Charities must know three Rs
Charities need to focus on the ‘three Rs’ – retrenchment, revolution and resilience – in order to survive in the current climate, according to Geoff Mulgan, director of the Young Foundation.
He was speaking at the CFDG Annual Conference – which was this year dubbed ‘Austerity and Innovation’ – where speakers and delegates were focused on the potential impact of the change of government and expected cuts in funding. Mulgan ran through the ‘12 economies’ – the measures charities ought to consider, not just to help them save money and retrench, but also to adapt and to earn new streams of income – the revolution. ‘If you don’t do the retrenchment, you won’t have any cash and if you don’t do the revolution, you probably won’t survive.’
The framework has been developed at the Young Foundation to provide an organisation with all the options it will need to consider if it faces cuts in funding. Some of them are straightforward: cutting waste, trimming across the board, delaying certain investments, or ceasing outright particular activities. They may be hard to do, but are quite straightforward. ‘But there’s then a set of economies which are more challenging and it’s much rarer to find rigorous focus on them in the charity world,’ said Mulgan.
Economies of scale, for example, may mean either merging an activity with another organisation, or choosing to focus on what the organisation does best. ‘Care-based services don’t easily scale, but many functions do have substantial unrealised economies of scale.’ Economies of scope may involve aggregating functions under one roof or service. ‘There are economies of flow, a concept that came from Toyota… this has been applied in hospitals, there you look at the whole flow of the “service journey”.’
‘If you look across the entire process’, he said, ‘you can potentially see unexpected costs arising, which can be dealt with’. He made the point that half of all apprenticeships are unfinished. To find out why and cut that figure would save substantial amounts of money. But those economies that can help generate new sources of income will help charities most of all.
An example, he said, is the social impact bond… a whole new family of financing devices. The first of these was intended to tackle recidivism in a charitable project in which the charity would be paid for reducing the number of prisoners returning to Peterborough Prison.
Furthermore, the new government’s commitment to putting every contract over £25,000 in value online will enable organisations to bid for relevant projects more easily – although they may also face more competition from business, too. Even in a crisis, he concluded, there are still opportunities and the stimulus of crisis could help charities to get sharper and better themselves – if they are smart and, in many respects, hard-headed.
www.youngfoundation.org
www.cfdg.org
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