2018 will certainly be a year to remember (or for some, to forget)! Political upheaval, the rise and fall of big businesses, and various scandals over data, privacy and #metoo. We are in a new world where transparency, innovation and inclusivity are ever-more important. As we enter 2019, we take a look at what this could mean for charity leaders as they face an uncertain New Year:
Playing catch up with commerce
2018 was truly the year that we saw commercial operations such as retail and technology take a beating on the high street and in the media. From high profile buyouts and closures such as House of Fraser to the questioning of tech giants such as Facebook in their shadier aspects of data management, the digital revolution has shown it still has bite.
Commercial organisations that are enjoying success are those that have adapted quickly to consumer demands through innovation. Whether that is the ‘on-demand’ trends answered by Deliveroo or Amazon Prime, this success has almost always been driven by technological innovation coupled with measured risk-taking enabling early adopters to forge domination of the market in record time. There is no ‘normal’ in commerce anymore. Instead consumers are demanding innovation at every level and those that answer quickly, win.
For charities this kind of innovation seems unreachable and, for many NFPs there is still an attitude of ‘this is the way it’s done’, rather than ‘why is it done this way and can we do it better?’ This is certainly true of charity financial strategies, which are almost always the most risk-averse division of a charitable organisation. However, as we will explore through these further challenges, it is precisely the finance arm that can be the strong influencer on innovation in a sector that must very carefully balance risk in any drive for change.
2. Scepticism and transparency
As explored in our previous blog on what it is that donors demand from charities, the profile of the biggest givers is changing. They are now self-made and have a great deal of insight into business practices. In a survey of wealthy donors 87% said that sound business and operational practices of a charity helped to determine which to support. 62% also expected full financial disclosure. Charities owe donors an impeccable level of care and diligence in their financial dealings.
As self-made successes these donors also expect charity leaders to make the same efforts towards innovation and commerciality as they have. They want to see charities exploring new ways of managing assets and making every penny work as hard as possible for the best return - and being open about how they are doing so. This drive towards transparency is positive. As Rathbones said recently about this issue, “There have been a number of things that have been really positive [in the drive towards transparency]: the improvement in investment policies, the greater prominence of finance professionals in senior strategic positions in charities.”
More generally, the public at large is still reeling from revelations about dealings at some of the best-known charities and therefore trust in the running and oversight of charities is of paramount concern. Charities must do all they can to assure the public that all they do is for the betterment of their cause, and are transparent in their strategy for doing so. Finance is the ideal place to start.
3. The ‘B’ word
Undoubtedly Brexit will continue to cause waves throughout the sector, and as yet we only have speculation as to what it will mean in the long term. With the government’s eye firmly on the separation, the bandwidth that can be given to wider issues has, and will continue to suffer. Local government is no different, with grants dwindling while delivery expectations are increasing. As Lloyds Bank Foundation recognises, these B-word related challenges mean that “charities will need to diversify their income streams”.
Not to mention the unpredictable economy, but the lessening attraction of the UK to EU workers will also squeeze talent pools. For charities in particular there is another issue to contend with. That is the social divides Brexit has brought to the fore, and in many cases exasperated. We could see this as the loss of a vision of a shared society, with ramifications echoing across the sector for many years to come.
4. Changing role of Trustees
Brexit, coupled with a drive for innovation will have perhaps unexpected impact on the role of the board and Trustees as they help charities navigate new seas.
As Gillian Murray, Chief Executive of Pilotlight wrote recently in the Guardian, many charities are struggling to recruit for the positions they see as vital - whether marketing or finance or fundraising. However, as she points out charities often fail to engage Trustees fully in the challenges they face, even though they often have the skills and experience to make true difference. Similarly, many charities are under so many demands they do not take time to assess wider strategy, instead focusing the day to day rather than long-term view.
This is where a diverse, experienced and invigorated board can make all the difference. They have the skills, experience and time to help drive a strong strategy, if they are engaged and if the charity engages them. No longer is it enough for Trustees to passively watch over a charity to ensure its continuation, they must proactively help explore innovation and question staid ideas. Of course, any change involves a degree of risk but by placing emphasis on the experience and knowledge of Trustees alongside senior professionals this risk can be measured and mitigated.
One area that can benefit from measured risk is within a charity's financial strategy. In fact. Cass advises that charities need to adopt a healthy attitude towards risk or face consistent but low return on investments. In this way embracing an innovative, risk-healthy financial strategy could be the first step towards an organisational culture shift. By adopting new strategies at the financial core of the organisation, from the top-down charities can generate the income and impetus to drive a culture of innovation across the whole.