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Attitudes to financing the social sector stuck in the past

By Richard Meredith - posted Friday, 25 September 2015

Many people's attitudes to financing the social impact sector are entrenched in the well meaning but somewhat patronising amateurism of the nineteenth and twentieth centuries.

Yet we live in a twenty-first century world where the divide between rich and poor is increasing rapidly and dangerously. The social economy will be the fastest growing sector in the developed world over the next 20 years according to Deloitte. We will need very different thinking if we are to be effective in resolving social issues.

In the Australian charitable sector itself, there is a huge financial gulf between the established, larger charities and smaller, under resourced organisations. Our attitudes to professionalism in the sector are similarly partitioned. 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 by definition only attempt to deal with a piece of the puzzle. As such they can become ends in themselves and quite ineffectual ones at that. Many of us have seen the struggling nonprofit staff with a business plan prepared by a well meaning pro bono professional, which they have neither the capacity nor the capability to implement. Piecemeal approaches avoid 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 sustainable solution. What are required are suitably skilled professionals with a cultural alignment to each organisation's mission who can provide ongoing organisational capacity and capability support.

The volunteer and low bono approach also 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 poor, 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. The funding of professional leaders must come from outside the organisation for two very good reasons. Most obviously, many of these organisations struggle to pay adequate wages to their operational staff and are not yet in a position to pay for an administration person. Paying organisational leaders from an external source ensures they don't become dependent on the organisation for their livelihood and can move on as soon as their work is done.

Finding suitable people is less of a problem than helping them to make the cultural transition often from a corporate or government 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".

Understanding the needs to fund administration and organisational development will only come through the charitable sector being proactive in educating the major donors and philanthropy organisations. By changing attitudes to the way we work and achieve viability with under resourced non profits we can change the lives on many more in need.

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About the Author

Richard Meredith is principal at Creative Practice.

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