How do you know when your NGO needs to change?

You never really know when the best time to reinvent and change is, but you certainly know when that time has passed.

This is what Charles Handy, an influential living management thinker, said to me at one of our charity talk series at Cass Business School. Charles has often been listed in the Thinkers 50 list and has a passion for charities and nonprofits.

He described organisations’ delivery curve over time as accelerating, peaking and then falling away as business models become old, or dysfunctional organisational structures start to hamper productivity. Before the point of plateau is when to start reinventing and reimagining your organisation. This gives a second curve that eventually drives your work to a higher level.

This is exactly the same with financial sustainability. We have to reinvent and manage any downturn in funding before the organisation plateaus.

How to start assessing your model and financial sustainability

I work with lots of NGOs in my work, who have a fixed model and way of doing things, but there are some important questions NGOs need to be asking about how they work. With greater competition for funding and a rising demand for our work, are we really making the most of our resources? Are we too set in our funding models of grants and donations, to notice innovation like social investment and crowdfunding? How is digital impacting our work? Are we on top of the “quality” infrastructure we need to deliver this?

At Cass Business School, we developed a framework to identify what NGOs need to assess when it comes to change. The RISE Framework recommends organisations should focus on:

• Reimagining their work: Academic research by Chapman and Robinson (2014) [PDF] identified that NGOs are resilient because they reimagine and reinvent themselves, and are creative with resources, including funding and money. NGOs need to create vibrant and listening organisations across the world that can adapt to uncertainty and change if they want to achieve their missions.
• Impact: We need to keep ruthlessly focused on impact and our beneficiaries. Looking at other resource-constrained organisations, there seem to be some tough choices for large INGOs to make. We need to get better at measuring the social outputs and outcomes we create, so we can demonstrate our legitimacy and our impact as individual organisations. The Business School’s research has shown that finance directors and finance staff are less likely to think about impact than others. We must help them link money to the outcomes and impact we deliver.
• Sustainability: We need to develop robust business models, which have well-funded infrastructure at the heart. At the moment, I see a culture of saying we will “make do”, where we are serially underfunding our infrastructure and not considering our business models appropriately. NGOs need to diversify income streams and find ways to spend more on overheads to build our capacity for the future.
• Efficiency: We need to focus on our efficiency, so we are using our scarce resources in the best way. How do we do this creatively, and give ourselves the time to properly reflect on whether we provide value for money?

But behind the answers to these questions sit people, leadership and change. We need to inspire people to make brave decisions if they are to help their organisations adapt and evolve for the future.

The problems NGOs need to tackle

The single biggest problem I am seeing is that charities don’t necessarily understand their business models and cost base effectively. They don’t have an idea of how much they subsidise a grant or contract. At the same time, they are failing to change their business models as funding flows change.

The second biggest problem is that charities are not innovating as they should be. NGOs often step aside from collaboration and working together because they think only they know the answer.

We need to assess where we are, and where we want to get to. We then need to understand that money underpins our ambition and creates the change we want to see in the world.

Change can come from many different perspectives. I think we need to be more thoughtful about how our money creates and links to impact. Money also has a large part to play in funding new innovation and we should consider how we use our reserves to achieve this.