Five lessons charities can learn from business strategy
The recent collapse of Kids Company has shocked UK’s charity sector. Looking ahead, the non-profit and voluntary industry is set to continue to face uncertainty and tight funds, with charities under growing pressure to do more with less. Chris Outram, founder of OC&C Strategy Consultants, provides five lessons charities could learn from successful business strategy.
The demise of Kids Company has shocked the sector. And, although it would be wrong to apply its specific set of challenges to the whole sector, the charity’s downfall as a result of alleged financial and operational mismanagement has undoubtedly led to a fall in trust in the sector by the general public as well as government. A report published earlier this year (long before the Kids Company saga), titled ‘Trust and Confidence in Charities: an overview of the existing evidence’, identified the use of funds, concerns about donations making it to the end cause, executive pay and running costs as the key factors undermining the public’s view of the sector.
With the public purse tightened, central government grants to local authorities on the decrease and a decline in public trust of the voluntary sector, there is a real need for charities to show more than ever how they’re making a difference and using funds in the best possible way. Five lessons that charities could learn from mainstream business strategy and which would make a real impact on the way they plan for and – crucially – secure sources of funding.
1. Set really, really clear objectives
However big or small your organisation and in whatever sector you operate, you should steer clear of broad overarching goals. They are difficult to explain – to your staff, fundraisers, volunteers, investors and stakeholders - and, more importantly, nearly always impossible to measure.
For example, a charity’s mission could be to combat childhood poverty. But rather than have this as your only stated objective, it’s far more fruitful to break it down into measurable components – for example, looking at the number of children positively impacted by the charity over a predetermined period of time.
2. Make these objectives measurable
Charities need to be specific about the metrics they are using from the offset in order to prove to their stakeholders and potential funders if and how they have achieved their objectives. At OC&C Strategy Consultants, we have worked on a pro bono basis with Impetus-PEF for the last decade. Impetus-PEF partners with the most promising charities and social enterprises which serve young people, and provides them with a combination of long-term core funding and sustained management support. They’re currently working with charity IntoUniversity – who help underprivileged students get into higher education.
IntoUniverity’s mission is simple: get more underprivileged students to attend university. But the real question they need to ask is how will they know when they’ve succeeded? What does success look like in year one, year two and beyond? What are the metrics they can use to show they’ve reached their goals? IntoUniversity sets itself clear objectives for organisational growth and the impact on its beneficiaries. In the three years since 2012, the charity has grown from 12 to 21 centres, exceeding its growth target by 28%. Last year 79% of IntoUniversity school leavers attained a university place compared with the national progression rate of 23% for students from similar backgrounds. In this way, the charity is able to show prospective funders the tangible impact it is making.
3. Look at the number of different ways you can achieve your objectives
99% of the time, there will be more than one way of achieving objectives, but it’s often easy to get stuck in a particular way of doing things. It’s really important to work out all the different ways of achieving these metrics, putting time aside to work out which of these routes is likely to be the most effective, and having a full understanding of the impact that each route will have on resources
Once you have listed out all the possible avenues to achieving your goals, you can then start to map out what the next few years should look like in order to achieve these goals and explain it clearly to your supporters and other stakeholders. Accountability for impact is increasingly important
4. …and make sure it includes your funding plan of attack
Your strategy needs to include your funding plan for the year and the next five years - where are you going to get funding from, how are you going to spend it, and when and how will you let your funders know that you have spent their money as they wished and wisely.
There is no doubt that sources of income are a lot more complicated for charities than for business, as rather than relying on sales and profits, charities are supported by foundations, grants, government resources and individual donors. It is imperative that you plan well in advance to secure a pipeline of funding and ensure that the projects they are funding can be delivered and objectives met in the set timeframes.
5. And before you get started, work out what this means for the deployment of your limited resources
Now that you have your broad plan, you then need to start mapping out the impact this will have on the charity and its work. And remember, when it comes to deploying your resources, you only have two of them - time and money. Everything else is a function of those two things.
How many people will you need? Has this process helped to identify a gap in your organisation’s expertise that needs to be filled? Do you need to develop training or hire new people in? This last point highlights a common pitfall that all organisations fall into, be they in the private or public sectors: underestimating the importance of great people. Good people cost money but you’ll get far more from your investment with one excellent hire, than plugging the gaps with lots of arms and legs.
Ultimately, even if you follow all of the above, the best strategy in the world is of little use if it isn’t implemented in the right way and by the right people. Execution is very often where problems begin, so developing a clear plan of how to get what you need from your people is absolutely crucial.
