The Cost-of-Living crisis is catching many charities in a pincer movement – as the need and demand for services rise, available funding declines. At the same time increased inflation levels mean the costs of staff, energy and vital provisions such as food have increased to budget-breaking levels.
Whilst this context and the challenges it presents will prompt difficult decisions for many, it could also be the trigger for looking even more closely at how effectively our charities utilise their resources. Silver bullets are in short supply, but hopefully some of the ideas below will help those wrestling with the challenge of balancing the books whilst trying to keep the wheels turning.
Time for a strategic re-think?
Rather than tinkering around the edges, re-imagine your strategy to fit new realities.
Is now the time to cease work that has never quite fitted – potentially handing it to a better-placed provider?
Would some form of merger or greater integration with a partner help deliver impact?
Strategic decision making is much more effective from a position of strength – don’t wait until circumstances force your hand.
Look at Service Models
Are services still as effective as when they launched or has inertia eroded their impact?
Could a more innovative approach bring greater impact for less or the same cost?
People are our greatest asset
Staff productivity is a good thing if the focus is on what level of service can be provided for the costs incurred – are there investments that would boost it?
Are there areas that could be outsourced, reducing fixed costs and helping to tap into new thinking that is difficult for smaller employers to harness?
Bricks and mortar
Hybrid working has helped many to downsize office space, but cheaper locations can also produce significant savings.
Could you share an under-utilised property with others – whether it’s yours or theirs?
Professional fees
Are your advisers really providing value-for-money – when was the last review/re-tender?
Would it actually be cheaper to insource anything?
Work your finances
Years of low interest rates mean that many charities (and banks!) have forgotten about shopping around to find the best deals – 5% returns are perfectly achievable at the moment.
Investment fees are another particular cost that can daunt trustees from challenging.
Process evaluation and re-design
Cost reduction isn’t a panacea – evaluating work through tools such as Lean or Six Sigma can reduce complexity and help to focus resources on the areas of maximum impact.
Future readiness
Current economic conditions are unlikely to relax any time soon, so now may be the time for trustees and managers to adopt a more agile, responsive and entrepreneurial mindset.
Conclusion
Given the challenges facing the social sector, I have tried to highlight a range of options for glimpsing a better future. Some are discrete, while others are more structural – that’s deliberate, because the resilience of our sector is matched only by its diversity. There are no silver bullets, but hopefully this stimulates some critical thinking and maybe pushes some towards difficult, but necessary decisions that help charities to find ways of achieving more with less.
NB: A longer version of this blog appears in Charity Finance magazine, October 2023.