How do we scale down?

If you run a social enterprise, or a charity that bids for public contracts, you may be thinking that it’s about time you started to scale up. The number of people in politics and ‘intermediary’ organisations that want you to scale up your social venture is far greater than the number of people who care what your social venture is or does.

It’s an interesting progression from the situation in the 2005 – 2009 period, when the number of social enterprise consultants helping people to write business plans vastly exceeded the number of social entrepreneurs with a viable plan for a business. So, there is now a growing artificial market primarily focused on not scaling up the viable social ventures that weren’t started then.

Unfortunately, while the government in particular is artificially stimulating the market for people to help companies get bigger, it has been simultaneously shrinking the markets that most social enterprises and contract-focused charities would be most likely to trade in, in order to get bigger – partly through cutting public spending in general and partly through spending money in ways that favour massive private outsourcing companies rather than social enterprises.

Whatever our views on particular government policies, though, most of us would accept that – whichever parties end up in power – for the foreseeable future there will be less money in the overall social pot. For that reason, it’s a shame that there’s been so much emphasis on helping organisations to scale up and so little support and advice for organisations who are forced to scale down.

The  story of Wiltshire Mind has been prominent in the voluntary sector world this week. The charity lost its core funding from the local council in 2010 and, according to Third Sector, its approach since then has been: “The charity also sold one of its offices, applied for a variety of grants and set up a funding arm, Friends of Wiltshire Mind, to try to bolster its finances. The latest published accounts show the charity’s income was £89,792 in 2010/11 and its spending was £191,379.

And the current situation is: “Wiltshire Mind employs 10 staff and receives support from about 13 volunteers. The charity runs eight groups that provide support to almost 100 people.

There are situations where it does make sense for a business to spend twice as much in a year of trading as it brings in – the launch of this now profitable free magazine being an example – but, from the varied but limited information available, this doesn’t seem like one of them.

Whether or not it’s entirely true in this case, there are many organisations around the UK who’ve responded to the challenge of having what they regard as ‘their funding’ cut by throwing absolutely everything they’ve got into trying to continue to deliver the same services, with the same number of paid staff but without the income.  In some cases because they’re fighting to get ‘their funding’ back. In other cases because they’re trying to raise similar amounts of money from other sources.

While the Old Testament stories of Moses may have a lot to teach us, it’s unlikely that the story of his adoption – where the baby Moses is set adrift in a basket on the Nile by his mother and ultimately adopted by the Pharoah’s daughter – was intended to be interpreted by charity trustees and social enterprises directors as a business strategy. Moses’ mother didn’t have any other options and the positive result was so gloriously unlikely that at least three major religions are still talking about thousands of years later.

Unfortunately, plenty of charities and social enterprises are effectively pursuing the approach of putting their organisations in the river and hoping that a public sector agency, grant-making trust or corporate sponsor will miraculously come along and fish them out.

The point is not that it’s wrong – when faced with funding cuts – to approach public sector bodies, trusts and anyone else who may be interested and make clear to them what will be lost if your services have to stop and what will be gained if they support you to enable those services to continue. It’s the right thing to do but, once that hasn’t worked, it is wrong to just repeat the same approach over and over again until you run out of reserves (or worse).

When faced with a situation where some of your income streams are reduced or no longer available, it’s vitally important to stop and consider what your organisation’s for – who you’re there to help, what outcomes you’re meant to be achieving – and then explore all available options for doing that sustainably.

Unless they’re specifically involved in delivering supported work placements, charities and social enterprises do not exist to preserve the employment of their existing staff team for as long as possible. Most of us, as trustees and directors, do want to keep our staff in work – and that’s a legitimate position  – but it’s vitally important to separate that intention from the vision and mission of the organisation. That’s easier said than done. From a personal point of view, the honourable intention to keep staff in post has been the single factor most likely to lead to wrong decisions being taken or, more often, right decisions being idiotically postponed.

That’s not to say that a better approach for organisations who lose funding is to just make everyone redundant and go home. The point to find different ways to do things you exist to do and help the people you exist to help.

In the case of a local mental health charity that loses funding the key question to ask at that point is not:  ‘how can we preserve our existing services?’ but ‘what can we do to help our members and other people with mental health difficulties in our area?’

The right answers would depend on the combination of what members and people with mental health difficulties want and the money available to pay for those things. It’s seems unlikely that, in most cases, the only two choices are: (a) get a set amount to provide a particular set of existing services or (b) close.

I don’t know enough about the specific situation of Wiltshire Mind to know the extent that this applies to them but, in a general sense, if an organisation has £100,000 to spend on temporarily preserving unfunded services for a year, it has £20,000 a year (subsidy not total income) to spend over five years supporting members to do stuff for themselves.

Scaling down properly isn’t easy but it’s just as important as scaling up. In the social enterprise sector, we’ve seen several regional and national support organisations close or dramatically reduce their activities very suddenly rather than move to new, more sustainable ways of working.

Sometimes there isn’t always a new, more sustainable model to be found and, in other cases, there is no longer a need for the services that organisations have been providing but as organisations dedicated to delivering positive social  change, it’s vitally important that we keep on putting creative and enterprise into achieving our social goals, rather than maintaining the existing structures and approaches of our organisations.

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3 Comments

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3 responses to “How do we scale down?

  1. jeffmowatt

    An obvious answer to me would be decentralise and distribute. For example, I understand that our local Age Concern in the Forest of Dean delivers meals on wheels at £3.20 where in some counties costs have risen to £5.

    This approach is described in our 1996 white paper on people-centered economic development:

    “Top-notch education is leaving the confines of physical campus and four walls. A student in remote Zaire, given an Internet connection, can become a Duke-educated Master of Business Administration, while remaining mostly in his or her home village to the village’s benefit. The prospect of such decentralized localization of education and economic activity allows a great deal of autonomy, freedom and self-determinism in the village’s own character and identity. It need not be a risk to cultural heritage and integrity to benefit economically; the means by which such benefit will occur, how local citizens can have food, shelter, health care, and a basic sustaining human standard of existence can be determined at the local village level and then communicated at the regional, national, and global level simultaneously at virtually no cost via the Internet and a web site. It is this basic level of human sustenance, coupled with self-sustaining enterprise to provide this basic level of support, that I refer to as sustainable development — which is just another way of saying “people-centered” economic development.’

    We can deliver services through franchising as proposed in 2004, for community re-investing broadband projects and in 2006 for childcare reform in Eastern Europe.

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  2. jeffmowatt

    David I’d been surprised recently to learn from the Simon Teasdale’s article on social enterprise you referred to that BITC were the umbrella organisation for social business,

    It falls into place today, when I read in New Philanthropy Capital’s blog that they are going to deploy what P-CED proposed 16 years ago and has practised since 1999.

    My question is, will our work be attributed or will we just be pushed out of the way?

    http://newphilanthropycapital.wordpress.com/2012/08/06/business-connectors/

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  3. Beanbags admin

    They’re not. This is the exception that proves that Simon’s right about everything else! To the extent that BITC are an umbrella organisation, they’re an umbrella organisation for collective CSR efforts.

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