TCII :: Management Consultants

Charities have been receiving a bad press recently, after details emerged of the amounts spent on hiring private contractors to recruit new donors.

A report by BBC2’s Newsnight revealed that many charities in the UK are paying out £100 or more to high street ‘chuggers’ (an amalgamation of charity and muggers) for every donor they recruit. What this effectively means is that, if an individual commits to an average donation of £5 a month, roughly the first year and a half of donations will go straight to the contractors hired to recruit the individual to the cause.

Even though this concept may not initially sit well with the public, who like to think all of their money is going towards a good cause, there is a business case to be made for it. It’s estimated the charities get on average between £3 and £4 back from every pound spent on a “chugger”. For a profit-making enterprise, this would be a sound strategy.

Many charities have in recent years adopted more businesslike structures, and they take the view that a great deal of their donors stay with them for a period of many years, and recoup the money spent on initially recruiting them many times over. While some people may leave the charity after their first year before the chugger’s fee is paid in full, the money earned from those who do carry on donating more than makes up for this. This substantial profit enables the charity to make investments that benefit those who most need it.

What is perhaps needed, is for the charities themselves to come forward and explain to the donating public exactly how their revenue system works, with great transparency and honesty, or face returning to collecting loose change.