Non-profit Organisations Facing Fight for Survival

As Barnardos closed recently to save costs, other charitable groups face similarly stark circumstances, writes Neil Pope of 2into3.

The recent week-long closure of children’s charity Barnardos brings the fundraising crisis in the not-for-profit sector sharply into focus.

Worryingly they are not alone in their struggle for survival — a significant proportion of Irish charities are on the brink of closing down as the sector struggles to cope with funding cuts, according to a report published earlier this year by Grant Thornton.

The ensuing public debate has focused on the salary level paid to chief executives in the sector. While this response is understandable in pointing to the strategic responsibility carried by the CEOs and boards it diverts from the crux of the issue we are now facing.

The issues and changes that not-for-profits seek to address are complex and usually take many years for true, measurable impact to become evident.

What happens when these charities disappear or, in the case of Barnardos, shut down for a period of time? What level of services should we expect and, perhaps more importantly, what level of services does our society want and deserve? What are the most efficient cost structures? What are the levels of financial risk and where will that risk be carried? And finally, given the extent of the over-reliance on Government funding, what are the alternative models of funding to guarantee sustainability?

These are all vital strategic and prescient questions when the uncertainty of the macroeconomic climate and the dissolution of Ireland’s economic sovereignty are considered. Coupled with sector-specific issues such as indefinite access to the generosity of large grant-giving foundations, or the capacity of the Church to provide manpower, the sector is facing inevitable change.

But can the sector in Ireland cope with such a development? As this critical gap in services widens, our politicians and community leaders will be faced with an urgent need to find answers to the crisis. Internationally we see politicians turning to the commercial sector. Serco, a leading private contractor, is in line to win a multimillion-pound contract in partnership for four not-for-profit groups to run the National Citizen Service in the UK, a non-military version of national service for people aged over 16. If this trend of contracting services and inter-organisational collaboration replicates itself in Ireland, and not-for-profit organisations are to be equal partners in delivery, advanced management competency on every side of the relationship is imperative.

Yet, in a recently paper published by 2into3, A Boardroom Guide to Organisational Capacity Building: Overcoming the Management Deficit in the Not-for-Profit Sector, we see that the sector has intrinsic leadership and senior management challenges requiring a culture change in the boardrooms and offices of the country’s charities.

For many not-for-profits, the voice of the service user is never heard. Poor service and bad management can go unnoticed yet the organisation continues to get public funding because of the appeal of its charitable cause. With such lack of accountability and absence of regulation, the sector must apply disciplined self-regulation and best practice including regular rotation of those in positions of power and leadership.

So why are fixed terms and rotation so important for not-for-profit organisations?

The issues and changes that not-for-profits seek to address are complex and usually take many years for true, measurable impact to become evident. This lack of immediacy in performance indicators makes it very difficult to assess the strategic performance of the chief executive.

Equally, changes to organisational or fundraising strategy take time to generate returns and for many we are only now seeing the evidence of their performance in addressing the systemic international economic crisis in 2008. This contrasts to commercial organisations which, if badly led, see profits and shareholder value fall, or the situation in government organisations where failure to deliver the standards the public expects because of bad management should cause the public to vote the government out.

Writing recently on ThirdSector.co.uk, the CEO of Womankind Worldwide, Jackie Ballard said the optimum tenure of any leader is five to seven years. This is based on the view that it takes 18 months for a new leader, with a fresh perspective, to develop a full strategic view on the changes a body needs to make; then three to four years to implement the changes.

Beyond this time the CEO becomes an organisational insider and with increasing time becomes less valuable as a leader of change. There are several well-governed groups in the Irish not-for-profit sector that apply best practice principles of board rotation and fixed-term contracts for CEOs, such as Focus Ireland and Dublin Simon Community. However, they remain the exception rather than the rule.

The development of this rotation of leadership and power in not-for-profit organisations would have an invigorating effect, allowing greater diversity of experience to be applied to the solving of these difficult social challenges.

In today’s world, the calibre of leader required for a not-for-profit and the level of commercial understanding they possess, must be at least equivalent to that of those leadership peers in premier division international commercial firms operating in their field. Fixed terms would go some way to balancing the public perception of the remuneration an experienced and competent organisational manager expects to be paid set against the difficulty, risks, and limited security attached to the position.

http://www.2into3.com