• Productivity of sector vital – £15bn of taxpayer funding in 2019-20
• But many charities struggle with vital changes needed, including tech adoption, investment in skills and improved management practices
• Commission has made 3 key recommendations to boost productivity
• Calls to improve funding system, evidence base and available support
• This includes boosting volunteering and widening eligibility for Help to Grow schemes

Boosting productivity in the charity sector requires improvements to charity financing, better evidence and data, as well as improved support infrastructure, according to a major commission.

New research for the Law Family Commission on Civil Society, carried out by Pro Bono Economics, has identified a raft of changes and initiatives required to drive up productivity in the sector.

These proposals, developed through engagement with experts and charities, are focused on achieving improvements in the key areas affecting productivity – innovation, technical adoption, management practices and improving the skills, wellbeing and diversity of the sector’s workforce.

Analysis for the new report, titled Productivity of purpose: Bringing charities into the UK’s productivity drive, found that while the sector is “highly innovative and creative”, it has “significant gains to make when it comes to technology”. The report points to “persistent skills gaps, leadership issues and under-investment” as obstacles to progress.

Among various findings, the report found that:

• Fewer than four in 10 (39%) charities are actively using or planning to use artificial intelligence, compared with almost two in three organisations (69%) across the economy.
• Six in 10 (60%) charities monitor key performance indicators (KPIs), but this is the case for only about half of smaller organisations (51%).
• One in five (19%) small charities spent nothing on training their staff and volunteers in the previous financial year.

The Commission research proposes a wide-ranging set of solutions to tackle the productivity challenges facing the sector. These are proposed around the following three central recommendations:

• The charity sector’s financial system requires fixing. Charities require:
  
  - More flexible and longer-term funding: Grant-making trusts and foundations, businesses, philanthropists, local and central government need to provide less restrictive and longer-term grants that enable charities to invest in organisational improvements.
  - The spread of good grant-making practice: The Charity Commission should play a more active role in highlighting the problems caused by poor quality grant-making, as well as what good grant-making looks like and the resources that exist to support improved practice. In addition, grant-making benchmarkers should look at expanding the scope of their work, with the Charity Commission encouraging wider use of benchmarks across the sector.
  - A boost to philanthropy: The government should support this drive by appointing a ‘Philanthropy Champion’ to drive forward the UK’s approach to philanthropy, alongside a push within the civil service to improve the understanding of the opportunities presented by philanthropy. Furthermore, the Financial Conduct Authority (FCA) can boost giving by improving the training of financial advisors on philanthropy.
  
  
• Better generation, diffusion, and use of evidence and data is needed in the charity sector. This requires:
  
  - A Civil Society Evidence Organisation (CSEVO): The Commission recommends the creation of a CSEVO to develop, hold and share evidence on how charities can be most productive; to raise awareness of and appetite for the usefulness and availability of this evidence; to advise, train and signpost charities to help them find and make use of this evidence and; to act as an ‘information broker’ – triaging organisations to the available evidence related to their work.
  - Productivity data and benchmarking tools: There needs to be a programme of work to audit, extract and analyse charities’ responses to productivity-relevant surveys, such as the Employer Skills Survey, the Labour Force Survey and many more. This would give insight into the current and changing state of the sector in relation to the key areas affecting productivity. This data could then be linked with annual return data held by the Charity Commission for England and Wales, the Office of the Scottish Charity Regulator, and the Charity Commission for Northern Ireland to enable comparisons of performance across cohorts of charities. From this, interactive data tools could be produced and used by individual charities to benchmark their performance.
  
  
• Opening up support, revitalising local infrastructure and boosting volunteering is needed to improve productivity in the sector. This requires:
  
  - Government productivity schemes like Help to Grow to be opened to charities: Help to Grow: Digital and Help to Grow: Management are government-funded schemes aimed at helping small and medium-sized enterprises (SMEs) improve their productivity. The Commission recommends charities be able to participate in the schemes as well.
  - A government review of local charity sector infrastructure: Local infrastructure organisations could act as a ‘single point of contact’ for charities looking for practical support to improve their productivity. However, while there is strong local infrastructure in many places, in others the infrastructure is fragmented, financially vulnerable and often in competition for funding with those it is supposed to be supporting. The Commission recommends the government undertakes a strategic review of local charity sector infrastructure to ensure it is financially sustainable and able to support the sector’s need to enhance productivity.
  - Boosting skilled volunteering: The Commission recommends that the newly-created Vision for Volunteering team should work with business organisations and the UK Pro Bono Network to release the potential of skilled volunteering.

Jack Larkham, Research and Policy Analyst at Pro Bono Economics, said:

“Charities are at the forefront of tackling the cost of living crisis, vital to delivering public services and fundamental to driving forward social change. But despite the crucial role they play in society and the economy, their ability to achieve these important social benefits is currently being diminished.

“Implementing changes to the way that they are funded, improving the generation and spread of good evidence and data, and rebuilding the sector’s support infrastructure are crucial to providing the resources, ideas and skills that will help the sector to maximise its full potential.”

Read the full report