Monday saw the launch of this year’s Eastside Primetimers Good Merger Index. The headline figure is that there were 70 charity mergers in 2016/17, up from 54 in 2015/16. This is a significant increase given the small number involved but, given that there were 61 in 2014/15, it doesn’t necessarily represent a major upward trend.
The debate around mergers is a strange one. I’m a big fan of the work that Eastside do on the issue and enjoyed working with them last year on some research for Social Investment Business looking at how social investors could better support mergers (report to be published this year).
But (to a lesser extent) Eastside’s output and (to a more significant extent) the recent output from Civil Society on this issue seems partly based on some curious, under-developed assumptions. This curious outlook is particularly reflected in the recent post: ‘Charity mergers scuppered by the self-interest of staff and trustees’ which is part of a wider focus on the issue in Civil Society’s print magazine, Governance & Leadership.
The article includes a couple of anecdotal examples of staff and trustee action that has prevented mergers that would otherwise have gone ahead.
I’m aware of other similar anecdotes from research I’ve worked on but I’m yet to encounter evidence (or indeed clear arguments) that these personal objections and obstructions are a key reason why there’s 50-70 mergers a year rather than 500, 1000 or however many merger advocates believe would be appropriate.
There’s (at least) two assumptions underlying the blame the staff/trustee rhetoric that I think are under-explored and at least partially wrong:
There are 167,000 charities who should be actively thinking about merger: the figure from Eastside’s research as reported by Civil Society is “only 70 mergers involving 142 charities took place in the year to March 2017, out of 167,000 registered charities.”
It’s a phenomenally small proportion but it doesn’t involve any estimate of the number of charities who are potentially in the ‘market’ for mergers. Even without (at this point) getting into the more complex issues about the wide range of different activities that a registered charity might be undertaking – just based on size the actual pool is far, far smaller than the headline figure suggests.
The latest Charity Commission figures report that out of 168,237 charities in the UK, 65,656 (39%) have an income of £0-£10,000, while another 57,570 (34%) have a turnover of £10,001-£100,000. Another 11,247 (7%) have income which is ‘not yet known’ so likely (in most cases) to be fairly low.
That’s 80% of registered charities accounted for. While there may be a few exceptions where organisations have a low turnover but own assets, there are not going to be many instances where a formal merger process involving an organisation with a turnover of under £100,000 is economically justifiable or socially useful.
In the event that an organisation is unable to continue but there is a need and funding for some of its work to continue, another organisation might take on a particular project and run it. This happens. Consultants, lawyers and formal processes may not be necessary or helpful.
Multiple charities means duplication of services: after that, we have 33,764 charities left with a turnover of £100,001+. That’s an average of around 52 charities for each of the UK’s 650 parliamentary constituencies.
The 13 descriptions of charitable purposes in the 2011 Charities Act cover quite a range of stuff – from the more obvious tackling of social need via ‘the prevention and relief of poverty’ to ‘the advancement of the arts, culture, heritage and science’.
Those 52 organisations in your area could include include charities helping older people, young people, people with disabilities, learning difficulties, physical and mental health conditions. It can include community centres and open spaces, museums and arts centres. On what basis, do merger advocates believe that 52 charities is too many the social, cultural and spiritual needs of (in English constituencies) over 70,000 people?
Even in the event that there are – for example – 10 different charities in the constituency of Leyton & Wanstead both turning over £100,001+ and offering activities for older people*, they may be offering different services to older people in different ways.
If 10 groups of trustees in Leyton & Wanstead (many of whom may be local older people themselves) have decided at some point they want to do something for older people, the Charity Commission has confirmed their purposes are charitable and they’re somehow finding the resources to make the activity happen, on what basis are outside experts getting upset that they don’t merge into 3 organisations?
Is there any evidence that there are significant numbers of £100,001+ organisations offering the same help to the same people in the same places in – competing with each other in ways which diminish the overall social offer to the people they aim to serve?
Is there any evidence in the current funding climate that there are any local charities *at all* currently offering the same help to the same people in the same places in competition with each other using public money?
I’m not assuming that the answers to these questions are necessarily ‘no’ but those who are angry about the idea of duplication and see the need for mergers in response really need to have – if not actual data – a more developed hypothesis to back up their rhetorical position.
Is it in inherently socially beneficial for charitable activities to be carried out by the smallest possible number of charities? If so, why?
I’m not posing these queries based on belief that merger is a bad idea. Merger has always been a good option for some organisations and the current economic climate for charities means that it is now likely to be a good option for a (relatively) increased number over the coming years.
My (qualitative) impression is that there are (at least) 10s of organisations in the UK where some combination of staff and trustees have decided that merger if the best way to achieve their charitable purposes: because it’s the only way to keep going or because it’s a better way to move forward as part of a stronger, larger entity. There are practical and financial barriers to those organisations taking the merger route and I want to see social investors and other funders help tackle them.
What I’m not seeing is evidence (or a even a meaningful hypothesis) that significant social harm is occurring because senior managers and trustees of 1000s (or even 100s) of organisations are ignoring a clear, economic and social case to merge based on self interest.
If that case exists, merger advocates need to make it.
*This is hypothetical. It is highly unlikely that there are 10 or more £100,001+ turnover charities providing services specifically for older people in Leyton & Wanstead.