When pursuing the holy grail of sustainability, as all charities and social enterprises must now at least claim to be doing, the major emphasis is usually on developing new sources of income.
As the National Council for Voluntary Organisations (NCVO) Sustainable Funding Project explains: “Increasingly charities are being told to move away from grant dependency, become more business like, earn income, develop an asset base and consider loan finance. And opportunities for delivering public services are increasing. Enabling organisations to see the bigger picture and develop the skills and resources to take control of their future is critical.“
One problem this creates, as already discussed, is that organisations attempt to diversify their income by carrying out activities that they don’t know how to carry out and which end up losing money rather than generating a surplus.
Another problem is that the emphasis on new income streams doesn’t encourage organisations to look at the other side of their balance sheet. If you can get funding for doing new stuff that aims to increase sustainability, you’re less likely to focus on not doing old stuff that decreases sustainability.
At a very basic level, it’s often possible to make small but meaningful cuts in your costs without making any significant changes to what you do. The vast majority of social sector organisations that produce printed materials spend far too much on printing and, if they contract it out, on graphic design. These industries are viciously competitive and, in the case of printing, half an hour’s work on the internet will enable you to find out whether you’re currently getting a good deal.
Obviously, the value of doing this depends on the situation. If you’re printing a few hundred business cards, it’s completely justifiable to pay over the odds (£50 rather than £30) to support a local printing business. If you’re printing thousands copies of a magazine (£5000 rather than £3000), it probably isn’t.
Beyond just not paying too much for stuff, it’s also worth looking at spending on things that are useful but not absolutely essential. For example, does everyone in your organisation need to have their own phone line? If you’re the Samaritans – or any service that people need to be able to contact in an emergency – the answer is probably ‘yes’. If you’re an organisation doesn’t specifically deliver services via the phone, it’s probably “no”.
The specific examples will be different but it is possible to save enough to pay a part-time salary by doing the equivalent of cutting your print bill and having fewer phone lines. I know because my organisation has done it this year.
Unfortunately, though, for most of us the biggest costs aren’t either direct costs (what businesses call cost of sales) or overheads. Our biggest costs are salaries and – while finding ways to spend less money on printing can be good fun (if you don’t work for the printing company that’s losing the business) – making people redundant is usually a horrible experience for everyone involved.
The combination of the horror of redundancy and the entirely commendable desire to continue to provide work for valued colleagues does not always produce good decisions. While there are sensible things than can be done – reduced hours etc. – to keep a staff team together over short period of time, it’s vitally important that this doesn’t slip maintaining roles than aren’t being paid for by either grants or trading income on the basis that ‘something will turn up eventually’.
As someone running a charity or social enterprise, your job is to deliver positive social change for the people who depend on your activities, goods and services – not to find ways to keep people in work. And even if the specific aim of your organisation is to create jobs, that doesn’t include jobs that nobody is paying for. Failing to understand that might be comforting in the short term but it just makes things worse in the long term.
Assuming you’ve been employing sensible, hard-working people, it’s not going to be possible to make people redundant without reducing the ability of your organisation to carry out tasks but – faced with limited resources – it’s important to choose which tasks you continue to carry out based on the extent to which they’re actually useful.
For example, one consequence of New Labour’s capacity-building binge era was that many relatively small organisations have been encouraged to develop a wide range of complex systems to produce detailed financial information to enable them to compete for public sector tenders. In many cases, even if these organisations succeed in winning small tenders, the surpluses generated from doing so will be less than the cost in person time of generating the information.
It’s important that organisations do fulfil legal requirements and have a good understanding of their financial position but beyond that you running the risk of spending £10,000 worth of person time discovering the details of your £10,000 budget deficit. If the public sector is not giving you money to waste money doing this, it’s probably a good time to stop doing it.
Once again, specific examples will vary but most organisations will have some tasks that they’ve been carrying out – initially for good reasons – that, in a situation where there’s less person time available over all could just not be carried out.
None of these points are arguments against diversifying income but, getting people to give you more money to do stuff if not easy and is a process that is only partially controlled by you. Relatively speaking, spending less money is quite easy.