Australian Charities – How Many Is Too Many?

Are there too many charities in Australia? This is a question that has been hotly debated in recent times. Is competition healthy in the charity sector, or should the sector consolidate and merge where possible to reduce inefficiency and ineffectiveness? Two sides to this argument have emerged, and we aim to take a look at the main points of both sides to form a balanced opinion.

Before we dive in, let’s look at some facts regarding the sector.

It’s important to note that there is a difference between Not-for-profit and Charity. In Australia there are over 600,000 not-for-profits with over 54,000 of them being charities (the charity sector).

According to the 2016 Australian Charities Report, charities employ 1.3 million people (10.6% of Aus workforce), account for more than 5% of our GDP, and Australia actually has the fewest charities per person compared to similar countries.

 

 

In 2016 seventy percent of charities received donations which accounted for $10.5 billion of annual charity income, while approximately half of all charities received revenue from a government grant. As the number of charities has increased so too has competition for these donations and grants.

 

 

The Case for Mergers, Fewer Charities & Less Competition

 

Merge & Reduce Duplication

In any sector where there is duplication, there is waste, inefficiency and ineffectiveness. As Paul Ronalds, CEO of Save the Children Australia, recently stated “In an environment of constrained resources, the effectiveness that can be harnessed from improved economies of scale must be part of the solution.” He is joined by CEO of World Vision, Tim Costello, who claims that too many charities are competing against each other which naturally creates a significant amount of waste.

Mergers can bring more power and effectiveness to an organisation; theoretically, more power provides a greater ability to alleviate complex social problems. “Mergers are not about the large charities getting bigger. They are about organisations who are pursuing similar missions leveraging the same infrastructure to more effectively achieve their goals,” said Paul Ronalds.

 

Self Interest Ahead of Community

The motivations of charities has also been questioned with some believing that charities can stray from their altruistic origins into an unintended state of self interest and ‘survival mode’. “Self-interest can be a hard thing for charities to put aside, however we are in the business of serving communities, not ourselves,” recently stated by CEO of the Community Council for Australia (CCA), David Cosbie.

 

‘Grief Charities’ Often Duplicate Existing, More Effective Charities

Many newly created charities can be classified as ‘grief charities’, where a charity is started after the loss of a loved one, or an experience that completely changes an individual’s life perspective. In these times of grief there is a high level of passion and commitment to the cause.

Unfortunately passion and commitment don’t always translate into effectively solving complex societal problems, or good management. These charities can often be left to wither as time goes on, and reality erodes the initial passion and commitment. It is hard to argue that the funds raised by these grief charities would not be better used by an established organisation with the same mission.

 

The Public Are Losing Trust

There is also the concerning trend that the Australian public’s trust in charities is declining. Couple this with the fact that many polls show that Australians do indeed think there are too many Charities in Australia. We posed the question ‘Are there too many charities in Australia?’ to our network over the last 48 hours and at the time of writing, 62.5% have responded ‘yes’ (from 19 respondents). It seems that a majority of the public may be tiring of being asked for donations from numerous charities with similar missions.

 

 

The Case for Diversity, More Charities & More Competition

 

More Competition for Grants & Donations Promotes Innovation & Demonstration of Effectiveness

In the private sector, competition can have many benefits, and in theory, some do translate to charities. New entrants into competitive markets usually bring innovation, disruption and new ways to tackle problems, something that the charity sector will always need, given the scale of the problems they are looking to alleviate. Competition also motivates charities to better demonstrate their impact, use of funds and effectiveness, as this will result in more donations and grants ahead of other charities.

 

Diversity in Size Is Good & Bigger Is Not Always Better

Mergers typically lead to bigger charities and bigger is not always better. Looking at a recent report from the Institute for Public Policy Research in the UK, Too small to fail: How small and medium-sized charities are adapting to change and challenges, we observe that many smaller charities are more deeply embedded in their local communities and are uniquely placed to engage with those that are hardest to reach. In Australia, 31% of charities are registered in regional areas, many being small, grassroots charities.

 

The Public Don’t Trust Bigger/Stronger Charities More

Interestingly, the ACNC Public Trust and Confidence in Australian Charities 2017 report shows that only 12% of people agree that they ‘trust big charities more than small ones’ with 31% disagreeing. Yvon Chouinard the founder of the environmentally focused clothing company Patagonia has made a point to only support ‘grassroots’ charities with 1% of the companies annual sales, believing that those smaller charities on the frontline have the ability to make the biggest impact and take bigger risks. Many of these smaller charities share the same mission.

 

Collaboration Occurs Despite Competition

In the competitive private sector there are joint ventures and many ways to collaborate together towards a win-win outcome. Similarly in the charity sector it seems that collaboration is occurring regardless of competition with the 2016 NFP Governance and Performance Study showing that 70% of surveyed Australian Charities reported they are collaborating with others to advocate for the sector or beneficiaries.

 

Our Point of View

This is a complex issue and clearly both sides only want the best for the sector and society.

Looking at both sides we can see there are clear advantages and disadvantages from either perspective. But what about the common ground between them? Both would agree that for the charity sector to be successful in alleviating and solving societal problems, charities must put the community ahead of themselves, work together more, better engage the public, and foster new ways of achieving their mission.

Are fewer charities in an underperforming sector better than more charities in an underperforming sector? This is the wrong question. What if we reframed the debate to how charities can demonstrate the attributes mentioned above better in the future, regardless of the number of charities that exist? Would this make the number of charities a moot point?

If we focused on how all charities can better evolve to achieve their outcomes we may uncover a new mindset that will allow the sector to flourish.

Taking another angle, can we learn something from the rise of social enterprise as an alternative model to solving many societal problems? There seems to be no debate about how many social enterprises should exist. In fact, the sentiment seems to be ‘the more the better’.

Is the debate about the number of charities an argument about the symptoms instead of a deeper discussion about the root cause of issues within the charity sector? For the sake of the sector that we are all invested in, we need to continue to dig deeper in our questions and discussions to secure a brighter future.

We would love to hear your thoughts at hello@raineandmakin.com

By Luke Schoknecht | Co-founder & Strategy Lead

Original image by Ethan Weil