Good profits at charities crucial for benefit of wider society
Everyone in business knows that change is the norm if good profits are to be attainable, let alone sustainable.
But for some organisations 'good' profits are not measured in euro and cents. These organisations, collectively known as not-for-profit organisations (NFP's), are a vital part of our economy and collectively employ in excess of 100,000 people in Ireland.
And with over 7,000 NFP's in Ireland, many of them small organisations, the challenge is how to stand out from the crowd in a saturated market.
From our own experience as a company that is owned by a charity, we believe the answer falls into four broad areas:
* Passionate specialisation coupled with clear strategy;
* Structure, governance and operating discipline;
* Plan, implement and measure relentlessly;
* Communicate constantly with all stakeholders.
Passionate specialisation coupled with clear strategy
The best organisations, regardless of size, have a simple recipe with two ingredients – be passionate about what you do and have a clear strategy for doing it.
This passion needs to be focused on a clear strategic objective so that everyone on the team knows what success looks like. In our case, we need our sales and underwriting teams to be clear on our risk appetite so that our growth is in the right areas.
Similarly, for NFP's involved in sponsorships, the sales team needs to be really clear on the values that are core to the NFP so that they always partner with the right type of organisation in their sponsorship.
Corporate governance, or perhaps the lack of it, has garnered lots of media comment recently and the right corporate governance is a vital ingredient for longer term success.
Governance is really about putting the right structure in place to cover ownership and control of the actions that need to be done to implement the strategy.
For instance a passionate founder or leader may be a source of great inspiration but be a terrible organiser. So the right structure, governance and operating discipline bring balance to the team and also frees people to apply their skills to the areas they 'control'.
That way the fundraisers focus on fundraising, the researchers focus on research and so on.
With the strategy and structure in place, the next steps are planning, implementing and measuring. The current environment is as challenging for NFP's as it for any other business.
Whether you are a school, a charity or a heritage site, economic pressures are felt everywhere and while the overall Irish not-for-profit sector had an estimated income of at least €4.9bn in 2011, this is spread thinly.
A recent study supported by Ecclesiastical highlighted that approximately 38pc of NFP's had an income of less than €100,000 in 2011 and almost 80pc took in less than €500,000.
Only one in eight organisations in the report sample had an income exceeding €1m.
So having a clear plan of action, specific targets and measuring progress is vital. One area where NFP's clearly need to invest is improvements to the quality of data in the sector.
Data is the fuel for measurement and the public expects NFP's to provide higher levels of transparency than those in the for profit sector. The measurements will differ for each organisation but broad measures to focus on are:
* Results compared to costs e.g. number of customers served per euro of cost;
* Key milestones in team development;
* Staff costs in ratio to income;
* Customer service results such as call response times if operating a helpline service;
* Total costs in ratio to income;
* Analysis of the source of income e.g. state funding as a percentage of total;
* Communicate constantly with all stakeholders.
This last point is perhaps even more important than the others. You can't over communicate but there is an important balance to strike. A basic model to follow has four simple rules:
* Quantity – as much as is needed and no more or no less;
* Quality – what you communicate must be accurate and actionable;
* Relevant – consider what you are saying, who you are saying it to and how it relates to their role;
* Manner – how you communicate is as important as what you communicate.
With increased regulation, pressure on sales in light of the downturn, significant competition and increased calls for transparency, the NFP and charity sector is facing as many challenges as every other part of the economy.
As a result, NFP's are increasingly turning to new and inventive methods of fundraising in order to carry out their work. Information is king and the time is now right to improve data quality to aid improvements in fundraising strategy and management.
This will help NFP's to use their scarce resources to maximise the 'good' profits that are so crucial to the wider public good.
David Lane is managing director of Ecclesiastical Insurance (email@example.com), the specialist insurer to the charity, education, heritage, and faith sectors.