In this brave new world, Not for Profits, like most Kiwi organisations, are struggling to deal with the urgencies of today while building resilience for tomorrow.
The impact that disruption has on NFPs is profound given that this sector traditionally has to do more with less in standard economic conditions.
Now, NFP industry leaders are charged with the mission-critical task of identifying not only the short-term, but the long-term issues impacting their industry, and to define the actions needed to navigate unprecedented uncertainty.
The top 8 immediate impacts
The instant impacts we are seeing in the short term are wide ranging:
- Immediate loss across a variety of revenue streams including membership/services and earned revenue
- Additional expense and operational complexity to continue service delivery, deploy a remote workforce, and to operate across local, regional, national and international jurisdictions. Contractual third-party relationships may also be strained
- A reduction and/or changes to the way mission related services are delivered to communities and constituents
- The wellbeing and subsequent disenfranchisement and dilution of the workforce
- Portfolio volatility and changes in endowment spending
- Compromises to financial, operational and technology controls
- Difficulties in meeting regulatory obligations and deadlines
- Risk of non-compliance with stakeholder reporting requirements and engagement
There are some levers that NFPs can pull to stem the tide of immediate negative impacts on their organisations. Currently, cashflows and other forecasting models need to be revised and redeveloped. Leaders need to consider if any non-critical assets can be used to fund cash shortfalls and look at work force strategies that not only ease pressure on cash flow but will still deliver on the organisation’s purpose. These strategies also need to be balanced with the safety and wellbeing of team members, volunteers, communities and constituents. The Government has set up a COVID-19 Community Awareness and Preparedness Fund Grant, and injected an additional $27m into the sector for select social services.
Communication is also key; crisis communication plans for both donors and team members need to be executed. You team members also need to be across polices about remote work arrangements, and any potential operational, financial and technology control gaps need to be assessed against a remote working environment.
An immediate focus also needs to remain on stakeholder access to quality programmes and services.
Building resiliency in the long term: 3 critical impact areas
Resiliency starts with a commitment to identifying and mitigating risk factors that can further disrupt an organisation. For example, as COVID-19 moves with rippling effects to every aspect of society, it will cause potential longer-term implications that need to be addressed; here’s three impact areas that we see as critical.
1. Liquidity and cashflow management
Many Not for Profits will discover that their ‘new normal’ has delivered operational complexity along with an outsized expense structure. Uncertainty around the type and amount of revenues going forward will also contribute to this challenge, and current financial and operational models that no longer reflect reality will limit the effective management of the organisation on an ongoing basis. Working capital is also likely to be constrained along with the capability of any investment portfolios that provide operational support. And course, these factors lead to the inability to demonstrate financial health to external parties to meet debt covenants.
Not for Profits can build resilience in this area by:
- Preserving and managing cashflow, and revisiting lending terms
- Assessing the composition and performance of any investment portfolios and revaluating reserve levels and funding strategies
- Revisiting the organisation’s strategy by considering strategic revenue enhancement and cost reduction opportunities
2. Supply and demand
Changes in the way programmes and services are delivered can put a strain on tools and technology. The labour, materials and infrastructure needed to deliver on an organisation’s purpose in times of disruption will also cause a lack of alignment between services, programmes and capacity.
Identifying areas in the market where there is duplication of effort is often overlooked as a cost saving strategy for Not for Profits. Building strategic alliances with like-minded organisations with a similar mission and purpose can enable pooling of resources, sharing of costs and even some bargaining power when negotiating contracts with suppliers.
NFPs’ workforce expectations and culture will evolve along with the pandemic, which means people strategies will need to change as well; this often starts with managing team members’ expectations while making any necessary updates to their compensation, benefits and contracts. Managing a changing internal culture will also require increased stakeholder communication along with extra support for mental and physical health and wellbeing.
Investing in workforce optimisation and transformation is a highly effective way of building resilience within an organisation, regardless of industry. In the meantime, regular and transparent communication with team members needs to be a priority; good communication strategies help nurture great cultures. Part of this will involve ensuring that particular policies are up to date, clearly communicated and accessible for all staff. A good place to start is the organisation’s formal working from home policy which should include provisions for future organisational, structural and delivery scenarios.
And don’t forget that there are organisations out there who want to support the NFP sector so that the great work charitable organisations are doing for our communities can continue. Microsoft is offering Office 365 E1 free for 6 months to volunteers; this package includes Teams as well as email, file storage and more. Teams will be particularly useful for maintaining a healthy culture and level of communication; its video conferencing facility and other collaboration tools can make “business as unusual” feel a lot more like business as usual. Communitynet Aotearoa have published a fantastic range of resources about working from home as well.
Communicate. Collaborate. Innovate.
Above all during this time of uncertainty, now is as good a time as ever for not for profits to create open channels of communication with each other and other stakeholder groups. Innovative solutions for different ways of working and delivering services will require strong, collaborative relationships - both old and new.