Business in the Third Sector -Think Tank Analysis

Most Australian Not for Profits believe that their organisations need to be more business-like but not at the expense of their mission — and perhaps a few businesses could well benefit from studying the practices of effective NFP’s!

That’s the finding of Pro Bono Australia’s latest Think Tank topic, Business in the Third Sector.

Some 90 Think Tank members from six states completed the survey – 75 % are employed within the Not for Profit sector, 18% within the business sector and 7% from the government sector.

There’s no doubt that sound financial management builds confidence amongst donors. Our Think Tank respondents were clear on this issue and many suggested that NFP’s need multi-skilled employees with a good business sense and experience as well as being able to work directly for the needs of their cause or mission.

The problem for many is that chasing funds can sometimes be a distraction from core Not for Profit activities.

As one respondent described it – Fundraising is often regarded as being for enthusiastic amateurs and as a result it is too often ‘hit and miss’ in its strategies….the more strategic a NFP is, and the more people rely on business plans the better the fundraising outcomes ought to be.

One volunteer based organisation said: It’s a long slow climb and requires not only resources but a change of attitude and organisational culture and individual thinking to run like a business.

Another said: We also have to involve people and manage often disparate groups which require quite different skill sets.

The participants were asked to respond to the statement that good Not for Profits need to run like a business to succeed.

One respondent said: My response is it is incomplete, glib and can be misleading. Not for Profits certainly need to utilise some business-like processes and procedures to ensure operational efficiency and good financial management. However, they are not commercial businesses, they need to play a broader social role that needs to consider objectives beyond profitability, and, at times, the business sector behaves extremely badly and is hardly always a desirable role model for the third sector.

Another said: We have a responsibility to provide accurate and honest feedback to our donors. However, to run as formally as a business is extremely difficult for some not for profits because turnaround of donations isn’t as timely as a standard business operation with stock in and stock sold etc. Deliverables for not for profits can take years. I believe there’s an enormous amount of public education required about this, but that’s a tough one to ask not for profits to do – because I’m sure donors wouldn’t appreciate their money being used for that!

The sticking point for many is that donors want to be assured that their gifts are used for the benefit of people in need and not for the benefit of employees of charities or the basic tools they need to run the organisation.

One respondent said: I refer to my organisation as a “Not for Loss” – I need to make a profit in some areas to subsidise others!

Another respondent currently working overseas makes this observation: I am currently in the UK where Not for Profits are experiencing mainstream success with wristbands branded with slogans like ‘an end to poverty’. There has been criticism that if NFP’s use the fickle vehicle of fashion and ‘cool’ to promote themselves they risk losing when/if they go out of fashion… but I think this misses the point. If Not for Profits don’t aim to be a popular choice then we sell ourselves short; once we have brand awareness then we have to find new ways to stay there. We will always have to work hard for our dollar; we should look to the business sector to find ways to work smarter. That said, people join the sector with the expectation that the loss of potential income is balanced by a supportive working environment. Not for Profits which preach a particular model of care/ hope for clients yet treat staff in an uncaring way in the name of business efficiency do themselves a great injustice.

Another says : It is important for any organisation to be run with structure and financially sound goals. In all ways Not for Profits need to be more transparent than their private counterparts but will have to play at real business when interacting with external profitable businesses…without losing sight of our core purpose of being. I also think some NFP are hell bent on becoming more business like then some businesses.

Participants were asked where they go for help on business-related issues. Some 67% turn to professional advisers and board members for assistance. The Australian Tax Office and Internet sites were also popular sources.

As part of the ‘business-like’ operations many organisations listed the following practices as part of their new or evolving culture: Strategic planning processes, risk management, sound financial management including regular audits, performance appraisal, HR policies that include training and return to work support, regular assessments of board structure and performance and strategic staff appointments for specialist skills.

One respondent said: We have adopted the Australian Business Excellence Framework. We review our systems against different aspects of this framework regularly.

Another offered this: We changed our staffing structure and sacrificed an admin position (the only one) for a finance officer who had years of experience in the NFP sector. All other staff are now responsible for their own admin. We also formed an advisory panel where further advice can be sort free.

And this: We use balance scorecard; have a CEO dashboard; monitor results monthly; have staff scorecards; and KPI contracts. We have enlisted Board Members from a wide range of business backgrounds to support our operations. We also have a number of volunteers from the corporate world who help us with accounts, IT, marketing etc.

68% of respondents say they have a long-term strategic business plan. Just over half of these organisations (37.7%) have five-year plans in place, while 25.5% have 2 year plans. Just over three percent have a ten-year strategic business plan. Some 72% of Not for Profits actually review their strategic plans.

Part two of the Business In the Third Sector Think Tank Survey looks at dealing with the corporate sector. We will review the results in the next edition of Pro Bono Australia.

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