I have had some very useful input into this blog from colleagues, funders, even ex-BB Group staff members. I am aware it presses a certain argument, that I think essential to have, but wouldn’t want this to be seen as too forceful critique of many of the players mentioned. Just a slightly different take on much of the analysis I have seen emerging around the story in recent months.
In September 2014, the BB Group, the parent charity to organisations like Beatbullying and Mindful, went bankrupt. To some in the sector, the writing had been on the wall for a long time – many funders have talked privately that, in the last year of its existence, it was almost impossible to invest in the charity given the state of its cashflow. However to most (most notably all the volunteers and beneficiaries) the news was abrupt and unexpected. It attracted a modest amount of media coverage – Third Sector set up a section to cover it specifically and spread the word relatively admirably.
As the news has died down and there is space for reflection, three things have struck me. Firstly, how few people I have spoken to knew about it happening. Perhaps it’s not national news, but it was certainly sector news, and that gave me some cause for concern about interest in wider sector and market developments and the level of thought that goes into what might need to be done at a systemic level to make change easier. Second, how little analysis has been done to ask what this might mean. And finally, how quick people were to judge and dismiss the causes of the incident, not perhaps perceiving that it is endemic of a much wider set of issues. All need some serious examination as the failure of the BB Group left many beneficiaries immediately without support. What can we learn from this sad story which, rather than an anomaly, seems to be a case study into perennial failures of the social sectors? Failures that if not addressed will never allow us to live up to the hype of our ideal.
Why did it happen?
The stock response to a question about why it happened in my experience has been a ‘well, it must have been mismanaged’ reference to senior management.
That seems a rather glib answer to me though, because if the team was so terrible then how did the BBGroup ever achieve all it did? I fail to believe that for many years of its existence it had a staff team that had carried it through successfully, only in the dying years/days for that staff team to descend into incompetence. No doubt the staff team were to blame to some extent (and there have been some strange stories about senior management to emerge since the autumn), but analagously, despite the worst horror stories about the bankruptcy of Lehman Brothers, no account of the financial crisis ever leaves the blame for the bank’s failure solely at the door of senior management. So too it must be with the BB Group I’d have thought – the staff must have made mistakes, but surely not the only ones?
And the staff aren’t actually the primary body of accountability in any case, so let’s examine this afresh.
We know the following:
- The BBGroup was a very very high profile charity of its type. In ‘charity innovation’ terms I’d say it’s disappearance is a bit like a tech company like WhatsApp or SnapChat (big, fast growing, but not massive like Facebook or Google) just disappearing overnight. It had more than 5,000 volunteers; it had won awards, including from Ashoka; Emma-Jane Cross, the founder and CEO, although always forthright and a marmite personality, was well respected in the sector.
- Beatbullying was well respected for its impact, with organisations like New Philanthropy Capital holding it in very high regard.
- It grew over 12 years, with much of the same senior leadership. And though the symptoms of its failure likely ran throughout its existence, it wasn’t therefore just a ‘flash in the pan’, like so many social sector innovations can be. The team had shown some ability to develop a robust organisation and clearly knew largely what they were doing. Perhaps they made some errors in the later years, but 12 years is certainly long enough for stakeholders to see any cracks and have time to analyse them.
- A turnover of £2.4m does not just appear overnight for most organisations. And again, surviving over such a period shows that it wasn’t just ‘pump primed’ by some large investors. It might have had a funding mix that took it beyond sustainability, given level of reserves, but it had clearly developed some steady funding relationships and solid backing.
- The BBGroup had before some wholesale changes to the board in its final year, in my eyes, a board that you would ‘die for’. Clearly it didn’t have enough wealthy members, who could bail it out when times got tough (see for example the Eden Project last year), but the board was made up of some well connected, intelligent, experienced individuals whose professional reputations and expertise should have seen them taking a close interest in the work of the charity.
- It was funded by some ‘big players’ – most notably in later years the Department for Education, the EU and in the last year ITV and the Cabinet Office. All should have had an interest in ensuring their funds were allocated properly (over £1.3m in the Cabinet Office’s case). The BB Group’s failure shows that some of the largest sector funders have even less of a grip as to what is going on that we might have thought.
Two points strike me from the above:
- Either the BB Group failed because whether a charity or social enterprise succeeds is an entirely random and arbitrary consequence of fate. There was nothing anyone could have done, because it’s all just a fluke. In which case we might as well all give up our efforts at social change and go home.
- Or the reason the BB Group failed is that it was mismanaged or mishandled by everyone. Board, Staff, Funders, Sector Pundits, the Charity Commission etc. Which again either means, this was a particularly perfect storm of general incompetence for one charity and entirely coincidental, or it points to a much much more endemic issue in how those stakeholders interact and operate in the charity sector. Plenty of organisations are let down by bad boards, bad staff, poor funding, but it should not have been the case that such a high profile charity, with a robust board, good auditors, competent staff team and high profile funders should have disappeared without everyone having a very clear idea about what was going on. The funding the BBGroup failed to get in its dying days, the Charity Commission conclude it could have entirely reasonably expected to receive.
And so what can we conclude (rather bleakly):
- Superstar charities are a joke. Being marked out as a superstar charity by the whole charity sector (rather than just one set of stakeholders like the media), should, one hopes, actually mean something. But it most probably doesn’t. Winning awards is in fact perhaps your surest way to irrelevance and bankruptcy.
- Growing to sustainability is seriously hard. From our experience at Hub Ventures, the ‘big missing conversation’ within the sector is about how organisations can achieve sustainability, as our seven short years of experience teach us that it isn’t easy and there is very little support around to assist.
- Reserves are impossible to accumulate if you grow quickly. Sustainability isn’t all about finances, but a low level of reserves is the crippling factor when it comes to cashflow and rapid growth, in a sector that doesn’t allow rapid accumulation of surpluses, is a real challenge. Another superstar charity here is the example of Kids Company that holds laughably low levels of reserves for its size.
- What role do boards actually play? Perhaps the BB Group was a special case but from our own experience of sitting on boards and working with boards we know how ineffective they can be as tools of governance, not through any fault of the board members, who do their best as volunteers, with strained time commitments, but just as the natural consequence of their makeup.
- Funders really need to get a grip. Seriously get a grip. In this story, I think they are marked out as public enemy number one. Whoever allowed the BB Group to grow as large as it did, so unsustainably, was just irresponsible. It’s annual reports only go back a few years, but one doesn’t doubt all high profile sector funders played a part in the BB Group’s growth over the years.
- This is what innovation actually looks like in the social sectors. Throw a lot of money at an organisation that is fashionable for a while (whether or not they are doing good work in fact, because although the BBGroup had very well reported impact, if it was still having that impact then surely it would have continued to be supported?) and then just hope that it magically becomes sustainable.
It’s a pretty bleak tale all round. More could be said about each of those issues but all are pressing challenges to a sector that is trying to make a difference in the world. And nor is this just about external impact. A funder remarked to me that such a tale flags up just how damaging organisations like the BBGroup and others are to the health and wellbeing of their own staff teams. Anyone taking even a cursory glance at the BB Group Annual Reports could have seen that finances were very tight. But that’s not necessarily a problem. Plenty of organisations run a loss and may even have negative net worth in their growth phase, depending on the way in which they are financed. Yet only if they are properly supported by a mature set of stakeholders.
For a sector that prides itself on innovation, and spends so much time talking about the ‘next big thing’, scale and sustainability the BB Group’s failure is a collective challenge to us all. There is no one group to blame but we have a lot to learn from a very sad tale. A conversation between funders, support agencies and charities is much needed to assess whether the sector really has any real capacity to succeed.
Question: What else can the BBGroup’s failure teach us?