Lord Gus O'Donnell - keynote speaker at NCVO Conference 2016

Below is the full speech given by Lord Gus O'Donnell at the NCVO conference on Monday 18 April. Follow the twitter hashtag #NCVOConf.


Thank you for inviting me to speak to such an important group of leaders. As someone about to take on the Chair of Trustees role at Pro Bono Economics, I feel I have much to learn from the collective wisdom in this room.

I would like to start by acknowledging that all of you here today make a tremendous contribution to the wellbeing of the nation. You do this by helping the disadvantaged, plugging the gaps in public provision, and in many cases, directly delivering services. You have passionate staff, both paid and unpaid. It is reassuring that there is growing evidence about the positive effects on wellbeing of volunteering but it must be challenging working in the current climate where it is all too easy to feel overwhelmed.

When I was head of the civil service, I said that our traditional values of honesty, objectivity, integrity and impartiality were a great building block but not enough for the challenges we were facing.

I added my 4 Ps: pace, passion, pride and professionalism. I think the same applies to your sector. You have never been short of passion but can you find ways to generate more pride in your achievements and operate with more pace and professionalism?


Like all of you, I am concerned about public attitudes to charities. We are in danger of losing their trust, which is invaluable. And our relationship with government is becoming more complex as new proposals threaten our ability both to campaign and to fundraise, and some question whether charities should even be delivering public services.

Today, I want to concentrate on two related issues: how to rebuild trust and how charities and voluntary organisations can prosper in a world of austerity.

If the state is going to provide lower funding in all non ring-fenced areas - and it certainly is, with local authorities for example likely to see further reductions of around a quarter in their government rate support grant during this parliament alone - how can charities still be effective - indeed, more effective- in a world where all the evidence is that austerity itself is increasing demand for their services?

And if charities are not trusted to deliver effectively or raise funds ethically, how must they change to rebuild their reputation?

I want to suggest three essential steps to produce this result.

First, we need to prove that we are making the world a better place. That means hard evidence rather than assertion.

Second, we need to demonstrate very clearly how our funds are spent and what we are doing to improve our productivity at a time when government at all levels is being asked to do "better for less". We should embrace transparency rather than having it forced upon us.

Third, and somewhat perversely, we need to try to put ourselves out of business, by which I mean find ways to prevent problems before they become intractable, not just cure them. And that will have implications for both what we do and what we campaign about.

Proving positive impact

In a world of austerity, everyone needs to show how they are achieving success. Of course this means first being clear about what constitutes success. I am surprised how often in government we embarked on policies without much clarity on the ultimate objective. The gold standard would be an analysis of the impact of the charity on wellbeing, a topic I explored in the Legatum Institute report on Wellbeing and Policy.

The new What Works centre on Wellbeing is developing practical ways for charities to measure their impact and is building up a useful set of case studies. Of course, there will be areas where this standard is hard to meet and we have to fall back on intermediate outputs.

This is still very worthwhile. Many fundraisers will tell you the key to raising money is individual stories: it is certainly true that a personal story helps to bring the cold statistics to life, but on its own, it's just an anecdote.

Or as W. Edwards Deming "Without data, you're just another person with an opinion."

Pro Bono Economics (PBE) exists to help charities answer this question. As economists we might not be good at passion but we love numbers and relating inputs to outputs (Geoffrey Howe, when attacked by 364 economists for excessive austerity, famously described economists as people who know 364 ways of making love but do not know any women.  I am not sure many people would make such a joke now , not least  because I am glad to say we have rather more women in the profession).

To carry out its activities, PBE relies on an army of volunteers to complete the reports that have been requested by charities. This currently amounts to 443 individuals, split between the public and private sectors. PBE believes that the development of a volunteering culture in this manner is, in itself, a source of considerable societal benefit.

It is worth emphasising that one often overlooks the impact a charity has on its own staff. The evidence that volunteering raises wellbeing is growing all the time. As we enter the period of the 100 year life, there is already obvious scope to use newly retired volunteers to help the growing aged population in areas like use of the internet, and simply relieving social isolation. But can we truthfully say that we have explored every option for making use of that able and willing volunteer pool to grow our reach and impact?

Finally, on the subject of impact, it is a great shame that the impact of volunteering is not captured in traditional measures like GDP. Prostitution and drug dealing are now included because they are deemed "market transactions". But if a volunteer takes over the job of a paid worker, GDP falls.

Andy Haldane, the chief economist of the Bank of England, has estimated volunteering at over £50 billion per year and if you include the wider social impact of volunteers, the figure could be many times bigger.

A further tip for fundraisers is the power of thank you. The Behavioural Insight team have just finished some fascinating studies demonstrating the difference it makes when you say thank you. They conducted a “network nudge” experiment to look at the power of various ways of saying thank you. They emailed mid-ranking managers in an investment bank who had previously donated to the bank’s fundraising campaign.

This email either thanked them for their prior donation; asked to reach out to colleagues in their team; or asked them not only to reach out, but to talk about the impact of their donations. Even a simple “thank you” was enough to double the number of staff members who donated. But the most effective message was asking staff to reach out and explain to others the impact their donations were making.

Economists Armin Falk and Urs Fischbacher argue that reciprocity is in part about our perception of why people are behaving as they are. How we respond to a gift or kind act from someone will depend on whether or not we think that they are doing it for the ‘right’ reasons. This theory could be extended to the receiver as well - if I think that you are a “good” recipient, then I may be more likely to give you a gift in the future.

Saying “thank you”, even for little things, builds a virtuous circle of reciprocity, with one good turn leading to another. I now realise that when my mum instilled in me the need always to say thank you she was teaching me about behavioural responses.

I should add that it is important to apply the same principle to your own staff. I spent a lot of my time as head of the Civil Service visiting staff around the country simply to give that two word message: thank you.

In a world where many forces are seeking to emphasise failure and blame, we need to push back and celebrate success and reward experimentation. After all, if we are to put ourselves out of business by solving rather than alleviating the problem, we will need to have highly motivated work forces as well as great innovation.


Next, let's look at productivity. The availability of big data presents opportunities if correctly analysed. The NCVO's report, The New Reality, gives interesting examples of how digital technology has been used to enhance social impact.

More generally, collecting and analysing data on performance is the necessary first step on the road to higher productivity. Again Pro Bono could help here as they have already done for many charities. New technologies are creating new ways of meeting needs: for example, pension credit has become more cost effective by shifting to phone and online delivery.

But we also need to ensure that we don't hit the target and miss the point. We want poorer older people to get pension credit to enhance their wellbeing. However, if the social interaction that was provided by older delivery methods is replaced, we need to avoid exacerbating problems of social isolation.

The answer is not to go back to face to face meetings to deliver the credits, but to develop better ways of tackling loneliness. This is an example of applying an approach that brings together an emphasis on wellbeing with the move towards more behavioural approaches.

David Halpern's new book, Inside the Nudge Unit, provides plenty of other examples that every charity should be studying. The beauty of behavioural approaches is that they are very efficient, often reducing costs while improving outcomes. The two key lessons from all the nudging work are, first, make it simple to do the right thing and second, don't listen to anyone who tells you they have the answer. As the thank you experiment revealed you need to try out various ideas and dos over what works best.

To get productivity up, we need to work on both improving outcomes and reducing costs. If we were being really honest, we all know that there are simply too many charities and many are sub-scale. I helped two charities come together to provide better services for their client groups.

The trustees realised that it is the end users - our beneficiaries - who matter most and understood the cost savings from merging various back office functions. I fear not all trustees are so far sighted. There are still very few such charity mergers. In the private sector, the market does this job fairly effectively but this is driven by a profit motive that doesn't exist in the third sector. I hope organisations like the NCVO can encourage charities, and offer practical support, to help them come together where this would improve the results of both bodies.

I also realise that to be effective, many charities need a mix of volunteers and paid professionals. I think we should be very transparent about pay, it is a necessary part of being accountable. And we should be clear why we have chosen any particular mix of paid and voluntary workers. In addition, we should publish measures demonstrating our impact and our costs. That way we can demonstrate how we are progressing.

Putting ourselves out of business

One specific role for all working in this sector is the need to feedback learning from front line operations. This brings me neatly on to my last point, namely how to put yourself out of business.

My wife is a volunteer for the Citizens Advice Bureau and as a member of the Lords, I receive very useful reports from them about the kinds of issues they are dealing with. In many cases, these are inadvertent consequences of legislation that by its nature can't cover all cases and throws up some anomalies.

This demonstrates the importance of a body like the Lords, scrutinising new legislation in much more detail than is done in the Commons.  By getting legislation right in the first place, we can prevent many problems. But it will never be perfect. And new problems are always arising so we need all of you to be active and vocal in passing these messages from the front line to government and to the public to create political pressure for change.

This is a vital channel that must not be cut off by the government's proposals designed to reduce lobbying by charities.

More specifically, organisations like the NCVO are well placed to point out where governments are failing the public. For example, in the mental health area we know that the quality of services varies dramatically across the country. To get the Treasury's attention, I suggest emphasising how more expenditure now will improve future public finances.

For example, Frontier Economics have worked with Dr Fiona Butler, the Chair of NW London mental health and wellbeing transformation board on a programme called "Like Minded". One initiative is to tackle conduct disorder in schools. They have appraised parenting programmes designed to recognise early signs of behaviour disorder and assessed various interventions. The results are impressive, reducing future demands on a range of expensive public services.

This kind of work demonstrates the need to show clear outcomes, the importance of changing behaviour and the need to join up across various budget holders as the costs fall to one body while the benefits are widely shared. It is why the experiment now underway in Greater Manchester is so important. If it turns out that devolution is the answer, then I am sure the Treasury will be absolutely delighted and the model will be replicated across the country.

I can't resist adding a more general point about sometimes hitting the target and missing the point. I saw at first hand the great work done by Michael Barber in raising exam results and reducing the inequality in exam performance. But we must never lose sight of the ultimate goal of raising the wellbeing of our children so they are more resilient and can build a better society.

As it happens, raising wellbeing is associated with better exam results so the two goals are complementary. But we spend enormous amounts of time and money on academic tests and next to nothing on measuring wellbeing.

If Nicky Morgan were to correct this imbalance, she would truly revolutionise our schools, however they are run. And the children coming out of such a system would have far less need of many of the services that prove so costly later on.

Concluding comments

These are tough times for many in our society and for many charitable and voluntary organisations. We could sit back, rein in our ambitions and wait for better times. I can see why this is tempting, but I believe it would be disastrous.

Instead, why not use this opportunity to try different approaches to traditional problems, embracing the insights of behavioural approaches and focusing on raising our impact. If we do this, and embrace transparency so it is apparent we have done so, we will be well placed to succeed in a world where governments genuinely choose the best delivery vehicles based on the evidence of what works best.

Finally, never stop being proud and passionate about what you are doing. Please now bring as much passion to the challenges of measuring impact, raising productivity and, ultimately, putting yourselves out of business.

18th April 2016