The UK’s productivity problem has plagued successive chancellors. Economic plans, industrial strategies and prime ministerial set piece speeches over the last decade have repeatedly and rightly set out the importance of raising productivity to the country’s growth, living standards and prosperity. Yet while the problems have been diagnosed time and again, there has long been a missing piece in the productivity puzzle. 

Heavy investments have been made in trying to understand and address sluggish productivity growth in the private sector. Leaps forward have been made in gathering insight into the productivity of the public sector. But charities have received little to no attention in the nation’s productivity policy drive. Undoubtedly, one of the reasons for this is that many assume productivity is not relevant to charities, but that could not be further from the truth. How an organisation utilises the resources at its disposal in order to achieve its objectives as powerfully as possible is the very essence of productivity, and the driving force behind every charitable operation. 

Bringing the missing social sector into the heart of the UK’s productivity drive is more crucial now than ever before. Having ridden out the pandemic, only to begin contending with a devastating combination of declining real terms income, rising costs and growing demand, the need to ensure that everything charities do is as efficient, effective and impactful as possible is immense. And with government and grant-makers providing billions of pounds of financing and tax breaks for the sector every year, optimising returns on that spending by ensuring every charity is as effective as possible is simply a sound investment strategy. 

Evidence suggests that focusing on a small number of key interventions can help any organisation enhance its performance. Innovation, technological adoption, good management practices and workforce development are the factors that make the biggest difference. 

While pockets of good practice in all these areas exist, there is an opportunity for the sector to achieve more in each one. Low levels of adoption and a deficit of digital and data skills, coupled with a lack of widespread engagement and investment in advanced technologies leaves much of the sector unable to reap the benefits of new technological developments. 

Polling conducted for the Law Family Commission on Civil Society suggests that strategic and business planning, and the monitoring and management of organisational performance in the sector is also variable. For example, around half of smaller charities struggle to carve out the time and space to implement these fundamental practices and only around one in five (22%) have a written theory of change.  

And there are issues with how the sector is able to utilise and invest in its workforce. For example, this survey showed that only half of charities (53%) funded or arranged digital training for their workforce in the last two years. Alarmingly, one in five smaller organisations (19%) reported spending nothing at all on staff and volunteer training in the previous financial year. Low pay and challenging working conditions are taking their toll on staff and are likely to be acting as a drag on the sector’s productivity, while a failure to address a lack of racial and socio-economic diversity within the sector adds further weight to these issues. 

The underlying causes of these problems are not disinterest, complacency or a lack of willingness. On the contrary, there is a real appetite for improvement. However, this enthusiasm is all too often scuppered by a number of structural barriers. 

The financial system for charities drains organisational capacity and provides too little investment in long-term effectiveness. There is a dearth of high-quality evidence on best practice and comparable data that would enable organisations to better understand their performance relative to their peers. The perceived threat of financial competition inhibits collaboration and the dispersal of ideas and knowledge between charities. And a complex and fragmented infrastructure system which has lacked appropriate investment for the last decade makes it difficult for charities to find the help that’s right for them.   

To boost productivity in the charity sector and unleash the potential of civil society, these root causes need to be addressed. To do this, the Law Family Commission on Civil Society has worked with experts and charities to develop proposals focusing on facilitating improvements in the key factors affecting productivity – innovation, technical adoption, management practices and making the most of the sector’s human capital.  

These proposals aim to achieve four significant shifts across the social sector:  

1. To provide the resources and capacity that enable charities to make practical improvements to boost productivity. 
   
2. To improve the generation and diffusion of evidence, knowledge, information, and resources about what works and good practice.
   
3. To influence behaviours and practice by providing accessible and relevant data that would enable charities to understand their performance relative to their peers.
   
4. To improve the coordination, access, quality, and capacity of the provision of charity support in order to provide advice and support. 

Achieving these shifts will require improvements in financing, evidence, and local infrastructure.  

First, there needs to be widespread improvement in grant-making and public sector funding, which tackle the issues of short-termism, and the lack of support for core costs or investment in people, processes, and organisational development. 

Second, a new Civil Society Evidence Organisation (CSEVO) should be created. Such an organisation would raise awareness of and appetite for the usefulness and availability of evidence to help charities be more productive. It would also generate, collate, and share evidence and case studies about how charities can be most productive; advise and train charities in how best to find and make use of evidence about what works in their practice areas; and help connect organisations to the best evidence and research for their work.  

In addition to this, the evidence base for improvement should be further advanced by better use of the charity data held within existing surveys.  Surveys such as the UK Innovation Survey, Management and Expectations Survey, Digital Economy Survey, Employer Skills Survey and Labour Force Survey contain responses from charities, yet this data is not currently extracted and analysed. Doing so would give insight into state of these vital productivity-enhancing factors within the sector. 

Third, the provision of practical support for charities should be broadened by opening up existing government productivity schemes. A relatively quick win could be achieved by amending the criteria of the government’s Help to Grow schemes to allow charities to participate. Government should also ensure that any future schemes focusing on improving the productivity of small and medium-sized enterprises (SMEs) include charities by default. 

Fourth, many charities require external support and expertise in order to make productivity-enhancing improvements, yet many do not engage with the services and support that is available. While internal barriers such as money and capacity are again a key issue, external factors are also relevant. Accessibility, complexity, and trust in external support provision are issues for many of the charities, and these problems raise further barriers which limit the ability of many to make changes.  

In their role as capacity-builders, local infrastructure organisations ought to play a crucial role in helping to bring down some of these external barriers. But long-term underinvestment restricts their ability to do so. As such, the Law Family Commission is calling on government to undertake a comprehensive review of the financing, shape, and functions of charity sector infrastructure, with a view to revitalising investment and improving the support available to charities nationally and locally.  

Driving up the supply and matching of skilled volunteers into organisations providing support to charities would also help to boost the quality and availability of help on offer. Key stakeholders in government, volunteering and business should work closely to explore how levels of skilled volunteering could be increased. 

Broadening the UK’s productivity drive to encompass the overlooked charity sector makes sense both socially and economically. Improving innovation, technological adoption, management practices and the sector’s workforce requires changes to finance, evidence, data, infrastructure, and volunteering, as highlighted in this research. A concerted effort from across government, business, and by charities themselves is required to achieve this, with a more productive, effective and impactful charity sector the reward for doing so. 

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