The foundations of a well-run not-for-profit: why internal investment is critical - 2017 survey results

Charities Governance Not for profit sector Australia
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It is sobering that less than 1 in 3 respondents to the survey believe that the majority of not-for-profit organisations are well-run. This has not changed in the two years since our initial survey undertaken in 2015, and indeed has worsened. So why hasn’t this changed and what do we need to do to break this paradigm?

This second survey aims to provide insights into why the not-for-profit sector may not be as well-run as we would like, and we believe it presents an opportunity to see positive change in how well organisations are run. We believe one of the key drivers of change relates to appropriate investment in internal capacity building. The survey results show that only 14% of respondents believe that the not-for-profit sector adequately invests in internal capacity building.

This is not unexpected given that organisations know supporters are keen to see every dollar used effectively and often like to earmark their contributions to support specific projects or programs. This can have the effect of driving down internal investment given the limited pool of funds available.

Another factor that can impact on internal investment decision making is the skill and experience mix of boards and management – are there enough people in board and leadership roles with business investment skills within not-for-profit organisations? The need to balance the head and the heart is essential in the sector but we have to enable organisations to determine the right level of internal investment to get the maximum return and outcomes. The survey tells us that there is a strong correlation between being well-run and impact – 92% of respondents agree or strongly agree that being well-run does correlate to delivering more impact.

Although it can be difficult to establish a direct link between capacity building and increased social impact, as more organisations begin to systematically address making sound internal investments, improvements in the frameworks for measurement will surface. We see this clearly in for-profit organisations who utilise a Return On Investment (ROI) measure to strategically select the investments that will deliver the highest returns or outcomes.

The sector needs to start having the right conversations with supporters and the public to re-orientate their thinking to delivering results and outcomes rather than focus mainly on operational costs. Another dollar spent on another inefficient program is just another dollar wasted.

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