High-profile cases of corporate failure have dominated media headlines, overshadowing the long-term implications of the financial crisis for charitable, not-for-profit and voluntary organisations. The third sector not only employs vast numbers but contributes significantly to firms ability to meet critical corporate social responsibility objectives. Imminent cuts in public spending and the increased difficulty to secure private sector funding and sponsorship will take its toll on third sector organisations. How will these organisations cope with the challenges that the recession has created and what, if any, are the opportunities for leaders in this area.
Despite sources of finance from government, third sector organisations often face the same challenges as the private sector. Contrary to many of their commercial counterparts though, they also face the pressure of an increased demand for their services. Martin Pilgrim, Chair, England Council and London Regional Council, Prince's Trust and Associate, Criticaleye explains: "The third sector is facing a triple whammy with the recession. Demand for services is increasing. For example, in the first six months of the recession, the Prince's Trust had a 50 per cent increase in calls from young people seeking help and advice. At the same time, many businesses have cut back on CSR and individuals have reduced their charitable giving. And, the imminent cuts in major areas of public spending will make it more difficult for the third sector to win government funding for many programmes.
"For third sector organisations, times are very difficult. In the organisations which I am involved, there have been staffing reductions, pay freezes and some painful reorganisations - and these are bodies which did not have a lot of fat to begin with," Martin continues.
Stephen Bubb, CEO, Association of Chief Executives of Voluntary Organisations reiterates the problems that third sector leaders are facing. He says: "The recession poses significant challenges to third sector organisations, not least the financial squeeze resulting from falling income and rising demand for their services. However, the third sector's role in a recession is more critical than ever and as a consequence there are opportunities for the sector to cement its reputation as innovative, adaptable and effective.
"This said, our sector is much more than a sticking plaster for society's ills. We have grown rapidly over the past decade and we are now a strong economic force. We are now a sector which earns more than we are given and we are at the forefront of delivering many public services. We will not only be instrumental to combating the negative social effects of the recession but we also have the opportunity to stimulate the economic recovery. We must seize this opportunity," Stephen continues.
However, it's important not to overstate the lack of finance to third sector organisations in the downturn. There are still opportunities to attain funding and many organisations will continue to develop their CSR policies. Kate Rogers, Chair, Charity Investors Group says: "The main concern for charities at the moment is the decline in income from donations, events and investment. It is heartening to see the recent Charity Commission research that suggests that most grant giving organisations are maintaining their programmes through this downturn. However, charities should take this opportunity to look again at their long-term strategy, where possible diversifying their streams of income and setting an appropriate level of cash to be held back as reserves."
Indeed, the current climate creates some significant opportunities for third and public sector leaders to look at the way their organisations are run and ensure they are working as efficiently and commercially as possible. Duncan Lewis, Strategic Lead Marketing, Commercial and Communications, Commonwealth Games England explains: "Third sector organisations certainly need to think more carefully about attracting private sector sponsorship in the current economic climate. From our perspective, engaging in dialogue with potential sponsors and structuring the offering we put on the table responsively will be key to achieving funding. The squeeze on public finances will mean that all voluntary and not-for-profit organisations will be looking to create a better balance between private and government funding. Government will still play a role, but third sector organisations need to exploit commercial opportunities more readily to be successful."
What about individuals looking for non-executive roles in the third sector? Although this space has proved very popular for senior individuals looking to give something back at the end of their career, questions need to be asked about whether the impact of the recession on charities, voluntary and not-for-profit institutions will mean there is less space for non-executives looking to expand their portfolio. Martin offers this advice: "At times like this, the sector needs all the help it can get and business acumen as well as specific skills in things like finance or HR are always needed on the board. What's in it for individuals? I can't guarantee that it will be career enhancing but I do promise that you will get a great kick out of helping people whose lives have not been as blessed as many readers of this."
It's also important to remember that for many individuals, gaining a non-executive role in a voluntary or not-for-profit organisation is an important first step in their portfolio career. Charlie Wagstaff, Managing Director, Criticaleye explains: "Gaining a trustee or non-executive role in the third sector can be an important development tool and provide a great experience for those looking to move into a portfolio career. They are invariably value focused and provide effective learning environments as well as the opportunity to do something which individuals may be really passionate about or have a personal or emotional tie. These organisations can provide a great platform for honing NED advisory and influencing skills for future roles."
If you are interested in exploring some of the issues in today's update further, please see some of our other pieces of Insight. Specifically, I would point you towards Transfusion: Public to Private looking at the differences in working practices, performance management and skills from the public to the private sector. Also see the key outtakes from a breakfast forum that we held Exchanging Best Practices: What Can the Private and Public Sectors Learn From Each Other? where an expert panel looked at the differences between private and public sector with special attention to how they handle change.
Please get in touch with me if you would like to discuss any of the issues raised. I look forward to seeing you soon.