Foresight seminar: The economic downturn and the VCS

The impact of an economic slowdown on the VCS

22 July 2008

With the credit crunch the topic on the edge of everyone’s lips, we decided that the next in our series of Foresight seminars would look at the impact of an economic slowdown on the VCS. The seminar aimed to help VCOs explore some of the challenges that this would present for their organisation, as well as the opportunities (yes there are some!). The emphasis of the seminar was on preparing for changes ahead through better, more strategic planning and thinking. Here are a few key findings from the seminar:

Presentations

The seminar was chaired by Karl Wilding, NCVO’s Head of Research – listen
to his introduction (password: foresight)
Rebalancing the UK economy – download the slides or listen to the presentation. (password: foresight)
Peter Hahn, Cass Business School , gave an overview of some of the key trends currently affecting the UK economy and explored where these might go in future.
The impact of an economic slowdown on the VCS – download the slides or listen to the presentation. (password: foresight)
Keith Hickey, Chief Executive, Charity Finance Directors’ Group explored the main implications of the current economic climate on the VCS and highlighted some strategic responses to deal with these.

The session was thought-provoking and insightful. Participants shared a variety of ideas about the implications of the slowdown on their organisation and practical solutions to prepare for this. For anyone who couldn’t attend, I thought I’d post them up here for you to read and add your own. Anyone who did, please keep on talking!

Risks

Increase in demand – e.g. for debt services. This is likely to be difficult to predict or plan for.
Change in beneficiaries – there could be more middle classes seeking services and this may mean that the most needy lose out.
Potentially less volunteers as people need to find two jobs.
Reduced spending on products/services that VCOs sell as a result of decreased disposable income.
Higher expectations from funders - the local authority or other funders may demand more in return for their funding. Will VCOs be wiling to walk away when their demands are too great? Local Authorities may also become slower at repaying debts. VCOs will need to improve their debt collection.
Increased competition with the private sector.
Reduced income for Corporate Social Responsibility (CSR) from corporate companies.
Reduced resources for campaigning - this may become a subsidiary activity if it is not your organisation’s primary purpose.
Avoiding mission drift in an environment where organisations can not afford to be fussy about where their funding comes from.

Opportunities

Time to influence political parties - there will be more pressure on them to perform.
Volunteering - there is some evidence that there is more volunteering in a recession as people lose their jobs and volunteer to find more work or gain skills. These volunteers are usually quite highly skilled as they have been made redundant. People may also want to help out those most suffering from the downturn. The government is focusing on making benefit claimants volunteer, although there was some concern over how this is enforced.
More sympathy for issues of social justice
Partnership working and collaboration – NOT merging, but using each other’s strengths to provide services (e.g. if one organisation has the volunteer workforce whilst the other has the admin backup etc.)
Less duplication - better tailored and structured services may survive whilst those that aren’t may have to close down.
Supplier discounts – many suppliers are willing to give good deals to get longer term contracts (improves stability for both sides).
A more competitive environment might be valuable as the sector provides added value or more complementary services – e.g. it can reach areas that public and private sectors do not.
Better recognition – if advertising sales are declining, there may be an opportunity to ask for reduced rates or pro bono adverts as magazines etc need the spaces filled.
Third Sector lenders do have money to lend e.g. Triodos and Futurebuilders.
National Indicator 7 for a thriving Third Sector provides an opportunity to create an environment which is conducive to the VCS.

Actions

The VCS is used to functioning with limited resources so some of these actions may be things you do anyway, however, they are worth taking note of:
Cash flow forecasting - the VCS has not always been good at this in the past.
VCOs need reserves and VCOs need to let decision-makers know why.
Work with funders to try and understand how they are going to be affected.
Consider merging or more collaboration/consortia building.
Consider partnership or co-working - some organisations are already cutting staff and this is one way to combat this. Not merging but working strategically together.
Keep on mission - be clear about the focus of your organisation.
Concentrate on what you do well, rather than trying to do everything.
Invest in marketing – make people aware of what you are doing and use this as an opportunity to widen your supporter base.
Use the media to tell people about what you are doing and spread good news stories to get support. The media is interested in stories about the worst hit by the credit crunch.
Tap into high net worth individuals for donations – they are less likely to be affected.
Build relationships with suppliers or commissioners to make yourself the preferred and reliable supplier.
Work with umbrella organisations to undertake campaigns, make use of the advice and support they provide.
Recognise and plan for risk - funders are more likely to fund organisations who recognise risk and plan for it as they are more likely to be sustainable. VCOs need to be less risk averse about borrowing.
Make use of skilled volunteers and learn to use them effectively. Often organisations either don’t have the capacity to take volunteers on (properly managed) or don’t have suitable roles that fully use their skills (media managers stuffing envelopes).
Set up better monitoring systems - there will be more need to demonstrate impact and greater pressure for financial transparency.

This list is by no means exhaustive and covers just some of the ideas we discussed. I will be adding other ideas and suggestions throughout the website.

Why don’t you add any more opportunities or risks that you think might affect your organisation or share any strategic responses that your organisation already undertakes?

Last updated at 15:08 Mon 18/May/09.

Recent comments

AuthorComment

I came across these suggestions about anticipating the unexpected and working successfully in unplanned ways in the current uncertain economic climate in this month’s Nonprofit Quarterly so thought I’d add them to the discussion:

  • Build your collective agility: Work closely with the board to ensure that your budget is understood and that panic, despair or blame is not the order of the day if things get difficult. Making sure that there is a common understanding of your core mission can be very helpful, particularly if things get spare and you need to reorganize.
  • Get connected: Make use of state, local, and field-wide networks that help forecast changes in the environment and can organize nonprofits to take on difficult state policy issues that could impact your work.
  • Get active with these networks and help them to work well for you. Talk to peers about what they are thinking about in the face of things like flat rate reimbursements, and opportunities to take collective action will emerge.
  • Strive for flexibility: Revisit your use of volunteer talent (which should be done for a whole host of important reasons, really) to strengthen your economic resiliency and political positioning.
    Accumulate as much unrestricted money as possible and try to avoid making decisions, which limit your liquidity.

To help with this last consideration, the article recommends you read Clara Miller’s Truth or Consequences: The Implications of Financial Decisions from the NonProfit Quarterly summer issue.

Caroline's picture

Caroline

Third Sector Foresight

With an increasing number of banks, building societies and big city firms in trouble or going out of business, everyone is wondering how it will impact on them. Although the media and the government has tried to claim that banks crashing in the USA will have little or no effect on people within Britain, when a bank like Lehman goes out of business, it is so inextricably linked to the global markets that it cannot help but effect them in some way. I think we have to be realistic at this time, and accept that, given the current environment, many people within Britain will be affected, as will many organisations. There are many possible implications for VCOs, for example:

An increasing number of people out of work requiring support

An increasing number of people in debt

A reduction in donations

An increasing number of people (employees and beneficiaries) suffering from stress

It is hard to see the positives in such a situation, but there are also opportunities, for example:

Charity shops have already shown an "increase in spending":http://news.bbc.co.uk/1/hi/business/7591970.stm_

Relationships and contracts can be negotiated at longer term as people try to guarantee income

There will be an increase in beneficiaries for some organisations

Karl's picture

Karl

Third Sector Foresight

I recently posted these top five things VCOs can do in a downturn on this epolitix.com forum where MPs and representatives from the VCS and private sector were giving their views on the current economic crisis:

“It is more important than ever during these tough times for organisations to plan ahead. It is vital to look carefully at your objectives and funding streams and ensure that you have the strategies in place to deal with any likely changes.

1. Plan for the downturn now. Look at your funding streams, beneficiaries and costs and plan likely scenarios for your organisation. Be realistic and don’t wait until it’s too late. Can you be more efficient in the way you do things? Can you save money by outsourcing some of your office functions?

2. Revisit your costs. Use this opportunity to renegotiate contracts with your suppliers (who will need your business more), or see if you can save money by switching to NCVO’s recommended suppliers

3. Develop your volunteers. Are you making the best use of their skills? Do you have a strategy to attract the volunteers you need, especially the pool of highly-skilled newly unemployed.

4. Build your network. With the sector facing the squeeze, collaboration can enable you to achieve more and accomplish your aims, despite having fewer resources.

5. Demonstrate your success. Measuring outcomes and demonstrating impact is notoriously hard to do. However, it is a great way to improve your chances of securing funding."

Natalie's picture

Natalie

Third Sector Foresight

I’ve just added a driver on the credit crunch here

Karl's picture

Karl

Third Sector Foresight

We are gathering together analysis, views and evidence on the impact of a recession on the sector. You can find all the sources we’ve identified here, on our delicious site (delicious is a ‘social bookmarking’ tool which allows you to collect and share web links)

Caroline's picture

Caroline

Third Sector Foresight

I read an article this morning which stated that the most trusted source of information on the economic situation is not the Prime Minister or even the Chancellor of the Exchequer, but the BBC’s business editor, Robert Peston. This raises interesting questions about trust in institutions and where people get their information about events impacting on their lives. Something to think about for information providers?

Kathryn's picture

Kathryn

Third Sector Foresight

The Pre-Budget report published by the Treasury yesterday outlines a number of changes to try and kick-start the economy, and provide a buffer from further misfortune. To find out more about these and how they might impact on the economy and on your organisation, have a look at the following links:

Institute for Fiscal Studies

Deloitte analysis

PricewaterhouseCoopers

How small businesses have benefitted

What the Pre-Budget means for your region

And a bit of a green tint on it: policy think tank Green Alliance’s response has some interesting comments on the implications for fuel poverty and social housing.

If you have read any other reports that analyse the impact, why not add them to the list?

Megan 's picture

Megan

Third Sector Foresight

Karl has been working hard to gather evidence about what happens to the sector in a recession. You can now read a summary of his findings in this news post.

Join the discussion!

How will this affect your organisation? Have you considered it during your strategic planning? Can you share any interesting relevant links?

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