Improving productivity in your charity

Sean McGurk
31/05/2022
A 2019 survey undertaken by the Access Group revealed that 87% of decision makers in mid-sized charities based in the United Kingdom, found productivity a challenge that impacts staff, fundraising and the quality of service for beneficiaries. And this statistic was pre pandemic!

Amongst many other issues the pandemic has highlighted, one significant challenge is charities are under increasing pressure, as well as scrutiny, to demonstrate efficiency and transparency while delivering evermore complex services in a difficult funding environment.

More recent economic matters offer little respite. Annual inflation hit a 20 year high of 5.1% for the year to 31 March 2022, driven by climbing petrol, home building and food costs. By its very nature, high inflation eats away at charity reserves and erodes the value of existing donations, grants and contracts.

At the same time, the rise in cost of living is hitting disposable incomes and will likely lead to an increase in the 2.9m people, or 11.8% of the Australian population assessed as living in poverty by the recently released Poverty and Disadvantage in Australia report from Bankwest Curtin Economics Centre. Consequently, charities are likely to be exposed to not only another financial hit, but simultaneously, a higher demand for services.

Such an operating landscape means that productivity is as much of an issue in the charity sector as it is for any commercial organisation. More than ever before, charities are seeking to make effective change across their entire organisation in the expectation they will have a positive impact on culture, people and ultimately frontline services and beneficiaries.

Governments in Australia invest heavily in charities. The seventh edition of the annual Australian Charities Report detailed that nearly half (47%) of the reported $166 billion charity sector revenue was derived from government funding. Commissioning charities to deliver vital public services is a large part of that $78 billion spend. On top of that is the income that the federal government forgoes in the shape of charitable tax relief on the $11.8 billion of reported donations.

With such high levels of investment in the charity sector in Australia, it is surprising that integrating the charity sector into a broader productivity policy agenda and national accounts framework has not been a government priority, as identified in the 2017 Productivity Commission,Non-market Sector Productivity,Shifting the Dial: 5-year Productivity Review,Supporting Paper No. 2.

So why should productivity matter in a charity?

Firstly, as the main source of input into charities is the Australian taxpayer, such measures are important in being able to demonstrate that good value for money is being obtained. Secondly, measuring productivity can help to drive efficiency and set policy that can lead to improved outcomes for users.

For charities looking to improve productivity the following four key factors should be considered:

1. Innovation

Not simply the use of new technology, but also a focus on the development of new services and products that can have the effect of reducing costs or increasing output or quality.

2. Workforce

The nature and use of the workforce, particularly ensuring good management practices are in place, are crucial. Increasing skills and training, improving health and wellbeing and addressing diversity are all proven ways to productivity improvement.

3. Organisational behaviour

Behaviours which influence an organisation’s approach to productivity improvement include a lack of appetite resulting from overconfidence in the organisations ability, lack of awareness of performance relative to peers, insufficient resources dedicated to identifying and applying new ideas, and too much focus on day-to-day operations at the expense of longer-term improvement.

4. Networks

Organisations and networks that help the flow of knowledge and ideas can be key catalysts for both behavioural and practical change. This ranges from the provision of simple information, benchmarking tools and opportunities to participate in peer networks, to the more intensive provision of diagnostics and consultancy, right up to the supply of products and services which can be deployed to boost organisational performance.

Improving the productivity of your charity is much more than just cutting costs or increasing the volume of activity at the expense of quality. It is about increasing the charity’s effectiveness, or to put it another way, it is about maximising outcomes using the available resources at your disposal.

To help your charity along the path to productivity, get in touch with our Internal Audit team today.