Attitudes to financing the social sector stuck in the past

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Richard Meredith has kindly allowed us to re-publish his article that examines the importance and intricacies of financing the social impact sector. The article gives rise to financial sustainability of Nonprofits and NGOs – something we at D3 are strong advocates of. Have a read, if you’re a leader of a small-mid sized Nonprofit or NGO what do you think? What other factors need to be considered in order to pursue the right funding model? Share your thoughts in the comments below.

Many of our attitudes to financing the social impact sector are entrenched in the well meaning but somewhat patronising amateurism of the nineteenth and twentieth centuries. Yet the social economy is the fastest growing sector in a developed world where the divide between rich and poor is increasing rapidly and dangerously.

In the charitable sector itself, there is a huge financial divide between the established, larger charities and smaller, under resourced organisations. Our attitudes to professionalism in the sector are split. The large, better funded (never ‘adequately’ funded) organisations do pay community service salaries and competitive professional fees.

Smaller, under resourced organisations, some as old as 10 or 15 years, doing remarkable work on a proverbial shoe string, are perceived differently. For them volunteering and ‘low bono’ (accepting a lower fee) fees for service are often the only way they receive developmental support and that is often piecemeal or ill-directed. Piecemeal remedies can become ends in themselves, thereby avoiding proper consideration of longer term, strategic solutions that will help these organisations towards financial sustainability.

While volunteer and low bono services are generous on the part of the provider, they do not offer a solution because they are not sustainable. What are required are suitably skilled professionals with a cultural alignment to each organisation’s mission who can provide ongoing organisational capacity and capability.

The volunteer and low bono approach limits the range of leaders to those with another source of income – their own (eg superannuation in the case of a retiree) or their partner’s. This is a form of enforced subsidy by the leader. It prevents many younger people, mid-career people, parents (mostly women) and older people without an alternative income from contributing professionally to under resourced social impact organisations.

The inference in the low bono system is that some social impact organisations are not as worthy because they are under funded, despite many of them having produced extraordinary outcomes on the ‘smell of an oily rag’ for more than a decade.

To achieve sustainability this kind of professional service must be provided on an ongoing basis so that strong relationships of trust and confidence are developed between the external expert and the internal mission driven team. Bridging the Gap aims to find suitable people and help them to make the cultural transition to a social impact organisation where they can do very meaningful and beneficial work on a paid part of full time basis.

This recent article in the Guardian further underlines the importance of spending adequately on administration: Good charities spend more on admin but it is not money wasted”.

At Bridging the Gap it is our continuing mission to change attitudes to the way we work and achieve viability with under resourced non profits. 

Bridging the Gap is a professional leadership organisation that helps under resourced social impact organisations to achieve long term viability. More details on Bridging the Gap will be made available at a later date.

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