Strategic Correction, Not Tactical Expedients

By Tobin Aldrich

Across this series I've argued two things that pull against each other and are both true.

Rapid growth in the UK charity sector has come far more from causes rising in public prominence than from anything the charities themselves did. And within any given market, the difference in performance between organisations working on the same cause is enormous, and it comes down to their capability rather than their conditions.

Salience decides how big the opportunity is. Capability decides whether you take it.

The practical trouble is that most charities can measure neither. This is why so many responses to disappointing income are tactical when the situation needs something more fundamental.

The pattern to break

When income falls short, the responses are familiar. Change the agency. Test a channel. Restructure the team. Replace the fundraising director.

We have some evidence on that last one. About a third of the charities we review are in senior fundraising leadership transition when we arrive, and a similar number have unstable leadership in some other form. Turnover at this level across the sector is high.

Sometimes a change of leadership is exactly what's needed. But where the real constraint is strategy, investment or measurement, and in our experience it usually is, the incoming director inherits it, spends a year working out what they've walked into, and is often gone before the multi-year investment their programme needs has returned anything at all. The tactical response makes the strategic problem worse.

Here's what I think a more strategic response looks like.

One: separate the income you caused from the income that arrived

This is the calculation I mentioned in part one, and I think it's the most useful thing a board can do quickly.

Most charities plan growth against total voluntary income. That figure usually contains legacies set in motion by marketing and stewardship done decades ago, in-memoriam gifts, unsolicited donations, and income arriving because the cause has been in the news. In one recent piece of work, around 60% of a charity's income fell into that category. Its controllable base was less than half its headline figure.

Growth targets built on the whole thing are, to a large extent, targets against conditions the charity doesn't control.

I want to be clear about what this isn't. It isn't an argument for discounting legacy or in-memoriam income, or treating it as somehow less real. Legacy income is often a charity's single most valuable asset, and it's the return on investments made years earlier. That's an argument for carrying on investing in what generates it, not for writing it off.

The point is that these two kinds of income behave differently, respond to different levers on very different timescales, and need planning separately. A charity that can't tell them apart will misread its good years and its bad ones.

Two: measure the questions, not the departments

I've never reviewed a charity that reports too little. I regularly review charities that report a great deal and can answer almost nothing.

The reason is nearly always structural. Reporting gets built team by team, so every function reports what it does and nothing gets measured across the boundaries. What comes out the other end is a board pack that describes an organisation chart instead of answering a question.

The test isn't how many indicators a board sees. It's whether the board can answer three things. What does a pound of investment return? Where does income actually come from? And what does next year look like if we change nothing?

One consequence is worth flagging. Where activities are judged on how fast they break even, which sounds reasonable enough, the activities with the longest paybacks are automatically disadvantaged. Legacy marketing is the extreme case. We've reviewed charities where more than half of income came from legacies while every fundraising activity, legacy marketing included, was assessed on time to break even. Nobody decided to under-invest in the thing paying for the charity. The measurement system decided it for them.

Three: test the ambition before you commit to it

We do a fair amount of feasibility and options work, assessing whether an income stream can be built before a charity commits to building it. The conclusions are consistently more cautious than the plans organisations write for themselves.

A public body with a very large and genuinely engaged audience was told it had real potential in individual giving. It was also told that it wasn't a charity, had no case for philanthropic support, would be entering one of the most competitive markets in the UK, and would need sustained investment and significant internal change before any of it worked.

A charity wanting a return on membership investment inside twelve months was shown comparator evidence that membership operations typically take three years or more to turn a profit.

The opportunity may well be real. But the timescale is longer, the investment bigger and the preconditions harder than assumed.

Where nobody does that testing, ambitious targets turn into millstones. We've reviewed charities whose growth strategy required income to double over a period no comparable organisation had ever managed, with no process at all for checking whether the projections were feasible. The shortfall was then treated as a failure of execution by the fundraising team.

On how much growth is actually available, I'd be wary of anyone offering a general answer, including us. Across our modelling the range has been very wide. At one end, non-legacy income capable of doubling in a charity with strong local trust and an under-developed programme. At the other, around 10% over seven years for a large national charity, and cases where holding position was the realistic aim. That variation isn't random. It tracks how close a charity is to its cause and how much trust it has already earned.

Four: know where the hard ground is

There's a pattern in our portfolio that I think deserves more attention than it gets.

The weakest fundraising positions we come across are concentrated in a range of social welfare causes: charities working with disabled people, older people, children and people in poverty. In our reviews, social welfare organisations were the least likely of any cause area to have growing income and the most likely to have serious structural problems across strategy, investment and data.

At the other end, the strongest positions we see are often in emergency services and animal welfare. Causes with high public proximity, visible delivery, and a proposition anyone can grasp in a sentence.

I don't think this reflects the quality of the organisations. It reflects something harder than that. Causes where the public has direct contact with the work, or can easily picture who benefits, are simply easier to fundraise for than causes involving complex social need, stigmatised groups, or people most of the public never meets.

The consequence is uncomfortable. Need is rising fastest in exactly the places where the capacity to fund it is weakest. No individual charity is going to solve that by fundraising better, though fundraising better certainly helps. It's a question for funders, for infrastructure bodies and for anyone thinking about what the sector looks like in ten years.

Five: build the capability that compounds

If salience is largely outside your control, capability is entirely inside it, and some capabilities compound more than others.

Data, because everything else depends on it. Digital, because the cost of being behind goes up every year. And bringing brand and fundraising together, because they're doing one job.

That last one has evidence behind it. When we looked at the charities that grew through their own efforts rather than external events, what they shared was clarity of purpose, focus on specific audiences and communities, an integrated approach to building brand and fundraising together rather than as separate functions, and sustained investment. That combination isn't common. In most of the charities we review, brand and fundraising are separately owned, separately measured and occasionally at odds. I may have mentioned this as an issue before.

Where this leaves the sector

I've set out a serious picture across these three articles. Transformational growth is rare, most of what has happened came from conditions rather than strategy, and the weaknesses inside organisations are widespread, persistent and largely unimproved where it counts.

But I'd end where part two ended. Almost nothing we find is caused by anything outside the charity's control. Not the economy, not donor fatigue, not regulation. It's strategy, investment, measurement, culture and leadership, and those belong to boards and executive teams.

Which tells you what an honest growth strategy looks like. Nobody can predict which causes will rise in public prominence over the next decade. What a charity can do is be ready when its moment comes, with the capability to turn attention into supporters, the data to know whether it worked, the trust to be chosen, and the investment horizon to hold its nerve.

The organisations that do well won't be the ones that guessed right about salience. They'll be the ones that built the capability to capture it, and that knew the difference between the two.

None of that can be handed to a fundraising team, because none of those decisions is theirs to make.