FEATURE

The Changing Challenges ofManagement and Leadershipin the UK Voluntary Sector

An Interview with Stuart Etherington

Margaret Harris

SINCE 1994, Stuart Etherington has been the chief executiveof the National Council for Voluntary Organisations (NCVO)—the membership organization that represents the interests of

charities, voluntary agencies, and other nonprofit bodies in England.Throughout his career, he has been involved in the leadership of vol-untary organizations and in the policy context in which they work.Before going to NCVO, he was director of public affairs, and laterchief executive, of the Royal National Institute for Deaf People. Hehas also held posts in social work, research, policy advice, and advo-cacy. In July 1999 Margaret Harris, international editor of NonprofitManagement and Leadership, interviewed Stuart Etherington aboutrecent shifts in UK public policy and the implications of those shiftsfor the UK voluntary sector as a whole and for the management andleadership of individual voluntary agencies.

Harris: Your professional experiences over the last decade have givenyou the opportunity to observe the management challenges of thevoluntary sector from many different perspectives. What do yousee as the key changes that have taken place in the environment of theUK sector in the last ten years or so—changes that have had majorimplications for managers?

Etherington: I think there have been two sets of changes. In the early’90s, there was the changing nature of the relationship between thestate and the voluntary sector—the offloading of services previouslyprovided by the state. Contracting changed the relationship betweenthe public and voluntary sectors from a trust-based to a heavily spec-ified one. There was also a clear change in funding streams. Most ofthe growth of the sector in the early ’90s can be broadly accounted

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for by two phenomena: asset values increased substantially, and sodid the level of public funding for the sector.

The second major change is the government of “New Labour.”In terms of government programs, there is a greater keenness toengage voluntary organizations in partnership—and they do meanpartnership. They have been very good at involving voluntary orga-nizations in early discussions around strategy and have been will-ing to adjust programs. In terms of environment for the sector apartfrom government programs, we are seeing a fall in the proportionof the sector’s income that is independent. This has declined as aresult of increased government funding and decreased sources ofindependent finance—nonbeneficial tax changes that have reducedthe income of foundations and the number of people who are giv-ing donations. So, in summary, independence is down, and thegeneral contextual environment is problematic; but relations withgovernment are good.

Harris: Do you see these changes as reflecting international trendsand pressures?

Etherington: There has been a growth of the voluntary sector incountries that previously had totalitarian regimes in Eastern and Cen-tral Europe and in South Africa and a growing interest in civil soci-ety in its broad sense. UK voluntary organizations have respondedby trying to rediscover what they mean by “civil society.”

There have also been implications of our changing relationshipwith Europe and the EU for some parts of the sector. The Europeanconception of what we call the “voluntary sector” is different inthat they base it more on the French understanding of the socialeconomy—linking mutuality, cooperatives, and associational behav-ior. That doesn’t have a lot of resonance in the UK. The reason thatthe EU does that, of course, is that it gives them an economic takeon the sector—which is their only license to operate. The emphasishas been “Well, let’s analyze what the sector is in terms of economicbehavior.” This is describing the sector not as voluntary or philan-thropic action or as civil society but according to what is its eco-nomic value. The main implication for the UK voluntary sector hasbeen in the employment and training fields—the EU seeing the vol-untary sector as a significant player in engaging socially excludedpeople in the labor market.

Harris: What has the changing environment meant for UK volun-tary agencies as a whole, as a “sector”?

Etherington: I can see differences emerging between the large con-tracted servicing organizations and unstaffed small community orga-nizations. There is a huge piece of territory between those two thatis quite difficult to analyze, but there are differences between the two

320 HA R R I S

The mainimplication for

the UK voluntarysector has been inthe employment

and trainingfields—the EU

seeing thevoluntary sectoras a significant

player inengaging sociallyexcluded people

in the labormarket

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extremes. If you take housing associations [social housing non-profits] for example, they are now major instruments of public policy.

Another point for the sector is that there is now a trade-offbetween accountability on the one hand and risk taking on the otherhand. If you have a lot of process-driven probity, your capacity totake risks is significantly reduced.

Harris: Is this any different from the dilemma faced by the publicsector?

Etherington: Because the public sector has always had to be publiclyaccountable, they have had to grapple with this for much longer—itis just being reinvented for them. For the voluntary sector, this ishappening for the first time because of its more intimate relationshipwith the state. The government is good at parking risk somewhereelse, and one of the places it parks risks is in the voluntary sector.They are saying, “In the future, look over there.” So there’s a publicresponsibility that goes with the voluntary sector’s new relationshipswith government. To whom you are accountable and where the risklies are key issues in the new partnerships between voluntary orga-nizations and government.

Harris: Turning now to individual voluntary agencies, how have themanagement and leadership tasks changed?

Etherington: The late ’80s and early ’90s saw the import into volun-tary agencies of a lot of private sector ideas. There was a point wheremanagement forgot about governance—thought that it didn’t matter,thought that it was in the way. There was an attempt in the ’90s totry and redress the balance—to improve the quality of governance.There has been a rediscovery of governance that has softened man-agerial style in the sector, particularly amongst the larger voluntaryorganizations, where quite a hard management style was developing.

But we have still not developed management technologies in thevoluntary sector at the senior level—outcome measures developedspecifically for the sector. Management is about achieving certainobjectives. And if you are unclear about the objectives of the organi-zation, what you end up doing is just managing stakeholderrelationships—instead of asking, “Is this organization actually meet-ing the objectives that it is meant to?” The failure of managementtechnology is also a failure of boards in asking the right questions.

Harris: You talk about managing stakeholders. Do you see a changein approach to users by voluntary sector managers?

Etherington: The key is to decide—and it’s a board as well as a man-agerial issue—who are the key stakeholder groups. Fundraisers oftenargue that it is the donors who are the primary stakeholders, but in

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To whom you areaccountable andwhere the risk

lies are key issuesin the new

partnershipsbetween

voluntaryorganizations and

government

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fact it has to be the beneficiaries—there would be nothing tofundraise for without the beneficiaries. Boards should be the reposi-tory of knowledge about beneficiary interests. They are there toensure that resources available to a voluntary organization are appliedin an optimal way for the beneficiaries. Managers in the voluntarysector probably need to be tougher with funders. They need to say,“You may want to provide us with a lot of money to go down thisroute, but we are not interested unless the needs of our beneficiariesare also met.” The desire to grow at any cost has been overriding,especially for the middle-sized agencies. The small ones are closer totheir roots, and the larger voluntaries can afford to be robust as theirbrands are as valuable to the funders as the other way around. Butthe middle-sized ones tend to drift with the money.

Harris: Would more cooperation between the organizations of thevoluntary sector be beneficial in standing up to funders?

Etherington: Cooperative agreements of that kind have never beentalked about in relation to funding. The voluntary sector breaksranks pretty quickly. Nick Hinton [former CEO of NCVO] in thelate 1980s tried to speak for the sector in this way to the Man-power Services Commission [a government sponsor of employ-ment schemes], who was imposing hard conditions on voluntaryorganizations. But he was deserted by the medium-sized volun-tary organizations that were only too pleased to take the money.

The main argument for joint working, joint ventures, and merger(which is the most extreme form) is, principally, declining incomebase and shared value systems. Organizations that are fairly closein value terms are prepared to collaborate and reduce overheads asa result. This is more common than ganging up together againstfunders.

Harris: Do you see the changing environment as having differentimplications for different kinds of voluntary organizations? Forexample is there a distinction between those that campaign and thosethat provide services? [Interviewer’s note: The term “campaigning”is commonly used in the UK to refer broadly to advocacy and lobby-ing activity. The use of the term in this question and in Etherington’sreply does not imply working for a particular political party or polit-ical position.]

Etherington: The majority of voluntary organizations still combinecampaigning and service delivery, and they would resist having tochoose between being one or the other. One of the interesting thingsis that the voluntary sector has not yet learned how to campaignagainst the new government. Labour in opposition courted the sec-tor, talked about partnership arrangements. Since coming to power,Labour has actually sought to maintain the engagement of all sorts

322 HA R R I S

The desire togrow at any cost

has beenoverriding,

especially for themiddle-sized

agencies

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of stakeholders, including the voluntary sector. Voluntary organiza-tions are thinking, “Well, why are we campaigning?” This is a verysubtle process of engagement that has gone on. I suspect it willchange—for two reasons. One is that governments have to do unpop-ular things. The other is that, for a while, new governments main-tain the relationships that they developed in opposition, but slowlythe ministers lose that intimate and direct contact with civil societyand markets.

Harris: What about the relationship between board members andpaid managers? Has the relationship changed?

Etherington: The managerial revolution has affected the relationship.There is a more mature relationship now. There was a time when itwas fairly random as to how long a CEO lasted. Now that is not hap-pening. I would like to think that the fact that the NCVO has beengoing on about improving governance has helped. The Charity Com-mission [which registers eligible nonprofits as charities and regulatestheir behavior] has also contributed. There has generally been anattempt to improve practice.

Harris: Do you think voluntary sector managers have also changedand matured? Where have they looked for support in dealing withthe turbulent environment?

Etherington: There is much more training than there was, which hashelped. The fact that managers have been given thinking opportuni-ties in postgraduate courses and short courses has been good. AlsoACENVO [the Association of Chief Executives of National VoluntaryOrganisations] has made a difference. They have focused on the pro-fessional development needs of chief executives and provided self-help for them.

Harris: Finally, looking ahead, what do you see as the new chal-lenges looming for voluntary sector managers?

Etherington: Devolution and regionalization are medium-term issuesfor the voluntary sector in the future. As regards devolution, mostvoluntary organizations tend to have federal structures anyway, so itis easier for them to adapt to devolution. They can respond quiteeasily to the Scottish Parliament and the Welsh Assembly. Englishregionalization is a more difficult issue. The problem at the momentis that nobody is quite clear what is going to happen. The govern-ment is not clear itself how it wants to play English regionalization.

There are also uncertainties about the future of local government,which is a big part of voluntary sector activity. Again, independentfunding is a big issue. And this whole issue about future trust andconfidence in the sector—some serious questions are being asked

CH A N G I N G CH A L L E N G E S I N T H E UK VO L U N TA RY SE C T O R 323

There was a timewhen it was fairlyrandom as to how

long a CEOlasted. Now thatis not happening

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about the ethics of fundraising, for example. Ultimately, the issue ofbuilding trust is about governance.

Harris: Is the lack of trust linked to the changing relationshipbetween the state and the voluntary sector? Or to the way in whichthe EU presents the voluntary sector to us as an economic actor?

Etherington: Yes, it is to do with an erosion of ideas about what thevoluntary sector is. The public sees the importation of private sectormethods, and it sees previously public services increasingly providedvia the voluntary sector. There is a loss of distinctiveness. There ismistrust of the state now in England, but the public is also confusedin its view of the voluntary sector. There is still enormous public con-fidence in something called “charity,” and they think that volunteer-ing is generally a good thing. But I think that the public is stillsomewhat confused about all this.

Harris: Is the implication that behind the concern about trust, thereis a concern about getting over what the voluntary sector can andcannot contribute to society?

Etherington: The state knows, certainly in its rhetoric, that it can’tdo everything, and therefore it wants something called “civil society”out there. But it doesn’t know what to do about it. There’s been thebeginning of a serious discussion amongst the think tanks about rein-troducing the notion of “mutuality.” Mutuality, social economy, socialentrepreneurialism—it all stacks up as an agenda on active commu-nities, yet it has not been translated into practical policy. This mightwell be where we are going. But government cannot do anythingabout it. People do what they want to do. You can encourage throughtaxation, but it can’t really get money down to the grass roots. Also,the new government has quite serious initiative overload now. Wehave “joined-up thinking” at the national level, but money flowsdown in separate streams. Government is relying on entrepreneurialbehavior at the local level to draw funding streams together. This cre-ates a serious capacity issue for the voluntary sector.

Harris: On behalf of the readers of Nonprofit Management and Lead-ership, I would like to thank you for sharing your thoughts on thechanging challenges of management and leadership in the UK vol-untary sector.

MARGARET HARRIS is professor of voluntary sector organisation and headof the Public Services Management Research Centre at Aston BusinessSchool, Aston University, Birmingham, England.

324 HA R R I S

Ultimately, theissue of building

trust is aboutgovernance

Government isrelying on

entrepreneurialbehavior at the

local level todraw funding

streams together.This creates a

serious capacityissue for the

voluntary sector

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