Helena Neave

Helena Neave

Private Client Advisor
Charities Aid Foundation

E: philanthropy@cafonline.org

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BIG VS SMALL CHARITIES

We often come across the perception that smaller organisations are more effective, impactful, with lower overhead costs compared to bigger organisations. Due to this, donors often prefer to donate to smaller organisations as they feel their donation will make more of a difference.

We hosted a discussion with some of our private clients to explore whether there is any truth to this, or whether donors should be taking other factors into account when deciding which charities to support.  

We were joined by Chris Gethin (Director of Philanthropy at Cancer Research UK), Jo Davies (CEO of WILD Young Parents Project, who were part of CAFs resilience pilot programme), and Monica Brown (Head of Charity Advisory and Programmes at CAF).   

COVID-19 has impacted all charities

The COVID-19 pandemic has had a significant impact across the charitable sector, with reports highlighting it could reach a funding gap of up to £10bn.

There is a perception that big charities, because of their reserves, have not been impacted as much as small charities. Whilst this may be partly true when it comes to finances, the operations and charitable missions of big and small organisations have been affected in real and serious ways with far-reaching consequences for the issues we care about.

Chris Gethin from CRUK highlighted that because of COVID-19, there have been around 40,000 undiagnosed cancers in the last 12 months in the UK. CRUK’s income has also taken a hit with an expected loss of about 30% this financial year. Like many charities, CRUK relies mostly on donated income to fund their programmes, and they don’t have an endowment. This has meant that they have had to significantly reduce their expenditure, including reducing the size of its workforce by 500 roles (circa. 24%), not including trading. In addition, CRUK recently had to cut its research funding by £45 million. This is on top of the £44 million cut made to current grants at the start of the pandemic.

Jo Davies mentioned WILD Young Parent Project’s fundraising took a big hit. This left them with a £300,000 deficit for next year’s budget that they are trying to close to continue providing services and support to their beneficiaries. This community, because of their pre-existing vulnerabilities, were hit exceptionally hard and did not have the resources, nor tools, to process and adapt to what was happening. This led to eight suicides, and the organisation needing to meet a whole raft of new demands, such as providing food parcels.

It is evident that the pandemic has affected all organisations albeit in different ways. Larger organisations likely have the financial runway and resilience built into their operations to survive until fundraising is able to re-start. Smaller organisations do not have this luxury; they are often deeply entrenched into their local communities, and very often are beneficiaries’ only lifeline.

Why do donors focus on size?

Monica highlighted that the importance placed on an organisation’s size is often due to mistrust and wanting to ensure funds are used well and effectively. For example, the misconception around overhead costs to compare organisational effectiveness, particularly with larger organisations. Big organisations will, by nature, have larger absolute running costs as they will require more capacity and infrastructure to support their operations, but these costs may still be small in relation to the organisation’s entire budget. For example, CRUK aims to spend at least 80% of their income on beating cancer, so their costs are proportionately small in comparison to what they spend on research.

The income of a charity is also important; charities with a large income may lead donors to think that donating small amounts to big organisations will be ‘insignificant’ and that they can get more value out of their donation with smaller organisations. This is not necessarily the case, as money can be pooled together and leveraged; such is the case with CRUK where the majority of their donors actually donate very small amounts.

What should donors focus on instead?

Donors should ask themselves what they want their philanthropy to achieve because bigger organisations often work on global issues on a national or international scale and may have greater leverage to achieve real change. Being larger in size means they can have greater reach in terms of funding and beneficiaries, and can bring a bigger range of people interested in solving bigger issues. For example, CRUK’s size enables them to work with other cancer organisations in areas where they see clear benefit for people affected by cancer, for example: by supporting campaigning work to give cancer charities One Cancer Voice with the Government, providing information about cancer and collaborating with organisations working on any single type of cancer.

There are other factors that donors should focus on irrespective of size, including understanding the organisation, what their mission is and their impact is. This enables donors to build trust with the organisation and support them to reach their full potential. For example, donors often feel that smaller organisations are more effective and nimble. In reality, this depends on other factors, including the organisation’s leadership and culture. Getting to know the organisation, their team, and track record is all much more important in understanding how effective an organisation is rather than trying to use size as a proxy for impact. As Jo summarised, getting to know a charity in this way before choosing to support is also crucial to building trust and correcting power imbalances inherent in giving.

Take home message

Focusing on an organisation’s size is misleading. It does not tell you how effective the charity is in responding to the needs of their beneficiaries, their strategy, or how nimble they are when responding to change or new information, or about how well run the organisation is.

A big part of this focus seems to link to mistrust, or at the very least trust seems to be something that donors don’t necessarily think about. By building trust, donors may worry less about size, budgets, and overhead, and instead be more willing to allocate crucial unrestricted funding.

While size, in terms of revenue, may go some way to helping donors understand how neglected a cause is (charities with huge budgets bringing in multimillions every year are unlikely to be working in neglected cause areas), and how neglected an issue is relative to its scale is a factor that donors may wish to take into account, this is probably all it can reasonably indicate to a donor.

It is more important to start with the problem you want to solve with your giving as opposed to fixating on the charity first. The charity is a means to an end, not the defining factor in a giving strategy.

If you have any questions from this event, please follow up with your client manager, Chris Gethin from CRUK, or Jo Davies from WILD Young Parents Project. 

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