Majority of NFPs Are Not Believed to be Well-Run, According to New Survey

A survey of the not-for-profit sector has found that less than one-third of respondents believed most NFPs are well-run, while only 14 per cent believed NFPs are adequately investing in internal capacity building.

The survey, conducted by Good Foundations in partnership with professional services firm PwC, aimed to offer insights into what makes NFPs well-run and what they needed to do to increase their effectiveness.

Only 29 per cent of respondents believed the majority of NFPs were well-run, down from 36 per cent when the survey was last run in 2015.

A lack of internal investment was one of the key reasons behind this lack of belief in NFPs and Stephen Penny, from Good Foundations, said this was not a surprising finding.  

“We all know NFP organisations are reluctant to spend money on themselves,” Penny said.

“We must change this mindset though, as if you have poor systems, ineffective staff, poor leadership and a lack of decent use of technology, the chances are that your programs are not delivering as much impact as they could. NFPs need to start thinking about prioritising smart internal investment options.”

The survey found the top three elements that were essential to being well-run were having great leadership, being crystal clear on purpose and employing and engaging effective staff.

Penny said a need to invest in people was a clear conclusion drawn from the survey.

“We need to upskill boards and management to be able to make the important internal investment business decisions. Having the right tools and frameworks available to help make good investment choices is critical,” he said.

“The sector also needs to start having conversations with supporters and the public to re-orientate their thinking to delivering results, impact and outcomes rather than just focusing on administration cost ratios.”

Rosalie Wilkie, a social impact partner at PwC agreed, and added: “The key question an organisation should consider is the impact they’re having. Understanding the drivers of this impact is critical to whether an organisation is well-run.”

Some of the major investment concerns among respondents, included retaining good staff (63 per cent), the ability to pay competitive remuneration (61 per cent) and being able to provide career development (58 per cent). Overall, 91 per cent of respondents felt a lack of internal investment had made a major impact on critical people areas.

Another factor that impacted on internal investment decision making was the skill and experience mix of boards, with the report questioning if there were enough people in board and leadership roles “with business investment skills within not-for-profit organisations”.

“The need to balance the head and the heart is essential in the sector but we have to enable organisations to determine the right level of internal investment to get the maximum return and outcomes,” the report said.

“The survey tells us that there is a strong correlation between being well-run and impact – 92 per cent of respondents agree or strongly agree that being well-run does correlate to delivering more impact.”

The report also outlined a need for NFPs to continue to diversify their income streams going forward, as an “over reliance on [government] funding will continue to challenge the long-term sustainability of organisations”.

“Charities must focus, improve effectiveness and become more strategic about other fundraising to manage this reliance on government funding,” Wilkie said in the report

“In relation to fundraising it is not just about large public appeals or events. It is about aligning the strategic aims of the charity with the key needs of the public or a specific donor.”