Survival of the fittest: recognising the need for action in the charity sector

May 09, 2018

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Continued financial challenges for many charities, coupled with a heightened sense of risk and failure arising from the ongoing public scrutiny of the sector, appear to be driving more charities to consider their ongoing viability.

On 1 May 2018, we hosted a seminar to consider what makes a successful financial turnaround in the charity sector. We wanted to share the experiences of those who have been involved in rescuing charities and helping them to become financially more sustainable.

The panel featured John Wood, independent turnaround professional, Oonagh Aitken, CEO of  Volunteering Matters, who has steered the charity through a period of change and Francis Runacres from Arts Council England, who is very familiar with supporting charities experiencing financial difficulties. They each gave their thoughts on a successful turnaround and answered audience questions about warning signs, actions to take and how to take colleagues on the journey.

Four main themes emerged from the panel discussions:

Good information is vital

  • Warning signs come in all shapes and sizes – financial, people related, organisational and external. Charities should scan both their internal and external environment routinely to identify these ensure they can take early intervention to remain in control and maximise maintain options available.
  • An early view is needed on whether a solution is possible which allows the charity to remain a stand-alone entity, or whether a merger is likely to be needed.
  • Regular, reliable and insightful information makes a significant difference in buying thinking time. A failure to provide this will often separate those charities that survive from those that don’t.

Be prepared for brave decisions and decisive action

  • Charities facing challenges need to consider whether the charity should be rescued at all, or whether the financial distress is a signal that the charity is no longer needed. If still required, brave decisions about cutting back services to protect the core charity purpose will need to be made.
  • Boards need to be prepared for decisive action and sharp focus to make difficult choices under pressure - including whether they have the right people to manage the change.

Keep your options open

  • For a number of reasons, charities can often be more complex to turn around than their commercial equivalents. It’s important to keep options open as long as possible to help find the right solution - whether a merger, a turnaround or securing additional funding from stakeholders in the short to medium-term.
  • Contingency plans may well need to be run in parallel – there is often not the time to run things sequentially.

Don’t forget the people side

  • Stakeholders can be sources of advice and guidance, as well as funding, so early communication is often important. External resource may well be necessary to provide situational experience and additional resource to complement and/or replace existing leadership. Stakeholders will consider the quality of management and will want convincing that the problems which caused the financial distress will not recur.
  • Consistent stakeholder management is often crucial – we were invited to consider the mantra that charities need to “inform, perform, manage expectation and no surprises”, ie stakeholders need to be consulted and kept informed, whilst if possible ensuring that plans are achieved or exceeded to inspire confidence that any plan is viable.
  • Regular, open and sensitive communication with staff teams is absolutely essential - all staff need to feel confident in leadership if they are to roll their sleeves up and remain committed to the work that needs to be done.

Turning around a charity is demanding, intense and often exhausting.  Emotions may run high and leaders will at times feel the weight of responsibility is heavy.  However, with discipline, humanity and focus, even the most distressed charity may find a new path and become sustainable.  Playing a part in such a turnaround can be immensely satisfying and help is out there.

 

Ian Oakley-Smith  | Charities Leader
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