Simon Leicester poses some questions that may be affecting many charities in the sector, and also provides some potential solutions. By implementing these strategies, Simon argues that charities can improve their performance and achieve their mission more effectively.
Are charities failing to attract highly capable trustees and non executive directors (of their commercial trading companies) because they cannot, or will not, pay them an honorarium for their time?
Are charities neglecting the effort required to develop compelling business strategies, with tight focus?
Are charities under-investing in IT to make their data more reliable, more structured and business processes more efficient?
Regarding the ‘war for talent’, are charities of all sizes, failing to prevent the gap between charity sector and private sector salaries from widening?
Are charities over-working their staff at the expense of letting them attend training sessions during work time?
With each of the above questions the problem generates a vicious cycle leading at best to weakened impact and, at worst, charity cessation.
Solutions
If you believe that charities are more challenging to run than private sector firms because the outputs are less measurable and demand grows faster than supply, then charities need to attract the best leaders to their non-executive positions. Lobby the Charity Commission to encourage NED payments and get your fundraising team to fundraise specifically for NED payments to attract the best leaders.
Funders, whether government agencies, charitable foundations, bank lenders, philanthropists, joint venture partners or members, will all expect the charity they are funding to have a clear and clever business strategy. The smarter and sharper the strategy, the better the risk-return ratio for your organisation.
If you’re a start-up charity, keep your focus tight and your resources channeled - when you are big, you can diversify products, services and markets. Look hard at what intellectual property you can develop and exploit – royalties are high margin and long term, unlike grants. Make a real options portfolio part of your strategy – you never know what ‘black swan’ event is just around the corner. When Covid hit the UK, a lot of charities issued the bulk of their staff with IT equipment to work from home. That was one investment in an option. Designing a flexible room use is another. There are plenty more.
With your commercial trading operations, avoid commodity products and services. That means fewer short-term events held in surplus spaces and more long-term space tenancies instead. Put your retail lines in someone else’s established distribution network and create data products behind a paywall.
Digital and data
On the subject of digital, it's vital to put the necessary resources towards IT in order to be a credible entity. However, because IT assets have a short shelf life, you’ll need significant reserves and have them designated for the digital journey ahead.
In the 21st Century, managing business processes means progressively adding value to the initial data you capture and process. As much as possible, use technology to capture the data, analyse it and format it as needed by your stakeholders with user self-service. Use your IT investment to change the services you provide to your beneficiaries – more customised services, but more scalable services too - mass customisation is another useful option to have.
Often, the largest single cost in the charity cost base is the staffing costs. Charities reward staff for the use of that time every month. However, how much effort goes into reviewing how that time is spent and whether it is being best spent? Charities need to manage their staff as a key resource to achieve their mission. Since resources typically have features of capacity, usage, right of use, repairs and maintenance, make sure you get the balance right on your staff resource. Employees will need motivating. They will need training and holiday breaks. Staff will need work-life balance.
There may always be a remuneration discount to move from the private sector into the charity sector. Charities like to say they offer other things to compensate for this. However, in reality, if your charity has an even worse work-life balance than the private sector, you may not retain those new joiners for long. The solution is to automate some things and invest in your staff, to do what human beings in a professional setting do best.