The sudden collapse of the high-profile (though rather small) Kids Company charity has been getting lots of headlines. Colin Talbot looks at what has gone wrong.

A quick look at its history and its published accounts suggests this is a pretty classic example of an entrepreneurial and charismatic ‘Leader’ coming up with a good idea – let’s call it ‘the Project’ – which initially works really well on a small scale.

This seems to be what happened with Kids Co and Camila Batmanghelidjh. A charismatic individual comes up with a new model for helping seriously challenged kids that succeeds where traditional social services and charities have not. It works well on a small scale, but as soon as it starts to grow the problems set in.

As long as the operation remains small the leader can oversee everything and informal ‘rules’ make things work. But as the operation expands several problems start to emerge.

Firstly, a rapidly expanding organization needs operating capital and reserves especially when income is fluctuating and uncertain. Kids Co. seems to have had neither.

The usual response of the leader to these problems is to muddle through, duck and dive, wheel and deal, do anything to keep the show on the road. Sometimes it works, but mostly it doesn’t.

Second, it needs basic ‘support services’ – proper finance, HR and other functions to make a larger organization function properly and with due propriety. This isn’t just ‘bureaucracy’ – it is also necessary to make sure ‘the Project’ has some SOPs (standard operating procedures) that make sure it works when the Leader isn’t around to supervise everything – which inevitably they increasingly cannot be.

Often the Leader has little time for this sort of “bureaucratic nonsense”. They just want to get on with ‘the Project’. Sometimes they are sensible enough to appoint someone to run all this stuff and actually listen to them. Again, all too often even if they do appoint someone they over-rule them when it suits them.

Looking at Kids Co. accounts the first set of problems set in early and have gradually escalated over time. Driven by ever-expanding services without the necessary finances the operating model became increasingly unstable and dependent on periodic large dollops of cash from either Government or donors.

Contrary to what some commentators think Kids Co. was not a glorified quango – it received less than a quarter of its income from Government.

Kids Co. income in 2013

Source: Annual Accounts

But the Government funding at critical points was essential to plug the gaps caused by its over-expansion and subsequent financial and other management issues.

Through out all of this the classic reaction of the leader is denial of the internal problems and denunciation of evil external forces who are really responsible for trying to derail ‘the Project’, sometimes for nefarious reasons” “we’re too good at what we do and our rivals are out to do us down”; “our success exposes the failures of others”; “we are the only ones who can do what we do and others are jealous of our success”; etc.

Like many such ‘start ups’ before it Kids Co. did not manage to break through the barrier between a seemingly successful small-scale operation into a larger, well controlled, successful organisation. They also weren’t the first seemingly successful organization to be led by someone who could mesmerize stakeholders into seeing only success and necessity and ignoring the (growing) problems. On a much larger scale, think of what happened at RBS?

The sudden collapse only a week after the Government handed over another £3 million raises huge questions for those running the charity, the Charity Commission and the Ministers who signed off the payment despite Civil Service objections. Resignations could yet happen in Government.

But there is no great mystery about what went wrong at Kids Co: the usual problems of transitioning from a start-up to something bigger; a charismatic leader who may have been good at starting something but was not necessarily good at running it; entranced ‘investors’ (in this case Government and donors) who cannot see the problems. All rather tragic and all too foreseeable – if anyone was looking properly, which to be fair it looks like the Civil Service were.