Nine hallmarks: what does operational efficiency mean for charities?
June 19, 2015
A key question for a charity is whether it’s business and operating model is fit for purpose and delivers the most efficient and effective use of resources.
The business model takes the golden thread included within the strategy document and explores the ‘what’ element: what customers do we have, what services will we provide, what channels will we use, which partners may we want to work with. Following on from this the operating model brings the golden thread to life by exploring the ‘how’ question.
Within charities it is common for operating models to have been built over time in a less than structured fashion, as they grow, merge and add services to their portfolio. In addition, charities can be reluctant to invest, for example in new technologies, which means that at times, their use of digital and other technology could be significantly improved.
Therefore improvements could be made in efficiency and effectiveness, which in turn will allow increased resources to be available to deliver front line benefit. We are increasingly working with charity clients to help them develop their Target Operating Model.
In our experience, many charities have spent the last few years responding to the current climate by reducing costs and salami slicing their activities to recalibrate them within a different funding environment. Lean reviews are one such incarnation of this philosophy.
Increasingly, however, charities are recognising that the most material changes can be made by investing in a more fundamental review of their business model and reorganisation of their operating model. This takes longer, costs more and can be more disruptive, but the prize in the medium term can be substantial. As funders and others are demanding a more efficient delivery of services, more charities are acknowledging that a clear understanding of how they operate in practice (as opposed to what people’s job descriptions say!) provides some compelling rationale for change.
The change will at times require a significant shift in behaviour and culture. Charities will need clear strategies, appropriate performance management and disciplined leadership. However, this will really engage those people in the charity who are passionate about what the charity does, but who may have been frustrated in the past by what will often be obvious inefficiencies.
Our view is that charities that can operate a truly effective model will continue to attract funding, while at the same time be able to evidence their impact in the most compelling fashion.