Guest blog: We need to talk about closing

Peter Deans is Director of Business Mind Social Purpose, an independent North East consultancy providing strategic management advice to public bodies, charities and social enterprises, and private companies that deliver public services. In this guest post, he talks about the fact that Covid-19 may result in the closure of a number of organisations in our region, but by pulling together, we can help one another prepare for the new landscape, and minimise the inevitable impact upon beneficiaries as much as possible.

In the next 12 months some charities will close. Their work is rarely complete. It will feel unfair and may feel like failure, but in the current circumstances, it will happen. 

In the North East, VONNE’s survey of 460 organisations found that 13 per cent think it likely or very likely that they will shut. Even if it were five per cent actually closing, that would be 350 organisations across the region. 

Charities are resilient of course. In past crises they've survived, but some as shadows of their former selves. The ones most at risk are those that sit between the very large and the local and small. Reserves will run out, emergency funding streams diminish, statutory bodies stare into empty coffers, the viability of different business models will be clearer and hard choices will emerge. 

We are overly squeamish about closing charities and that undermines doing it well; in a timely fashion that sustains a legacy in some form. I want to discuss why we shouldn’t be squeamish, how we all need to talk about ‘closing’ more, and the lessons from those who have done it successfully.

The decision to close is easier when the change in an organisation’s circumstances is dramatic or very clearly beyond the charity’s control; Covid-19 is providing a good example. If the decision is clear our squeamishness is reduced.

Limping along syndrome

Often however, it is not clear cut and, in our sector particularly, there is an ‘only just surviving’ syndrome, which sees organisations limp along, chasing the funding, and simply regarding ‘success’ as the survival of the organisation. It is not. It is the impact on the purpose for which it is established. That is often best served by the organisation thriving, but if it is struggling year after year, a hollowed out version of what it might be, what then?

Lots of good charities think strategically about how to survive, but rarely about whether to exist. It takes a particularly selfless attitude from a Chief Executive to contemplate writing themselves and their team out of a job. It is hard for trustees to set aside their personal feelings, their loyalties and history, but that is what we must do. Otherwise, there is a risk the organisation is taking up space, serving egos more than beneficiaries, occupying attention and effort that would be better served in a different organisation. What I often hear is “We’re the only ones that can do this, we’re better, we have stronger values, we’re different from other organisations in the same field.” Periodically, every trustee needs to critically assess the truth of this.

Personal experience

I speak from personal experience. For nine years I was a trustee of a national charity, Alcohol Concern. We lost our core grant from central government in the cuts that followed the 2008 financial crisis. We spent several years trying to reformulate our business model. We did this thoughtfully and with skill, but didn’t find a version that sustained the organisation. So, in 2016 we entered negotiations with Alcohol Research UK, which had a stable source of income and we merged our remaining assets into theirs. This blended their research experience and asset base to our network and campaigning skills, including the ‘Dry January’ campaign. They have since rebranded as Alcohol Change UK.  

This was a successful merger. With hindsight it should have happened much sooner. It took the ‘burning platform’ of our likely demise to force action, by which time we'd used up resources exploring ways to stay afloat. I wish I'd been bolder and taken a clear-sighted look at our field much earlier. It was too easy to express confidence in our staff team (who were all great) and not take the long objective view of what would ultimately be the strongest vehicle to serve our beneficiaries. 

Making it a routine good practice consideration

How do we make it easier to consider closure, mergers and collaborations? There is a practical difficulty here, particularly on closing. The open consideration of closing risks losing the faith of important stakeholders, particularly our people. It ought to be routine good practice. It feels safer to introduce the conversation by combining it with consideration of collaborations and mergers.  But let’s not dodge that hard question. It is probably easier in trustee-only meetings. Some Boards hold these annually (a good thing). Sometimes the conversation is between the few most active trustees and senior staff.  On the wider good practice point, all of us can talk about closure more, make it more matter of fact, reduce the squeamishness. Funders that are making available support for organisations to re-examine business models (a good thing) should insist that collaboration, merger and closure are options considered and reported on. 

Creating a vacuum can be useful

When a main source of income has gone and is irreplaceable, the organisation can shrink for a while, but at its smaller size the energy put into sustaining itself outweighs the energy on the organisation’s impact. Sometimes the organisation can evolve to a different model, sometimes it can collaborate with other organisations to become part of a new model. Sometimes it just needs to shut, to create a vacuum from which something new will emerge if the need is still there. We shouldn’t be scared of creating space.

What about the practicalities? 

The government guidance on the formal process of closing organisations is pretty clear. There is a different process for closing an organisation with company status and one that is unincorporated. The link to the relevant advice on process from the Charity Commission is at gov.uk/guidance/how-to-close-a-charity.

Lessons from those that have done closure well 

Be timely about considering closure. Avoid dwindling resources being spent exploring unrealistic alternative options. Decisions in these circumstances are complicated, but if you want your core work to be preserved, albeit in another organisation, there is a much greater chance if you negotiate from a position of having assets to transfer. 

Find a good partner organisation that you might move the assets to. Find the values fit. Build the relationships. This takes time. It helps if trustees are already actively networking in the field, albeit in close collaboration with the executive team. There is a whole other piece to be written about what makes mergers successful or not over the long term.

Attend to the human dynamic. We know that organisation’s must serve their mission above their staff and that these two aims are normally aligned. Chief Executives, senior staff, and back office staff in particular may lose jobs, whilst service delivery staff get transferred. Mergers normally feel easier when one Chief Executive is looking to move on in some way. All this takes sensitive handling, care and respect.

Control the message. The timing here is often tricky. Who can you tell what and when? We value transparency - being straight with people is often a cultural value. However, not everything can be shared and nor should it be. It is unhelpful to feverishly feed news on detailed machinations. Much better to be transparent about the fact that you cannot share everything.

…Change is coming

These are complicated times. My appeal is that we are bold. That we try to make change happen as successfully as we can. Let’s talk about the options more, face choices head on and early, think about how we can all support organisations to navigate these important conversations.