News13.03.07 | Nick Aldridge, acevo’s Director of Strategy and Deputy CEO addresses Leadership Challenges and the Future of the Third Sector
Nick Aldridge, Director of Strategy and Deputy CEO, acevo, will be addressing the leadership challenges currently facing the voluntary sector at Agenda Consulting’s annual Strategic HR in the Voluntary Sector Conference on Tuesday 13 March.
Nick says:
But, I suggest, simply indulging in ideological debate about the sector’s true purpose won’t protect the independence of organizations on the ground. Serious and practical changes are needed to strengthen the sector.
In particular, we are going to need stronger leadership, better governance and more robust accountability to those we serve. A benevolent culture of well-intentioned amateurism, on which much of our public goodwill rests, is a declining asset. Demands on the sector are growing and changing fast, and we need to catch up.
The agenda demands more attention to development at all levels in every third sector organization. If the sector is to take its rightful place at the centre of civil society, we must overcome two unfortunate complexes that plague the sector’s collective subconscious.
First, we need to overcome our guilt complex about investing in our people. High quality, effective organizations need people who are professional, as well as passionate. That’s what leadership is all about.
Second, we need to overcome our victim complex about our relationship with others, and particularly our relationship with government. The political climate, at present, is pretty favourable to the sector. The two major parties are jostling for our attention, and ways to put us at the centre of their agendas. We can’t squander that.”
“Leadership challenges and the future of the third sector”
Thank you very much for inviting me along today. And thank you all for coming. I’d like to say a few words about the future of the sector, and the leadership challenges it will present. I want to speak from the perspective of chief executives, who we represent, but also of all those with an interest in developing the sector’s leaders, now and in the future.
And I’d like to begin with this thought:
At a time of unprecedented opportunities - and of course challenges - for the sector, we are at risk of turning in on ourselves. We all value the independence of the sector. Without it, the game is up. There’s no point us existing.
But, I suggest, simply indulging in ideological debate about the sector’s true purpose won’t protect the independence of organizations on the ground. Serious and practical changes are needed to strengthen the sector.
In particular, we are going to need stronger leadership and more emphasis on professional development. A culture of well-intentioned amateurism, on which much of our public goodwill rests, is a depreciating asset.
I want to argue that if the sector is to take its rightful place at the centre of civil society, we must overcome two unfortunate complexes that continue to haunt the sector’s collective subconscious.
First, we need to overcome our guilt complex about investing in our people. High quality, effective organizations need people who are professional, as well as passionate. That’s what leadership is all about.
Second, we need to overcome our victim complex about our relationship with others, and particularly our relationship with government. The political climate, at present, is pretty favorable to the sector, even if implementation on the ground remains poor.
The two major parties are jostling for our attention, and ways to put us at the centre of their agendas. We shouldn't take that for granted.
I want to begin with a few thoughts on political engagement. What are the causes that people care about, and the organizations they want to be part of?
It’s interesting to look at membership numbers – something we do quite a lot at acevo:
We’ve heard a lot about petitions in recent weeks. They have a noble history, from Chartism through the abolition of slavery. How many of us are signing them now?
The last time I checked the No.10 website,
According to the man behind the website: “Research shows people are more willing to sign a petition than engage in any other kind of political activity.” But why? Surely not because it takes so little time and thought?
It’s now a cliché that the pace of communication is increasing. The total number of emails sent in 1990 will this year be sent in less than half a day. According to the Chatham House Forum, the entire information throughput of the year 2000 will be encompassed in one second in 2020.
But is this at the expense of the value of our communication? An estimated 90 billion spam e-mails are now sent every day, accounting for nearly 90% of all incoming email. We’re heading towards 1.5 billion items of direct mail every year. We all spend less and less time looking through it.
How many emails do we delete after less than two seconds? Compare that to the surging value of a handwritten letter, personally signed. The analogy holds good for every form of communication – we value the personal touch: something which reveals more thought, and involves us in more depth, than a quick mass email.
In making a quick decision whether to back a campaign, whom do people trust? Those with whom we have a direct relationship. Those who seem to know where we're coming from, and are aware of our interests. Perhaps that’s why we are becoming more reliant on the circulation of information across personal networks.
Here’s one example. Back in 2002, who did the public trust to give them information about the health risks, if any, of MMR vaccinations?
According to the researchers, Richard and Judy were trusted not because they had any medical expertise, not because they had any authority or legitimacy, and not because their legal status means they are established for the public benefit.
But because they have human faces, and they seem to know where their viewers are coming from. They are more like friends than authority figures.
So, over the phone line scandal last month, they were just as shocked as their viewers. They felt the same about it. Their personal brand will survive.
The "Charity" brand has a reasonable starting point, in terms of public trust. In 2005 the Charity Commission asked 1000 people to rate their level of trust in charities on a scale of one to ten. We scored 6.3 overall.
Our highest average score was 7, on being trusted to make a positive difference, but we only managed 5.9 on making sure donations reach the cause. Solid scores, but hardly spectacular. And notice how the scores come down when financial competence is on the table. There's certainly not much room for complacency.
And meanwhile, charities are certainly making their brands work harder, in bolder and more sophisticated collaborations. Educational charities are working in private prisons.
You may have heard, two weeks ago, about a collaboration between Medécins sans Frontieres and a French drug company, to produce low cost drugs to tackle malaria in the developing world. Mainstream drug companies aren’t pursuing it, as there’s no money to be made.
A great example of a charity recognizing a market failure and bringing in partners to tackle it. And an interesting juxtaposition of brands – an internationally renowned aid organization, and one of the world’s biggest pharmaceutical firms.
There are three ideas I’d like to suggest to you:
The best businesses are continuing to invest in customer relationships. But Philip Cullum’s fascinating report, The Stupid Company¸ shows that many big businesses are still squandering their customer goodwill by mechanising and depersonalising their communication.
According to Philip, “people think that too many companies have no idea what it feels like to be a customer, and simply lack common sense, let alone a personal touch.”
Those of you who, like me, have had to change mobile phone operator in order to keep your phone number will know what he’s talking about.
There’s a message here for us in the sector. We need to make sure our style of communication stays personal, and involves people in the way they want to be involved. We do now talk about a fundraising industry. But we need to avoid acting like the Stupid Companies that Philip talks about, by relying too heavily on industrial models of fundraising and communication. We need to stay accessible, human, and in touch.
We have a huge advantage already in the sector, with over a million staff, and 22 million adults involved in formal volunteering every year. Those who engage with us see that human face. Not just in the volunteering and mass membership charities, but also in the major service-providing charities, on whom so much attention is currently focusing. The best of them provide a powerful voice for the people they serve.
The second idea. Our approach to communications and technology needs to fit within our overall strategy. This assumes, of course, that we have a strategy.
As you’ll remember, the writer Jim Collins encourages us to act like hedgehogs. This means identifying the one thing we can be the best at. For a hedgehog, it’s curling up into a spiny ball to discourage potential predators.
Collins considers the response of the pharmacy, Walgreens, to the dotcom revolution. The company was built in the idea of customer convenience, and maximizing customer spend per visit. Unlike many others, they decided to pause and reflect, rather than hurtle into reflex action. Their CEO said "We’re a crawl, walk, run company."
So they had an intense internal dialogue. Would going into the Internet go against their convenience theme; would it tie in with the idea of maximizing spend per customer visit? They decided it could, and approached the technology with enough thought to make it work.
Charities need to have this kind of thought process about No.10 petitions, mass marketing, and new forms of fundraising. We shouldn’t be afraid to be left behind, if we think others are heading in the wrong direction.
This was one of the key findings of our recent inquiry into public trust in the sector, chaired by David Omand. Members pointed out how rapidly trust can be lost where organizational behaviour, including communication, fails to match public expectations.
And this is a real leadership challenge. As people come to judgements ever more quickly, they will judge organizations more and more by the people associated with them – particularly the most visible people. So we’re going to need very good people.
Are we going to be able to attract them? On the face of it, yes. We surveyed 130 high calibre graduates currently on the "Teach First" programme, which enables them to spend 2 years teaching in inner city schools before moving on to blue-chip corporations.
Almost half of them said making a difference was the most important thing to them. Intellectual challenge and a good working environment came second. Only 1 in 20 rated their salary as the most important issue.
Perhaps even more surprising: the third sector was more popular than the private sector as a career option, with the public sector coming top.
Before we get too swept away on the tide of graduate idealism, here's one comment: "I am currently in large amount of debt and as much as I would love to try working within the third sector I could never afford too." 54% said that low salaries were a concern about moving into the sector. 20% said they were too worried about career progression.
So just as soon as money and career progression stops being important, all these ambitious graduates will rush into the sector.
So, you'll all be relieved to hear, there is plenty of work still to do in attracting talented people into the sector. Particularly since, according to the CIPD, two thirds of UK organisations are suffering from a shortage of highly effective leaders. 85% are now investing seriously in leadership development.
Are we all among these 85%? The aim of the sector's leadership centre, launched last year by acevo and NCVO, is to drive up demand in the sector, as well as supply.
So, to recap – in a world of devalued communication, charities’ relationships with their supporters and clients will become more fundamental. Communication must be managed carefully as part of an overall strategy. Quality of leadership will be central, and presents real challenges for those in charge.
It is striking how absent all these concepts have been from recent debates about public trust in relation to the sector’s role, and its independence.
The sector’s current opportunities are rich and varied. In the last month alone, a Treasury report has proposed giving the sector the major role in tackling long-term unemployment. The House of Commons has passed a bill to give the sector new opportunities in working with ex-offenders. And the Conservatives have begun detailed work on how to develop “Social Enterprise Zones”, which will give the sector the lead role in helping local communities to overcome poverty.
Whatever your level of skepticism about political announcements, there is little doubt that the sector is going to stay firmly on the political agenda, at least for the next few years. The latest initiatives should soon begin to filter through to practice on the ground. There will be considerable opportunities to grow, from a current low point of less than 2% of government spending, if we take them.
But there is little doubt that the government's procurement is going to become more professional, and take place on a larger scale. There may be fewer seats at the top table, and fewer crumbs from it.
Our leaders – from our CEOs and trustees through to our frontline staff - are going to become more prominent, and more exposed. They'll need to be increasingly entrepreneurial and ambitious, while retaining a firm grip on the organisation's guiding mission and purpose. They'll need to combine rapid responses to a fast-changing political environment, with the ability to present a trustworthy, human face to the public. This doesn't sound easy to me.
The debate about independence is nothing new. Amateur archivists within the acevo membership have unearthed articles from the early nineties. In them, commentators on the sector worry that our increasingly close relationship with government, particularly in public service delivery, will blunt the sector’s independence and ability to campaign.
Reports from Civitas, the Centre for Policy Studies, and the Directory of Social Change have all revisited this familiar ground in the last 9 months or so. Broadly speaking, I think we should welcome attention from thinktanks, who are more likely to recognize the sector’s role in society if they start to look at it. But we can legitimately ask thinktanks to live up to their name, and do some thinking.
I have two problems with this debate, beyond the fact that it hasn’t moved on one inch in twenty years.
Independence is very clearly not just about the government. I know that Medecins Sans Frontieres is extremely cautious about accepting government funding, in case it compromises their ability to respond to needs on the ground rather than the agenda of individual governments. But, I am sure, they think equally hard about partnerships with major pharmaceutical companies. After all, MSF has spoken out vociferously against drug firms for failing to reduce their prices.
And those organizations who want to get more involved in welfare-to-work services, or support for ex-offenders, will probably find themselves contracting with major private companies rather than directly with the state. They will need to be acutely aware of the risks involved – both operational and reputational – and manage them. They will need the confidence, and the skills, to negotiate effectively with partner organizations in all three sectors.
But I don’t think the answer to these challenges is to give up, admit defeat, and withdraw from helping the most vulnerable.
At an abstract level, I think Suzi Leather is right to stress that independence must be “absolute, non-negotiable and sacrosanct.” But I don’t think this translates easily into charities’ work on the ground.
And I don’t think the facts behind the headlines support the somewhat panic-stricken tone of much of the coverage it received. We heard that only 26% of charities delivering public services feel free to make decisions without pressure from their funders.
Here are some other, less reported figures from the report:
These figures suggest that, in fact, the vast majority of charities do not feel their independence is being compromised by their funders.
I also want to quote the very sensible comments of Ann Blackmore, NCVO’s Head of Policy, on this.
She says that most of the debate on independence builds upon “the myth of the golden age, a time when the sector and government operated in different spheres, and when the sector's independence was not in question."
As she points out:
So I don’t think we necessarily should be worried that just over one third of charities’ funding now comes from the government. But perhaps we should be worried that very few CEOs think their donors know this.
This brings us back to communication, and to leadership.
You may have seen the comments from Jeremy Swain, one of our members, who runs the homelessness agency, Thames Reach.
"As part of our relationship with funders and commissioners, we seek their views and improve our services in the light of their often very sensible comments. Why is it that we think that the voluntary sector alone has all the answers and should be sheltered from reasonable challenge? Absolute independence is not the holy grail at Thames Reach - transforming the lives of homeless people is."
I think this confidence, and this focus on the mission, is what we need to be aiming for as a sector. We don’t want our funders to stop talking to us, or to stop challenging us to improve. We don’t want to retreat into splendid isolation, becoming less and less plugged in to the other agencies we may want to work with.
I think this approach encourages us into a sort of victim complex, where we assume from the outset that any interaction with others will be to our disadvantage. Rather than admitting defeat up front, we need to develop focused and ambitious leaders who are up to the challenges our working environment presents.
So, over the next few years, you won’t see too much handwringing from acevo about the sector’s level of funding from government, or the fact that our funders may seek to influence what we do.
Instead we’re going to focus on making sure the sector's leaders are able to handle the many complex and demanding relationships that are now inevitable, and – for the most part – desirable. This includes the relationship with government, and our relationship with the general public.
And this isn’t going to be easy for us.
Our research suggests a few core competences and characteristics for leaders in the sector. You may recognise, I hope, some of these qualities among the people in your organisation.
But perhaps not. We are still, in the sector, heavily reliant on bringing in talent from outside. One third of our members have a private sector background, and 50% come from the public sector. Only one in seven has always worked in the sector.
71% of our members say they have no natural successor within their organisations, and almost 74% say they have no succession plan in place for senior management teams.
It’s possible, of course, that all of you have the succession plan in place, and the chief executives aren’t party to it.
But I think it’s fair to say much of the sector still has an ambivalent attitude towards development.
The best estimates we’ve got are that training budgets in the sector average 1% of turnover, compared with 3% in the public and private sectors. Only one in five organisations makes specific provision for developing its CEO.
I think this low spend results partly from our failure to make the case for investment in internal infrastructure. Charities have done too little to dispel the public’s distinction between funds that “go to the cause”, and those that are allegedly “wasted on overheads”. Hence the ongoing debate over “core costs”.
The distinction between core costs and direct costs is often simplistic and arbitrary: an extremely high telephone bill certainly isn’t an overhead for the Samaritans. Moreover, guilt about paying competitive salaries, and investing in our people, remains endemic in the sector. And this is the second complex we need to address. We saw earlier that talented young people may not be quite as altruistic as they appear at first glance - the opportunities, and yes, the salaries, matter.
16. Slide: Ambivalence about development
In meeting the kind of challenges we’ve been talking about, a culture that discourages investment in skills, professionalism and leadership, will prove counterproductive and inefficient in the long-term.
Richard Chambers, trust officer at the Church Army in Sidcup, recently put it rather well:
“Our staff are among the most skilled, dedicated, value-for-money professionals in the world. We are missing an enormous trick by pretending that people – and their salaries - aren’t at the core of what most of us are trying to achieve.”
And this emphasises the role of HR directors. The business case for skills and leadership development has never been more pressing. CEOs should not need much convincing. They know your organisations must become ever more competitive to attract people, public support, and income. But they need reminding that people development is at the centre of this. The ability to attract, retain and develop high-calibre staff is the fundamental source of competitive advantage in a sector driven by people. One defining feature of the great organisations Jim Collins studied, was the priority they placed on getting the right people on board.
And I’d like to end with two things you, as HR directors, should consider.
First, have a look at your organisation’s external communication. Does it emphasise the role, and value of people? Or does it imply, however subtly, that all income will go to “the cause”, as distinct from staff salaries and development?
Second, you should think about joining a board. If you already have, join another one. This is a brilliant way of widening your experience, and seeing the connections between your own priorities and those of other leaders. It's a great form of professional development for senior executives in the sector.
And the drive for increased skills needs to come from the top of third sector organisations. According to our research, 50% of third sector boards don’t have anyone with professional HR expertise. So you should be made to feel very welcome.
These two actions serve to illustrate a bigger challenge for the sector. We have to place people development at the centre of what we do, and to convince our funders, and the public, that this is both necessary, and desirable.
If we are to rise to the challenges we face, this is the kind of introspection we need in the sector. We must be prepared to have a good, hard look in the mirror, and resist the temptation to gaze instead at our navels.
Thank you.
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