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Managing in turbulent times June 09
- 1. Managing in turbulent times: problems, opportunities and responses in the downturn Northamptonshire Conference for the Third Sector February 2009 Karl Wilding NCVO Research Team January 2009 Contact: [email_address]
- 3. The growth in charity numbers, 1960-present
- 6. Inflation adjusted total giving (US) Source: Giving USA Using one definition of a slowdown, giving grows an average of 0.8% in years with a slowdown
- 7. Foundation Giving, 1997-2007 (US) Source: The Foundation Center , Foundation Growth and Giving Estimates , 2008. Figures estimated for 2007. Dollars in billions (inflation adjusted) Total Giving During Recession Years: 1975; 1980; 1981–1982; 1990–1991; 2001–2002.
- 8. The Sector’s income sources Statutory sources & Lottery: 36% The public (giving and purchases): 37% Other VCOs: 11% Private Sector: 4% Interest & Dividends: 12%
- 9. How did government respond in 1991-93? Local Government Central Government Commentary A majority report no change in attitude of government to the sector – but where there was a response the most widely cited response was a funding cut.
Notes de l'éditeur
- Commentary The CC register is the only indicator of start ups/closures we have: however, major changes are likely to reflect administrative effort. There does not however appear to be significant changes in start ups or removals at times of recession. The important point also is that downturns might lead to a redistribution of income – to be frank from the weak to the strong. Some have argued that, at an aggregate level, this will lead to an improvement in efficiency. This however only relates to the public services delivery function of the sector.
- Commentary The CC register is the only indicator of start ups/closures we have: however, major changes are likely to reflect administrative effort. There does not however appear to be significant changes in start ups or removals at times of recession. The important point also is that downturns might lead to a redistribution of income – to be frank from the weak to the strong. Some have argued that, at an aggregate level, this will lead to an improvement in efficiency. This however only relates to the public services delivery function of the sector.
- Unemployment might be the biggest single political issue facing the government Public sector funding of the sector will certainly be affected. As unemployment rises and tax receipts fall, and the government continues to maintain public confidence in banks by supporting failed financial institutions, it seems inevitable that future governments will seek to rebalance the public sector balance sheet by slowing down public expenditure. This will be particularly challenging in the light of increasing need for many public services, including for hospice and palliative care. Consensus forecasts are that growth will return in 2010, though some are saying 2011. I realise it might be easier said than done, but its important to remember that the economy will turn upwards at some point, so charities do need to keep an eye on the opportunities that will shape your future once the upturn begins.
- Commentary The black bars indicate years with a month or more of recession. Giving does not go down during all recession years. It rose or stayed stable (adjusted for inflation) in 9 of the 15 years on record with at least one month of recession.
- Dependence upon philanthropic support from individuals: unpaid time, charitable donations (whether actual or promised in the form of legacies) and other charitable purchases; Dependence upon statutory sources of income, whether contract income for the delivery of welfare services or grants from government agencies (including the Big Lottery Fund); Reliance upon philanthropic support from other institutions: grants from trusts and foundations (which implies significant recycling of capital within the sector); Reliance upon investment income, which in turn is a function of the performance of equity markets and property markets.
- Another potential challenge for the future is that further rationalisation of contracts may bring to the fore potential contradictions with the government's localism agenda, which promotes local and personalised solutions to people's needs, user involvement and co-production. Will niche local providers be squeezed out?
- Recheck your mission. How are social and demographic changes affecting the number or types of people needing hospices? How are needs and preferences changing? Should you focus on your core mission or experiment with new ideas? Ensure that their mission and the needs of their users is at the heart of all actions taken in relation to the recession Review the needs of their clients/users/beneficiaries in order to better plan and target the support and services they provide
- Planning. It's all a lot easier if you can try to stay a step ahead. Scanning the horizon, looking forwards, is an activity that management should both do themselves, and encourage their people to do. 1. What trends are emerging - use 3s4.org.uk? 2. Which trends will affect us most? 3. How shall we respond? Ensure they have in place good systems for receiving information about financial performance and can act quickly and decisively to a sudden downturn
- Closer eye than normal on cash flow and budgets, assets and investments, and fixed costs. Keep downward pressure on costs and keep an active management of investments. Diversifying income streams is essential, whether that's a broader range of grant funds or, preferably, a broader range of income types including earned income and loans Investment in new technologies might help reduce costs in the long term eg recruitment Consider ways in which they can reduce their costs including through making use of bulk purchasing schemes and more effective use of technology Is your financial management system up to the job? Are you able to reforecast every month so that you know exactly where you are?
- People. In turbulent times, the leadership role of a management team becomes even more important. People's performance right across the org will drop in situations of uncertainty, so its imperative that there is clear communication pitched at the right level of honesty. This should include things the Management Team don't know yet, but are still planning for. Communications also need to include the positives - the importance of the work and the great stuff that the org achieves.
- Partnerships. Hospices already work well together. Management teams should continue to look at joint working, both through Help the Hospices and bilaterally, for example to share HR functions. And beyond the hospice movement what other collaborations can be developed to increase resources, reduce costs, or have an even greater impact. Consider whether their missions could be better fulfilled my merging with other organisations
- Turbulence is a good analogy! The flight will be very bumpy, uncomfortable for the passengers. Many will be frightened – they might not have experienced turbulence before. But turbulence doesn’t imply the plane will crash or that passengers will be hurt – if those who are flying the plane have reliable instruments they can avoid the worst of the turbulence. Moreover, if they communicate with passengers and air traffic control they will manage people’s fears, which themselves might be damaging And, at some point, there will be blue skies ahead...