Interim Finance Director and turnaround specialist, Simon Hopkins, shares his key insights and advice on successfully turning around struggling and failing charities.
At ‘Shaping Tomorrow’ – CFG’s 2024 Annual Conference held on 27 June – Interim Finance Director Simon Hopkins presented on the often-neglected subject of charity turnaround. It was standing room only, however, suggesting the topic has crept up the charity agenda.
Hopkins shared with the 90+ members of the audience that a significant number of charities had assessed that they did not know how they would meet future demands for their services.
This, claimed Hopkins, meant that “many charities will need to radically rethink their business model. And they need to do that if they're going to survive in a meaningful way and still be both sustainable and impactful.”
Hopkins noted that an unsustainable demand for services was just one threat that charities were facing. Others include external economic factors, and a disconnect between the organisation's mission and its operating model.
Specialist skills shortage
Hopkins highlighted the critical role that finance leaders play in transforming struggling charities and claimed that successful turnaround usually means having to be bold and disruptive. The sector, he stated, desperately needs to “build bench-strength” in turnaround skills.
Finance professionals are “uniquely placed to tackle this subject and bring more focus onto it collectively at a time when it's going to be sorely needed,” Hopkins said. “However, there is a historic tendency not to discuss this, and it has arguably a Cinderella subject.”
Unlike for-profit businesses, charities often lack external pressures, such as investor demands, that drive change. Additionally, measuring success and organisational health in the charity sector is more nuanced and relies heavily on judgment, as well as large amount of emotional investment.
Staff, volunteers, donors and beneficiaries are all deeply connected to the cause, noted Hopkins, making difficult decisions around change and turnaround even more complex.
“Whether we like it or not,” Hopkins stated, “we are going to need great turnaround skills in this sector and we're perhaps going to need them at a level that is unprecedented.”
Hopkins underlined the importance of strong leadership from trustees and finance leaders. Trustees, he said, have a duty to recognise and understand all the problems, set the right tone and ensure turnaround efforts stay aligned with the charity's values. Meanwhile, finance professionals are frequently thrust into the role of "architect and driving force" behind turnarounds.
“Your role is non-negotiable. If your organisation needs to go through financial turnaround, you’re not going to say ‘I’ll just produce some management accounts and watch the rest of you sort it out.’ Of course you’re not going to do that.”
Turnaround tips
Drawing on his own experience of being a turnaround leader of more than 20 years, Hopkins set out several key areas of a successful turnaround. His key takeaways include:
- Formalise turnaround status: Clearly communicate the organisation's need for turnaround and get board approval. Then make it clear to everyone that turnaround is underway.
- Set speed and sequencing: Balance the urgency of the situation with the impact on beneficiaries. Hopkins noted that data maturity plays a crucial role in informed decision-making.
- Find your turnaround team: Look out for staff with high emotional intelligence, problem solving skills, a long-term mindset and an appetite for change.
- Have a 'North Star', such as a strategic financial model a single, up-to-date financial model to track progress.
- Prioritise risk management: Emphasise a robust risk framework and keep it prominent.
- Conduct root cause analysis: Understand the underlying reasons behind the charity's difficulties to prevent future recurrence.
- Utilise existing resources: CFG’s Inspiring Financial Leadership programme and Finance Journey are some of the available resources to make use of.
Communication and support are key
Hopkins emphasised the importance of effective communication throughout the turnaround process. Internal and external messaging should be consistent and highlight the organisation's long-term commitment to its mission and beneficiaries.
Hopkins also warned against stepping outside of the role and becoming too Machiavellian, and to not enjoy the politics of change for its own sake.
This point led Hopkins to reflect on the burden that turnaround leadership can place on finance leaders. He encouraged building a strong support network with mentors, colleagues and peers to ensure resilience and maintain focus on the positive impact charities can achieve.
“We do stuff that the other sectors with all their resources cannot begin to do, and it's brilliant. Your support network will keep you attached to that magic and that is so important!”
Hopkins concluded with a final call to action for the charity sector to build a "community of practice" around turnaround, fostering collaboration and knowledge sharing to empower more finance leaders to navigate these challenging situations effectively.
Further resources
Simon Hopkins' slide presentation 'Finance as the Turnaround Leader' to CFG's Annual Conference 2024
Inspiring Financial Leadership (IFL) course
Join this year's Inspiring Financial Leadership course to enhance your leadership skills. This eight-module course runs from October 2024 to May 2025, and is led by Bayes Business School, Sayer Vincent and CFG. Find out more.
The Finance Journey
Find out more about CFG's learning and development tool – The Finance Journey – for charity finance teams and professionals. This unique framework for development will set your finance function on the right path to becoming truly transformational.
Create a community
If you would like to find out more about the topic of turnaround, or would like to explore further how we can share ideas with peers, and provide mutual support on this subject, please contact the CFG team.