Non Profits: Improving efficiency and productivity

Recent surveys carried out on the state of the charity sector show a fall in income, reserves and cashflows, with a concern reflected by some that many charities will not survive the current challenges the sector is facing. Every day seems to bring news of yet another charity having to make significant cutbacks to survive the impact of the current crisis. Undoubtedly there will be mergers brought about by necessity. To help cope with the challenging environment of tightening resources and increasing demand, charities need to focus on improving wasted effort and making improvements in productivity.

Download pdf

Productivity is a measure of efficiency that converts inputs to hopefully useful outputs. In some cases this is easy to do, but for the charity sector it can be more difficult when there is a need to focus on measuring outcomes and impact.

Our latest update looks at how charities can manage the impact of tightened resources and increased expectations from stakeholders and regulators over the last few years, including:

How to improve productivity – it is often supposed that raising productivity means increasing output, and this can be even more complex in a charity context. Generally in charities, the people paying for the work differ from the people benefitting from the work. The challenge is aligning differing interests to be able to prioritise what will best help the organisation to achieve its mission. Without understanding organisational outcomes, we can’t understand what works and what doesn’t.

Designing a cost efficient organisation – to improve productivity, there needs to be consideration of whether there should be a greater focus on activities that add value and deliver for the organisation’s beneficiaries. Has there been mission creep over the years that has diversified activities beyond capabilities, and ultimately added costs to the organisation?

Managing costs – to respond to uncertainties, charities should be flexible and agile and focus on finding out what costs add value to the charity and achieve outcomes and give impact. The tendency has always been focusing on direct versus indirect costs or core and non-core costs but this old separation, while simple, is no longer as simple as it seems. The question is, what are the inputs and outputs that add value and what is their associated costs?

Breaking down silos – successful change and process transformations will need to tackle organisational silos; quite often, organisations slip into silo mentality in their functions rather than looking at the process. Successful process redesign requires a shift from a functional to a process view, allowing different teams to work together to share information, reduce inefficiencies, improve productivity and boost morale.

Making goals drive behaviour – productivity gains can be achieved by focusing on the key goals, the critical processes and the key activities that have been selected to deliver the goals. There is often a lack of linkage between processes and a failure to understand how a change in one process impacts on another. The key question is, are all activities delivering goals in the best way possible – do we need to give some up, and which ones do we need to change?

Measuring change – what gets measured gets changed, and measures can affect behaviour. To address the change, it is important to define the change required or the problem to be solved and identify someone in the organisation who will lead on the particular change process. Consider:

• describing the issue and recording improvements needed
• assessing the current conditions and the problem that needs to be solved
• defining the target or outcome wanted
• carrying out a root cause analysis
• documenting proposed actions
• devising an implementation plan
• conducting follow ups and being prepared for failures or other consequences.

Implementing a successful transformation – improvements in productivity are about improving processes, systems and operations. The success of making transformative change depends on changing behaviours of managers and employees. The most successful examples of change efforts include a series of phases in the change process which are implemented over a considerable length of time. While skipping steps may seem like good time saving, it rarely produces a satisfying result.