The continued environment of austerity and pressure on the public purse (as well as individual donor wallets) are creating a new environment for charities. An environment where they have to be able to demonstrate they can deliver better value than any in-house or alternative third sector or commercial supply option.
In this tough market, when they submit grant applications, third sector organisations will need to offer clear benefit statements at the outset, monitor and report on delivery progress, whilst having robust performance data to evidence it.
Charities that have been dependent on grant funding and a regular and robust flow of donor income, will have to show how funding invested in them will provide sustainable solutions rather than contribute to future dependency on gifts and grants.
They need to make sure they have the right skills and business development (from opportunity identification to closing a deal) capacity. And they’ll need the base business information and ability to analyse, track and trend customer preferences. Supporter leads and marketing teams are increasingly alert to the need for proactive promotion that links donors to their cause, using case stories that enable givers to get the philanthropic return they seek. Like their commercial counterparts, third sector marketers and funding leads are increasingly calling for data-driven approaches that enable them to profile, analyse, track and trend their donors and volunteers.
The shift to more commercial approaches within the sector means developing a clear response to increasingly ‘intelligent commissioning’: one that maximises commercialism but within a definition that sits appropriately in the sector. Our recommendations are:
1. Don’t be ashamed to be seen as a business – we all need to start seeing third sector bodies, especially the larger named brands, like Cancer Research UK, Oxfam and National Trust, as businesses. Whatever guise and purpose they pursue, there’s no escaping the fact that if they don’t consistently generate a healthy surplus (i.e. receive more money than they spend) they’re unsustainable.
2. Invest appropriately – commercial approaches must permeate the culture and how organisations prioritise spending. Deciding not to invest in modernising technology may seem a good decision in the short-term but is unsustainable in the digital age. Not making it as easy as possible for donors to understand and register for gift aid is a missed revenue opportunity.
3. Get to know your customers - organisations need to really understand which services donors, users and volunteers need. We’ve worked with a number of organisations in the sector who cling to outdated customer profiles or services with dwindling numbers because there’s a perception of risk or letting people down by changing the service. Don’t change it without evidence, but likewise don’t fail to mobilise data collection and performance trend analysis.
4. Get to know the competition – every successful business knows it has to stay one step ahead of the competition. The third sector is perceived as collaborative, mutually supportive and even soft. There’s a time and place for collaboration between organisations but there’s equally a need to know what others are doing to stay one-step ahead in the crowded competitive landscape.
5. Develop a more commercial approach to payment for performance – linking delivery to user outcomes is difficult even in the commercial world. It’s also an area that commissioners still have to grasp consistently and maturely in the public sector. However it can help charities become more commercially ‘savvy’. We’ve done this ourselves with our award-winning Argenti telecare service. We agree measurable outcomes and commissioners pay depending on performance.
Developing a little more of the commercial edge and focus will help charities prosper in an increasingly competitive market. And it should convince commissioners they can not only meet users’ needs, but deliver real outcomes, improving the quality and efficiency of our public services.