2.1. How are organisations run in the sector?

As you will know by now, there are many types of organisations in the third sector, that may differ vastly in the way they are set up, structured and governed (e.g. compare charities to social enterprises). Even ‘charities’ come in different legal forms (OSCR, nd, a). Some of these elements are also defined by the regulatory system in respective countries, so what works in a charity in Scotland, will not necessarily be the same in a charity (or foundation) in the US.

Rather than covering all eventualities, which would be impossible, this section will focus on Scottish charities and how they are run, in order to keep things relatively simple.

Governance
A charity needs people to run it, and these can be volunteers, staff, and/or members.

While some charities rely only on volunteers, many charities have an organisational structure akin to any other organisation that can be found in the private sector, consisting of a board of directors, CEO, senior management, and front line workers.

Charities have a governing document (their constitution) that sets out various rules for the charity (e.g. what number of members make a quorum for official meetings, and how to formally call for meetings such as the AGM) but also what the purpose (mission) of the charity is. This document plays a critical role in directing the work of charities, with their mission being what they are bound to.

It is noteworthy that the charities that rely solely on volunteers also need to have the same minimum charity trustees, and while the organisation is volunteer led and run, these charity trustees also need to comply with the same duties as in those organisations with paid staff, including the need for a constitution. When you put matters into this context, it is commendable that anyone volunteers their time and effort, especially in the smaller charities and community groups, where the board of trustees is not supported by management and staff.

Staff and volunteers

As noted, all charities have volunteers, at the very least in their board of trustees. While managing staff in charities is not all too different than managing staff in private or public sector organisations, there are some differences, e.g. when it comes to motivating your staff. For example, a good salary might be a motivator in the private sector, but is unlikely to be a motivator in the third sector where salaries are notoriously lower. However, what makes third sector management truly different than private or public sectors is the reliance on volunteers. Motivating people you are not paying is very different than motivating paid staff. So we’ll devote a bit of time to exploring the role of volunteers and some of the intricacies around this.

Some motivations for workers in the sector include (Worth, 2021):

Congruence between personal and organisational values
Rewarding work
Monetary and non-monetary compensation

So what motivates people to volunteer then? Some of these will certainly be similar if not the same to those working in the sector (Worth, 2021):

Motivated by mission
Desire to advance a cause
Desire to repay for some benefit received
Altruistic reasons
Benefits received

It is also worth noting that motivations differ hugely between different generations, both when it comes to work, and volunteering, which can be of significance when it comes to how staff or volunteers are managed in the day to day. What motivates one, does not motivate another, and it is a tightrope charity managers need to thread carefully. It is very resource intensive to be recruiting and training new staff and volunteers, and not really something charities want to spend their hard-won resources on.

There are also different types of volunteers (Worth, 2021):

Spot – Casual and not repeated
Episodic – Time to time
Regular – Makes a regular commitment
Marginal – Encouraged or mandated
Virtual – Participates electronically
Vacation – Travel projects

Their prevalence in any one charity largely depend on the type of charity in question and the need they have for volunteers. However, for charities that regularly rely on volunteers, it is the regular volunteers that they should want to maintain some level of stability with, making their management and motivation all the more important.

Funding

Organisations need to have some form of income to sustain their operations, and this applies to third sector organisations just as much as to private enterprises.

Yet, financial management is uniquely challenging for third sector organisations for a few reasons (Worth, 2021):

How do you generate sufficient and reliable revenue for the charity? Charities need to think about short term operating costs but also about long-term capital needs.
So where do these monies come from? Charities need to rely on multiple sources of insecure income, ie. Income that can vary greatly year by year, and that is never guaranteed.

The sources of income are vastly different to the private sector, and varies quite a bit even within the third sector, consisting of income from the public, the government, the National Lottery, the voluntary sector, the private sector, and from investments (NCVO, 2021). What primary source of income or what combination of income third sector organisations rely on again depend on many different variables (size, type, service area, legal form, etc).

Income from the public is split into four types:

Donations: Income given freely by the public, mainly charitable donations
Legacies: Money that people give to voluntary organisations in their wills
Fees for services: Income earned through voluntary organisations providing charitable services – examples include tuition fees for training, micro-credit schemes, selling equipment and services
Fundraising: Earned income from providing other services. Examples include the selling of goods in a charity shop

All of these income sources also require different skills and strategies, and potentially different people and departments. For example, you could have a fundraising team, who primarily deal with any fundraising efforts involving the general public (think charity runs like marathons, or charity challenges like the Cancer Research UK Burpee Challenge), and you could have a corporate relations team who deal with any corporate partnerships (like the MND Scotland and Scotrail partnership)

Charities need to hold a certain amount of money in reserves. Reserves are the funds that a charity has which can be freely spent on any of its charitable purposes, but it excludes e.g. restricted income (many grants are restricted to particular projects, and therefore cannot be used towards building the reserves). Having reserves is extremely important for charities, for example, the reserves can help cover for unforeseen emergencies, unforeseen day to day operational costs (such as cover for long-term sickness absence), or to cover for grant income not being renewed (and sometimes this information may come at a very short notice). However, reserves are also extremely difficult to build up for some charities (e.g. those heavily reliant on grant income), making their operation very uncertain.

TASK
Create a table in which you reflect on who you are, assessing yourself on three dimensions and what skills/experiences you already have or need to develop for each role type. Would you be cut out for a trustee role? What expertise could you bring? Now look for such roles on Young Trustees Movement. Or would you rather work for a charity? In what role? Now look for such roles on Goodmoves. Or would you prefer to volunteer, or at least start there? What motivates you, what kind of volunteer would you be, and what role would you be interested in? Now look for such roles on Volunteer Scotland.

The main duties of charity trustees are that you must act in the interest of the charity and that you must comply with the 2005 Act

However, all charities must have charity trustees (at the minimum, a Chair, Treasurer and Secretary). Charity trustees (or board members, or board of trustees), are at the centre of running a charity. They have general control and management of a charity, and their role is similar to the director of a company – they might not do all the day to day work but they are the people who are legally responsible for the charity and what it does. The main difference between a board of trustees for a charity and a board of directors in private enterprises is that charity trustees are volunteers who receive no financial compensation for their role. Their duties are set out in law and charity trustees must follow them. At its most basic, a charity trustee has been trusted to look after the charity’s assets and they are responsible for making sure that the charity fulfils its charitable purposes (OSCR, nd, b).

Source: OSCR

"There’s also far less, particularly in the charity sector or the smaller community sector, there’s far less software or programmes or services, like none of the accounting packages help charities at all, none of them are fit for purpose, for the kind of stuff we do in the projects that we have. So just because you’ve got Sage or Xero or anything like that as an accounts package, you’ll still not have a clue when it comes to charity accounts because it’s so different and not always relevant."
Moira Ann

"I’m hesitant to ever say that the whole sector is unique, because there are third sector organisations that are run in a way that is much more akin to private or public sector, that’s the nature. What I would say is by and large, I think the third sector has a number of things going for it, which are quite positive. I think there’s really good values-driven elements in there, both in terms of how organisation work but also the types of people that end up in the third sector and their values. I think by whatever nature, there is a reality that because third sector organisations don’t have the funding all the time, they have to be much more flexible and adaptable to the people who are willing to work in them. So I think we have more people who work part-time. So that I think gives a much more balanced culture to the world. There’s a group of people who don’t progress well in other areas. And I suppose compared to other sectors, there’s a lot more female managers in the third sector, and I think that gives the sector as a whole a different dynamic which is healthy."
Ian

"I think this is probably more of a small organisations, rather than third sector organisations, because I would suggest that it holds true in small private sector organisations, is that very often, not through bad intention, but actually just through lack of knowledge and capacity, HR, people management isn’t always as good as it should be."
Ian

"We are seeing many more smaller groups pop up which just creates more and more competition, because everybody is trying to get trusts and grants. And what’s interesting, if you look at some of the life cycle of some of these smaller organisations, they may only have a lifecycle of maybe one or two or three years, because they find it so difficult to get funding in after that initial injection of funding. It’s that repeat funding that is difficult. And there’s always a pressure to innovate, innovate, innovate. There is only so much you can reinvent yourself as a small organisation."
Roberta

Income generation.pdf

Take me to Unit 2.2.