Helping London's most damaged and disadvantaged children is a vocation for Camila Batmanghelidjh. But she's no soft touch. The way she runs Kids Company draws admiration from politicians and business leaders alike

I don't take myself too seriously," says Camila Batmanghelidjh. Lounging on a sofa in her south London office, dressed in trademark colourful robes and matching turban, she looks far from the typical chief executive. Yet hers is a very serious business indeed. Through her charity, Kids Company, Batmanghelidjh has succeeded where the government has come up short, in turning around the lives of thousands of children with severe emotional, behavioural and social difficulties, many living in chronic deprivation and turning to crime. It is a particularly pertinent issue today—so far this year, 23 teenagers have been killed in London and Batmanghelidjh, says this is a public health issue, not a criminal justice issue.

Her flamboyant appearance is matched by a larger-than-life personality and loud shrieks of laughter interrupt her tales of the early days of Kids Company, when she and a few other therapists decorated some old railway arches in Camberwell and opened the doors to the neighbourhood's most troubled kids. Around 100 boys from local gangs turned up and sabotaged the place. "It was frightening, but I have a vocational attitude so I would continue to open the doors at 3pm every day, even though they would come in and set the curtains alight, pull out knives and start rolling spliffs," she says.

As word spread, younger children turned up. "The adolescent boys were criminally surviving while the young ones were children of drug addicts who were scavenging in bins. I was gobsmacked," she admits. "These kids were on another level in society." When she sat down with them she discovered children who slept with knives under their pillows to protect themselves from their abusive parents, girls watching their mums being forced to have sex with drug dealers, and parents who just couldn't cope because of mental illness.

Kids Company plays a parental role in these children's lives. Staff register them with a GP, buy them clothes and look after their housing needs—84 per cent arrive homeless. "We try to get them stable enough to think about what they want to do. And then you discover they have no idea, because they have never seen anyone go to work." Once registered with Kids Company, though, children can take up courses and gain skills. Many go on to university or to learn a trade.

"There are large numbers of children in this country who don't have a functioning parent. Social services are not taking them, in the poor areas, because they can't cope with the caseload, so we have to redesign the structures at street level," says Batmanghelidjh. Every year 552,000 children are referred to child protection services but only 30,700 are taken in. "These are not children who need one appointment every fortnight; they need complete reparenting and you won't be able to take them all into foster care," she says. The solution is more centres like Kids Company, she adds. "They don't have to sleep there but at least you give them resilience and dignity."

Today Kids Company serves 12,000 children through two street-level centres and 33 therapy units in south London schools, employing over 250 staff and more than 3,000 volunteers. The charity has seen outstanding results and Batmanghelidjh has won several awards, including Woman of the Year and [Ernst & Young's] Social Entrepreneur of the Year. A study published earlier this year found that 77 per cent of children who were outside the system when they found Kids Company had since returned to employment or education. Of those with a background in crime, 89 per cent said the charity had helped them move away from it.

Having enjoyed a privileged childhood in Iran, Batmanghelidjh came to England aged 12 to attend boarding school in Dorset. Two years later, the Islamic Revolution saw her father, a successful entrepreneur, sent to prison for four years and left her unable to return. Struggling for money, she worked in nurseries after school and built up a reputation for being good with disturbed children. "I think I am one of those people who are born to do just this one thing and then I'll be off. I am one of those catalyst personalities who just need to get a job done. I have no other definition," she says.

It's a special gift that is clear to those who deal with her. "When you meet Camila, she is such a stimulating character and you want to follow what she wants," says Vince O'Brien, director of Montagu Private Equity and a trustee of Kids Company. "These are not little tough kids on the streets. They are badly damaged and she has this magic touch; she wins them over through kindness and concern."

But, says O'Brien, she is no soft touch. "She would be a tough CEO to work for because everything is focused on what she wants to achieve. What people may forget is that the charity is built on solid intellectual foundations. What she believes in has been proven by independent studies. She is not just a woman who looks after children, she is a woman with intellectual brainpower who drives the theory and the thinking behind it as well."

Peter Lambert, deputy chief executive of Business in the Community, which introduces business leaders to issues in society, agrees. "People are challenged and inspired by Camila and the work she does," he says. "We notice how deeply passionate she is about the kids, but it is combined with a brilliant brain."

After an arts degree, followed by an MA in psychotherapy, she worked with adult abusers, victims of domestic violence and disturbed children in family referral units. Before Kids Company, she set up the Place2Be, a charity that now offers counselling to 42,000 schoolchildren throughout the country, which she left in 1996. By that time she had gained a profound insight into the system and identified huge flaws. "The problems were already happening when the children were four or five and because they were relying on the people who were abusing them, they didn't get help. I wanted to structure something where the children could self-refer," she says.

Up to 90 per cent of the Kids Company client group suffer from complex post-traumatic stress disorder. Batmanghelidjh has also discovered that social and emotional deprivation has caused chemical imbalances in the children's brains, meaning they can only calm down through violence. The Institute of Psychiatry is keen to  carry out further research with her, but she will need £250,000. She hit the news last year when, deprived of funding, she threatened to close Kids Company. The response was one of outrage and the government awarded the charity a £12m grant over three years. Although delighted, Batmanghelidjh still needs to raise £4m every year to support the under-14s, who are not included in the grant.

But financial uncertainty is nothing new—dependent on private benefactors from the beginning, she has remortgaged her flat three times to rescue one charity or the other. She says she was never interested in making Kids Company a safe organisation. "I wanted the kids served and sometimes that meant not having the resources. We didn't know how many kids would self-refer and what conditions they would arrive with, so you can never really plan properly," she says. "People encouraged me to turn it into a business, to sell the service, but I kept saying no, because the kids can't buy the service." It is a service that includes Christmas dinner and presents—last year 1,273 turned up on the day. "I have to find a new venue for this year because we won't fit into our centre any more," she says.

The chances are she will find somewhere, because Batmanghelidjh gets what she wants. Her mission is fuelled by anger. "What is the excuse for the fact that we have the most dysfunctional child protection and child mental health service in the fourth richest country in the world?" she asks, immediately answering the question herself. "I'll tell you—the child abused behind closed doors does not bother the voter; it is only when that child becomes so angry that it starts attacking the voter that society mobilises."

So how did we get to this terrible situation? "The financial economy and the sciences have progressed, while the spiritual and emotional economy has been taken for granted, but the world is systemic: if one bit is ignored it falls behind and upsets the rest," she replies. "Now companies have to invest vast amounts in protecting their staff and property, so unless business engages with child mental health, it is breeding an enemy, which stems from children who grow up with terror and hatred."
Plenty of businesses realised this long ago. Big names including Barclays, Virgin and Goldman Sachs have long supported Kids Company.

Such is Batmanghelidjh's power that no politician is seen as taking crime seriously without first having met with her. "They are just waking up to the fact that these children exist, because they are making headlines," she says. David Cameron took inspiration from Kids Company for his "hug a hoodie" speech and she seems optimistic that things may change if the Conservatives take power. She believes Gordon Brown is "hugely committed" to children, but seems doubtful he will have the courage to introduce radical changes in this stormy first term. "For the Conservatives, getting child mental health and social services sorted has got to be the priority, because if you don't, the hatred from these children will be more lethal than any bomb," she says.

But the week after our meeting, Cameron says that any youth found with a knife should go straight to prison. Perhaps there isn't much reason to be optimistic after all? Batmanghelidjh dismisses it as spin. "If they carried that out, they would quickly run out of prison space. I hope Cameron will develop courage because to solve this you need more than cosmetic statements," she says.

I wonder what she could achieve with the £230m the government spends on the 3,000 children in custody. "Prison does not work," she says. "Nationally the reoffending rate is 80 per cent within two years of release. If that was a school or hospital, they would have labelled it failing and shut it down by now."

Love is not a word often mentioned in business, but it is clearly love for the children that drives Batmanghelidjh. "I have great respect for them," she says. "They have exceptional gifts because they have visited the depths of human despair and come back from it. They are extraordinary people and they have a lot to offer if society facilitates their healing." In terms of the work, she says she loves doing things well and seeing her teams do well. "I get a buzz out of that."

O'Brien says he has never met anyone as driven as her. "She is unique and if she was running a company she would be massively successful because she is totally focused."

And she hasn't finished yet. Kids Company is setting up a Centre of Excellence in partnership with the government so that people working with disturbed children across the country can get help and advice. A specialist drug rehabilitation programme is also in the works.

Although, for many people, Kids Company is Batmanghelidjh, she will have to move on at some point. Happily for London's disadvantaged children, she believes her legacy will live on. "Founders have to hand over one day," she says. "But I have allowed something to grow organically and I have released people's qualities into the organisation. Kids Company has become amazing because of the extraordinary staff we have."