Third sector takes private lessons

Ex-Crisis boss Shaks Ghosh tells MT how the voluntary sector can learn from the private sector.

Last Updated: 31 Aug 2010

In recent years, improving management efficiency in the voluntary sector has become an increasingly hot topic, in a bid to make sure that more of the money raised gets to the right place. The entry into the sector of large private donors like Microsoft boss Bill Gates, with a specific aim to bring corporate disciplines to charitable giving, has only encouraged this. And in the UK, with the government looking for the third sector to take on many of the services currently provided by the public sector, it’s become a pressing concern.

MT spoke to Shaks Ghosh, the former CEO of homelessness charity Crisis, to ask what the private sector has to offer. Ghosh is now running the Private Equity Foundation, a new cross-industry body that invests in youth educational charities.

MT: What attracted you to the PEF?
The government ultimately wants the third sector to take over a lot of public sector services, particularly in education and healthcare. But charities will have to compete for these through an open tender process – so to prevent private sector firms hoovering it all up, we need to help them raise their game in readiness. The mission of PEF – to bring private equity discipline to charity management – seemed to fit in well with that.

And also there was the amount of money involved. People say it’s not that much, but to raise £5m in three months, in the first year of fundraising, is pretty amazing.

MT: Why this particular focus?
The economy is changing from manufacturing to knowledge-based services, and private equity is leading that change. The industry recognises that as this happens, there are going to be some people left behind, and we want to help unlock this potential.

This idea of focus is also something that my trustees are very keen on. When you’re running a charity you tend not to have a tightly defined focus, because you need to go where the funding is. But the trustees are keen for our charities to work out what they do best and focus on that.

MT: How will it work in practice?
We’re working with our charities to develop a best-practice plan. We say to them: we’ll provide you with resources and in return, you tell us how we can make charities in this area truly best-in-class.

MT: What do your board of trustees bring to the party?
The board give a lot of their time, they’re very engaged. Some people think that’s a CEO’s worst nightmare! But for me they’re PEF’s greatest asset – not just because of the money they bring, but also because they advise the charities, mentor the CEOs and just generally make things happen – which isn’t always a strength of the charitable sector!

Of course they can’t motivate managers in the same way as they would do at a portfolio company, i.e. through financial rewards. After all, they don’t own these charities in the same way in the way they own businesses. So you need to try other approaches. For example, we’re working with a consultancy to develop a leadership programme that will be on offer to CEOs – something that will look great on their CVs.

MT: The PEF launch received quite a negative reaction – were you surprised?
I wasn’t surprised, but I was saddened. If people do something terrible, then by all means criticise them, but if they try to do something good… After all nobody had to donate – they could have just kept the £5m in their pockets. Instead, they’ve given it to me to spend on improving young people’s skills.

MT: So what went wrong exactly?
It was a new venture – nothing like this had been done before, and the trustees freely admit that mistakes were made. So when I came on board, one of my first tasks was to meet all the firms involved and get their ideas on what we needed to do differently. One of the key messages I kept hearing was that we needed a sharper focus – people wanted to know: ‘Why exactly should I support this? Which social issue is it trying to address?’

MT: But aren’t these firms just doing it for good publicity?
When I talk our supporters, every single person one wants to make the world a better place. But ultimately, it doesn’t really matter. The reasons behind charitable giving are always complex – the key thing is that the money ends up in the right place to effect social change. Philanthropy in itself is by-the-by.

Shaks Ghosh was chief executive of homelessness charity Crisis for ten years before leaving in 2007. She took the top job at the Private Equity Foundation in April.

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