Not for profits’ untapped opportunity for transformation
We do a lot of work across the not for profit (NFP) sector and there is a common pain, a theme to the observations and I think an untapped opportunity to deliver a transformational organisational win.
Like all organisations, NFPs have a strategic purpose and objectives framework. As a public-facing organisation, awareness of this framework is what drives funding and so they are typically very public, clear and transparent.
The purpose and objectives of the organisation are played out in programs and services that then go on to deliver aligned outcomes, like improved healthcare, better education, increased access to resources and effective and efficient land usage. Each specific program or service design is a defined series of activities that support each outcome.
Not for profit organisations also have outputs, clearly definable non-financial outputs that should be delivered: 12,000 care packages, 5,000 tonnes of recycled waste, 12 trained nurses, etc, and of course the classic financial budget, in terms of funding, expenditure and acquittals.
Here’s the key issue in all of this: outcomes and outputs are seen as operational, whereas budgets is seen as financial. Typically the two are like ships passing in the night, except for when they briefly come together in a strategic review or on the pages of a glossy annual report. Indeed most NFPs have separate processes for the setting, reporting and performance management for the two perspectives; separate processes, indeed separate applications and separate stakeholders. Quite often I find at least one half of this operational / financial equation is the hands of the unpredictable spreadsheet and file system approach.
The opportunity for transformational change is to deliver these in one integrated performance framework. Why?
- Time and cost saved. Professional Advantage frequently transforms the simple financial budget process in these organisations from long, drawn out regimes and delivering 90% productivity gains and eliminating non value-added activities. We see a similar picture on the flip side, just different resources, constraints, and bottlenecks. So this translates to greater value for money and more focus on what the organisation is primarily about.
- The convergence of operational and financial thinking will bring together often disparate stakeholders in a shared and common framework. This has massive long-term change benefits. I frequently hear “we do budgeting and they do planning”. It’s a cultural and physical chasm that must be bridged in a forward-looking organisation. Again what typically alienates users and managers is being asked to participate in multiple regimes, with multiple user experiences, in unfamiliar terms. Does the program manager get enthused about doing a financial budget? Generally not.
- Performance should be tracked and measured at the speed of business. Indeed the executive and management need a current portfolio management view and insight across all perspectives. The conversation should be about where risk and opportunity is, with consideration of lead, not lag indicators. Considering all perspectives, going back and forth between a strategic top down view to the underlying programs and services.
So cracking this nut is transformational and yes technology exists that can enable this mission. In fact, this is an area that Professional Advantage has a depth of experience in and can work with you to reach this high performance vision.
Step outside the NFP sector and these challenges exist for others, such as government and government agencies, and this aligns with the work we do in that sector with integrated and evidenced-based reporting. They have the need for transformational change, too.
Let’s not underestimate the challenges, such as:
- The departmental and organisation tendency to see the problem from either side of the chasm.
- Software vendors and resellers focus on serving this divide, perpetuating the problem with technology offerings, that cannot bridge the operational and financial requirements. Indeed I sometimes think that many think it’s not feasible because they frame the problem in terms of old and conventional tools. Often the advisors and third party consultants that these organisations reach out to are seeking answers too.
- Many outcomes are hard to measure in terms of program and service cause-and-effect. Rather they are longer running measures that traverse concepts like financial years, often including external measures, covariant and indicators. Nevertheless technologies should be able to hold these alongside the programs and services to add context to the question: are we performing against our strategic objectives? And yes they do exist. We’re working with them every day.
What have been your experiences? I’d be interested to get your thoughts on this. Comment here or on the Professional Advantage LinkedIn page.
You can read other blogs for CFOs by Jonathan Marcer here.