Laura Masheder considers whether collaboration could be a win-win proposition for charities in a turbulent economic climate.
The world has changed a lot over the past few years. Post pandemic, we find ourselves amid the cost-of-living crisis with inflationary pressures compounding tightening public finances. It feels inevitable perhaps that the charity sector will again be at the front line as we navigate difficult times.
Pressures to deliver more to meet need, but with increasing costs and funding reducing in real terms is a challenge faced by many charities.
Cost reduction is finite in its benefit, and while value for money is really important, over time, minimising expenditure reduces the quality of what you can deliver. This may manifest itself in insufficient infrastructure to manage the charity effectively, an under-invested estate that needs significant capital expenditure to make it once again fit for purpose, or poor staff retention which may be created by low morale and uncompetitive benefits packages.
Looking at the efficiency of how you deliver, new funding opportunities, diversification, commercial opportunities and collaborative working are all more sustainable ways to improve the finances and resilience of your organisation.
Collaboration
Collaboration can take many different forms. Many people think of mergers when we talk about collaboration, and while this is the right solution for some situations, collaboration can take place at many levels. At one end of the spectrum there may be quite low levels of activity such as information and resource sharing, while at the other there may be a lasting commitment such as joint delivery or a merger of the organisations.
Working with other organisations can help you raise additional funding. You can take advantage of cost sharing opportunities, and many funders encourage collaboration to remove duplication of effort and to potentially increase the reach of your work. The Charity Commission has for some years encouraged and reminded trustees of their responsibilities. The Charity Commission publication Choosing to collaborate: helping you succeed – reminds trustees that: “Collaboration can lead to improved organisational effectiveness, reduced duplication, better use of resources and more value for money, all of which enable the charity to better help its beneficiaries. Trustees should consider frequently whether there are any aspects of their work that can be better delivered in partnership with others.”
Potential collaboration models, with the structure and complexity varying include:
- Knowledge sharing
- Consortium bids
- Joint activities
- Joint ventures
- Mergers
- Cost sharing centres
- Staff secondments.
While collaboration in the sector tends to be with not-for-profit organisations with similar objects, charities can also collaborate with commercial organisations. Such collaborations may feel less comfortable, but there may still be benefit to your organisation providing the relationship is properly managed. The Charity Commission has acknowledged this both as an opportunity and as a risk that should be managed, and it has issued Guidance for charities with a connection to a non-charity to help manage the process of working with commercial organisations.
The legal position of all collaborative working should be very clear, and appropriate professional advice sought to ensure that the necessary legal agreements are in place. The taxation and VAT status of such arrangements can be especially complex and a view of these should be sought before arrangements are entered into to ensure that the structure does not create unmanaged taxation or VAT leakage.
Also, a reminder that collaboration must always be in furtherance of your organisation’s own objectives. As entities come together and plans go through reiterations and multiple boards and committees, they can morph and move away from the original vision. A charity must only operate in line with its own objectives and the risk of mission drift may also be a real one when you work collaboratively.
Is it really a win-win?
There is a sense that the Commission sees less collaboration than it would expect. However, effective collaboration can be hard to achieve, and dependent on the form, there may be disadvantages/risks such as:
- Reduced agility and slower decision making – at least two executive teams will need to agree a proposal which will then have to be ratified by two Boards of Trustees.
- Operational changes may be required to standardise delivery across a service if delivered by different organisations.
- You may lose or blur your identity if you become too closely aligned to a consortium or work too closely with another entity – this may harm your ability to raise funds independently and/or confuse your stakeholders.
- Setting up the collaboration is likely to incur cost and be time consuming which has both a direct and opportunity costs.
- Due diligence will be necessary for all of your partnerships. A failed collaboration or one with the wrong partner can cause huge reputational damage and expose your organisation to financial damage/potential liabilities incurred by the partner.
Collaboration can have many benefits; however, the process needs to be properly managed by both parties to ensure that any risks or disadvantages can be mitigated. Should you require any expert guidance or assistance, get in touch with our specialist Charities team or call 0333 123 7171.
