The perils of commercialisation

Why striking a balance between income and impact is the last thing you should do

morning dew - sEvery six months, I host a group of CEOs from some of the UK’s largest and best-known charities for an early breakfast seminar.  Each time the topic is different, but each time the discussions are inspiring and challenging in equal measure, and last week’s seminar was no exception.

The topic, suggested by attendees at the previous breakfast, was “how to develop more commercial capabilities inside charities”, and as a corollary, “what might be the unintended consequences?”

As the early morning dew evaporated, the group talked through their experiences and two challenging consequences consistently emerged. One was around having to constantly balance the commercial needs of the organisation with the delivery of its social mission. The other was a distinct increase in the internal divisions and “departmental silos”, between those that brought in the money, and those that used it to do good work.

These two tensions aren’t exclusive to trading charities, there’s often a similar feeling of distance between operations and fundraising, but it can increase dramatically as an organisation starts trying to diversify their income through more commercial means, especially if the chosen route is to create a Director or Head of Department role to drive the new agenda.

On paper, it sounds like a sensible approach – appoint a single accountable owner at Exec level, bringing visibility to the top table, not to mention providing an opportunity to recruit skills from outside… Why wouldn’t it work? The truth is that it can, but it generally doesn’t. Here’s why:

The best opportunities for growing commercial income will almost always involve applying your unique strengths as an organisation, but in ways that can also make you money. That might be: offering paid services for people who can afford to pay; partnering with an organisation to add value to their service and charging them for it; selling or licensing your insights or intellectual property to others in related fields; or training people in other organisations to provide a better service for the types of people you normally support.

All of those examples have something fundamental in common. They all rely on the people who have most expertise in your organisation getting fully involved. But to get your experts to commit their time and effort to make it succeed, any commercial initiative needs to have a clear line of sight to your mission. If they really understand why you’re doing it, specifically how it will benefit the people they signed up to help, it will work. Fail to do that, and it won’t; they will keep their heads down and concentrate on their day job, business development will become a disconnected silo, and two years on you’ll have a very frustrated Director and very little new income.

The need for balance and the emergence of silos might seem unrelated, but the two issues are actually the same. For as long as your commercial ideas are about income more than impact, you will create silos, and you’ll find yourself constantly trying to balance those two competing interests. Conversely, the more they are about delivering both, hand in hand, the more those challenges will evaporate like the morning dew.

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