Reviewing charities

I have blogged before on why entrepreneurs who start new firms may choose not-for-profit status, see Thinking about nonprofits. Charities are one obvious form of not-for-profit firms. An important issue for charities is how do you evaluate their performance? Given they lack the obvious performance measure for a firm, i.e. profits, how do we know when a charity is doing well?

One paper by Ed Glaeser, The Governance of Not-For-Profit Firms, argues the primary check on the not-for-profit organisation is the need to compete in markets. This is true for areas like education where their a many provides of the service, but its not so clear that many charities have a "market" in which to complete.

The Times has an article on efforts to review the performance of one charity in the UK, namely Jamie Oliver's Fifteen. Fifteen was set up to help disadvantaged youngsters by training them as chefs. According to The Times article

It [Fifteen] offered “hit-and-miss” training and patchy support and counselling for its often troubled recruits, and was distracted by the television cameras that were recording for a Channel 4 documentary.

Of the 106 young people who started apprenticeships with Fifteen since March 2002, only 54 completed the course and many of those who dropped out were never heard of again.

“It was assumed that everyone, inspired by Jamie’s example, would just get it and the training would work,” the report concludes. “The truth is that the start-up of Fifteen was messy and the boat left port without all its sails and supplies ready.”

But the article goes on to say

But perhaps the most surprising aspect of this warts-and-all assessment is that it was commissioned by Jamie Oliver and Fifteen itself, who wanted to know exactly where they had gone wrong and how to improve. Few charities assess their work in this systematic and critical way.

Fifteen will publish the report, Life in the Present Tense, next month in the hope that it emboldens other charities to do the same.

The director of Fifteen makes the point:

“... there is a a straight business case. If you don’t understand what you are doing, if you don’t get someone from outside the culture to verify it, how do you know how to improve things?”

I'm not sure too many other charities will follow this lead and allow outsiders to investigate them in a similar manner. You would think that a few too many charities are too happy just fundraising, agitating and achieving not too much at all.

Many charities are happy with, what Sir John Hicks called, "a quiet life" and given there is no obvious performance measure to guide evaluation of them, they can get it.

(HT: Adam Smith Institute)