all agree that good governance is a key determinant of success, and we would all like to see best practice across the sector. But building and managing a strong board, attracting talent, training staff, and working collaboratively all takes time and resource. Funders must acknowledge that good governance costs money and, since it is so hard to raise funds for core costs, it is no wonder that this is an area that is routinely underinvested.   

#6: Small charities are resistant to IT

Are small charities held back by a debilitating tech phobia? 10 years ago it might have been possible to argue this but if Covid-19 proved anything, it is that community organisations can roll up their sleeves and implement new systems where and when they’re needed. In 2020 we saw the 200 small charities we supported set up online training, offer arm-chair yoga or connect young people to digital mental health support in double-quick time.

If there is resistance to adopting new IT, it is usually due to resource concerns and the challenges of raising core funding. Scoping and implementing a new CRM system will almost definitely have long term efficiency gains, but it is a huge task for a small team with only one or two members of staff, a significant time drain in the short term and immensely expensive to do it properly. Lots of tech now comes with significant non-profit discounts but funders need to acknowledge the full costs and support charities to implement new IT systems that will ultimately help drive impact.

#7: Small charities don’t have clear strategies

Small charities can look, from the outside, like they do not have a clear strategic vision.  But if you dig just a little bit deeper, you will find that often this is not because the leadership lack an awareness of  what they want to achieve.  The causes of mission creep or confused strategy are almost always the demands placed on charities by those who are funding them.  If a funder asks for something new or a project that meets specific objectives, small charities contort their services to please the funder because they rarely have enough funding options to say no.

Small charities are certainly not perfect but if we want to call out inefficiency, the first place we need to start is with those holding the cheque books. Of the barriers preventing civil society from achieving its full potential identified by Pro-bono Economics, poor funding practices is one of the most important to tackle.  £900m each year was recently cited as the cost to charities of writing grant applications – considering the value of trust and foundation funding in total is under £6bn, that’s an inefficient system.  There are more funders that offer unrestricted funding than ever before but there are often still so many hoops for charities to jump through to prove eligibility. 

It is widely acknowledged that funders opened up during the pandemic but we’re hearing worrying stories from the many small charities we work with, that these changes haven’t stuck.  We funders must all work harder to offer the support the sector really needs.  And in the meantime lets be much more honest about where the faults really lie and not perpetuate stereotypes that blame small charities for inefficiencies they didn’t cause and have little power to change.”

Mary Rose Gunn is the Founder and CEO of The Fore. Follow our blog and newsletter for more charity sector insights.