In February 2022, we surveyed senior professionals at not-for-profit organisations to develop a deep understanding of the sector. In this article, you’ll discover the top strategic challenges for NFPs in the next three to five years, and why a health check of the organisation’s approach to strategy may be needed.
Survey findings at a glance
Top three strategic challenges for NFPs in the next three to five years:
- 27% say attracting and retaining the right talent (staff and volunteers)
- 22% say non-government funding sustainability
- 16% say sustainability of government funding
Talent and the sustainability of revenue dominate as the challenges for NFPs to achieve their strategic endeavours in the coming three to five years.
Only 53% of respondents said they had no barriers to implementing a formal strategic plan, however, all responding NFPs recognise that their organisation must evolve in the coming three to five years to address the current challenges and to survive.
The dominant solution to the challenges cited is to grow services and funding sources. For many of the organisations with this expectation and aspiration, the questions must be asked, without a strategic plan how is it known that this is the right solution, how will it be achieved, and lastly, does growth necessarily improve impact?
COVID-19 has impacted attitudes to strategic planning. 85% of survey respondents confirmed that it has led to a refinement of future planning processes. Most commonly, organisations are now intending for plans to be reviewed more frequently and with an increased focus on short term objectives.
Almost 20% of respondents state that there will be increased long term planning, suggesting that these organisations had previously been short term focussed and not in a position to look forward beyond the numbers in the current year budget.
Strategic planning is not easy for all organisations, with the internal challenges of resource constraints (people, skills and financial) prohibiting nearly a third from implementing a plan. Interestingly, 25% of NFP respondents are of the view that the everchanging environment is a barrier to long term planning.
This need not be the case. This ‘new reality’ can render a static plan redundant, however, working toward a vision that is broken down into incremental steps or goals, that builds on the previous achievements, can resolve this challenge. Building a strategic plan in components allows for assessment and provides flexibility to pivot if the environment changes, whilst remaining accountable to longer term priorities.
Video: Partner Mark Harrison tells you if growth should be part of your strategic plan.
Examining the post COVID-19 landscape, NFPs identified that the key challenges to meet their ambitions are attraction and retention of people, and the sustainability of revenue.
Uncertainty of revenue, government and non- government sourced, continues to be a challenge. It was also a leading cause for uncertainty in our last NFP survey completed in 2019.
Increasingly, contestability for consumers, government contracts and grants, together with greater participation from for-profit organisations and lower expected investment yields, results in the ongoing inability to reliably plan for revenue.
In response, NFPs must continue to build their brand, engage consumers, measure their performance, be ready to respond to revenue disruption, and have cost control measures in place that are being monitored and reported on an ongoing manner.
It was hardly surprising in 2022, to see the attraction and retention of talent being a threat to NFPs achieving their long terms goals.
The same would be said by many for-profit organisations. Interestingly, the talent constraint was more pronounced by our survey respondents in Queensland and WA, being two states which experienced less time in ‘lock downs’.
Furthermore, the competition for talent against high paying mining and infrastructure employment opportunities also contributes to this challenge.
Strategic responses to challenges
Finally, what do organisations plan to do in response to these challenges? The response is dominated by NFPs seeking growth through expanded service delivery and/or the adoption of technologies.
One in three responding NFPs incorporate at least one growth focused solution, whether by merger (although this is significantly less popular than in prior surveys), seeking additional/diversification of revenue streams or simply obtaining a greater share of the market.
None of these solutions are easily achieved, and if obtained may:
- Come at the expense of another market participant,
- Require additional people resources, and/or
- Need an accelerated digital transformation to deliver services.
If this aspiration is achieved, the NFP sector will continue to be competitive, with the likely outcome that large organisations will get larger, and some organisations might fail.
For two in three NFPs, technology is a potential solution to resolving the identified strategic challenges. This may be a logical solution to some people challenges, and particularly in the delivery of operating efficiencies.
However it does not recognise that most service delivery is ultimately undertaken by people performing tasks that automation is not yet equipped to do, or consumers are not yet prepared to accept
(not to mention the capital cost of adoption). It will be interesting to observe where the technology gains are realised in organisations, beyond back-office efficiency and use of data to support decision making.
What this means for you:
NFPs should consider a health check for the organisation’s approach to strategy to ensure:
- A strategic plan is agreed and clearly
- The strategic plan is translated to a realistic action list.
- There are clearly identified owners for actions under the strategic plan.
- The owners of actions are capable of delivering, without damaging other aspects of the organisation.
- Organisations are tracking progress of the strategic plan.
- It remains flexible enough to respond to market changes and opportunities outside of the annual cycle.
Return to the not-for-profit survey insights hub here.