How can charities demonstrate their ‘value added’ in welfare-to-work?

By Benedict Rickey 24 May 2010

I visited a training centre called Building Futures East (BFE) the other day. It’s doing fantastic work getting people into jobs in a deprived part of east Newcastle. BFE talks to local employers to discover what jobs they have that need to be filled and then develops training courses aimed at young people to fill these gaps. BFE reaches its young people through local schools and community organisations, and as a social enterprise, re-invests all profits back into work to engage the local community. Training is free for many individuals, including those on benefits and living in Newcastle.

BFE is a great model for providing routes to local employment for young people who are Not in Employment Education or Training (NEET). However, it struggles to get onto some of the larger welfare-to-work schemes – programmes to help people on state benefits back to work. It also struggles to get work on the local Flexible New Deal contract*, even though it’s included as a sub-contractor. It seems that BFE’s experience is not uncommon, and relatively few non-profit organisations are bidding for phase two contracts (see article in Third Sector). These are bad omens for the sector.

Why is this? There is of course the issue of scale—many small charities are just not big enough to take the contracts on. But perhaps even more crucial is the fact that contracts ask for job outcomes in tight timescales. As Anthony-Woods Waters, Chief Executive of BFE put it current measurement is ‘driven by annual performance cycles that are directly at odds with the complex issues and needs to be addressed.’ Charities tend to reach out to those furthest from the labour market, who have a longer journey back to work. As a result they often struggle to deliver work outcomes in tight timescales. Most won’t ‘sell out’ for the sake of a contract, as they aren’t prepared to leave the most excluded young people behind.

Non-profits like BFE must convince commissioners that they add value to the work of private sector contractors. But how are they to do this?

In the case of employment, the public sector typically defines efficiency in terms of the number of job outcomes per pound spent. For them, more jobs per pound equals better value. However, charities need to show them that they should be counting the cost of the intervention against the cost of leaving some NEETs behind. Figures show that people who are NEET are more likely to be depressed in early adulthood, and also more likely to use drugs and alcohol. In Getting back on track, NPC reported that Government estimates the lifetime costs to society of each young person out of work is about £90,000. Charities need to show that it is a heck of a lot cheaper to get a charity, like BFE, to help them back into work or training, than to just leave them behind.

But how does one count the value added by charities that support those furthest from the labour market? Step one is charities need to show how their clients differ from a typical job hunter that are picked up by private sector contractors and Job Centre Plus. Are they long-term unemployed? Do they have complex needs?

In addition, they will have to find clever ways to measure ‘distance travelled’ by their client, rather than just a ‘job outcome.’ For instance, Depaul UK – a youth homelessness charity – tracks how many of the graduates from its programme ‘Drive Ahead’ went into employment, but also education or training. This makes sense. Whilst a relatively small proportion (1 in 10) move into employment, a larger proportion (2 in 10) go into education or training. This means around a third either get employment or make progress towards it. Given the difficulties their client group face, this is a significant achievement. Organisations like Depaul UK have made a start but more work needs to be done to develop and apply alternative measures of progress to a pure job outcome.

Charities need to find smarter ways of measuring the difference they make if they are to convince commissioners that they add real value in welfare-to-work.

* The Flexible New Deal is a new initiative aimed at providing tailored employment and skills support to those who find it most difficult to find work. It is delivered by 14 ‘prime contractors,’ of which only one is voluntary sector (ten are from the private sector, two from the public, and one is a cross-sector partnership).

For further information about Building Futures East please contact Anthony Woods-Waters by email at