Charging for services, trading and ethics (put a poka-yoke in your pipeline)

Last week, NCVO released its Financial Sustainability review of the Voluntary Sector. Amongst the none-too-rosy findings of the challenges surrounding funding in the sector, one quote leapt out at me, particularly in the context of the media furore about charities and ethics:

“While donations have recently recovered to pre-recession levels, the significant growth in income from individuals has been driven by fees charged by charities for services. Relying on this as a major source of future income growth may be unsustainable or undermine organisations’ charitable aims in some parts of the sector.”

This statement, in my mind, is pretty controversial, or at least it should be. Especially as the stats show that charging for services has been one of the few growth areas for the sector.

capture income individuals

In my role at NCVO, I’ve spent the past six years or so helping organisations to look at sustainable funding, which has often focused on helping them to diversify their income away from a dependency on grants. One of the key ways organisations can do this, is to charge for services.

But surely, beneficiaries can’t afford to pay?

The answer that organisations used to give, time and time again, was that their beneficiaries couldn’t afford to pay for services. And some of the time, this is quite right.

But often not.

For example, one organisation we worked with – an early years childcare provider – ended up in a situation whereby they could either cut services, reduce their quality, or charge. When asked, the parents overwhelmingly supported paying something towards the service to make sure it continued. Because they valued it highly.

Quite a different response to the one anticipated by a delegate in a training course I ran once, who memorably said, ‘but if we charge people, then they’ll just go to the organisation down the road!’.

If you ask someone if they’d rather pay for a service, or get it free, then it’s no surprise when they say, ‘free’. If you ask someone if they’d rather pay for a service, or see it close, then you’re likely to get a much more revealing answer.

But we’re a charity, not a company!

There is nothing, anywhere, that says that charities are obliged to give stuff away for free. There is nothing inherent in ‘public benefit’ that implies ‘free’.

On the other hand, there is a lot about people valuing things more if they have to pay for them. It’s really depressing and says a lot about the degree to which capitalism has permeated our culture and our brains, but there we are. The psychologists have proven that if you pay for something, you value it. If you pay a lot for it, you value it even more. The most expensive things are usually also the most desirable, even if that bears no relation to their actual quality.

Back in the good old days of grant funding, NCVO used to deliver a lot of training for free. People used to fail to turn up. They’d leave early. They’d check emails all the way through. They’d be disengaged and clearly not valuing the training at all. I even had one lady tell me she’d need to leave after lunch because she couldn’t come to London without taking the chance to do a bit of shopping.

A few years on and the same training, charged for, has a full room of enthusiastic delegates who tell us they are acting on what they’ve learnt from the day (and the trainers are happier too).

Some charities, particularly in the area of disability, have a different approach to thinking about charging, believing that turning ‘service users’ or ‘beneficiaries’ into ‘customers’ is a pretty empowering change for everyone (and this approach echoes much of the current policy for the delivery of public services).

So grants are bad, enterprise is good?

No.

The report is right – charging does have ethical implications. Charities need to make sure that the people who need their services can access them. And this is likely to mean that in order for those services to be high quality, they need subsidising.

And in some cases, they will need to be free. Because it is easy to think of all sorts of occasions when it is completely inappropriate to discuss money before giving people access to help.

And it is easy to see that whilst charging promotes an appreciation of quality for those services that are in demand, what about charities that are not in demand? Those who are trying to reach groups who do not want their help? Who are disengaged and not interested?

If we limit access to charity services to only those who are prepared to pay something towards them, then the sector can only ever be responsive to market needs.
And the most vulnerable, most disengaged, most at risk will be shut out.

Deciding whether or not to charge for services

The photo below is from my copy of the Good Guide to Trading (sorry, I couldn’t lay my ethical compass1hands on a digital copy – the pink circles say ‘mission and values’, ‘transparency’, ‘accountability’ and ‘equality and diversity’, in case you can’t read them).

It shows an ‘ethical compass’, which is a shorthand illustration to help you to think about trading in reference to your organisation’s ethical principles (it’s actually quite helpful for all types of fundraising). The idea is that you use each heading to identify the ethical principles that underpin your trading, and then the specific actions you will take to guard against these principles being compromised. You could also think about the positive ethical opportunities associated with your idea too – such as my earlier point about service users and beneficiaries.

This process reminds me of the (quite frankly ridiculous sounding, in English) ‘poka-yoke’ approach from Lean Methodology. It can roughly be translated as ‘mistake proofing’. The moral compass helps you to think through the elements of a trading idea that could conflict with your ethics, and then it is down to you to work through the design of your idea to make sure they don’t!

For example, the childcare provider I mentioned above developed a sliding scale for charging, and included non-financial contributions such as volunteering. I’d also suggest that they keep a close eye on whether there are any changes in the demographics of people accessing their services.

The stats are there – trading and charging for services is a clear opportunity for growth in the sector. But I think the sector has had enough bad press recently, so please build ethics into the design process!

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Rosaline Jenkins Ros is NCVO's lead in Sustainable Funding, promoting a more sustainable, suitable and strategic approach to generating income of all kinds - donations, grants, contracts and trading. @RosJTweets

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