Why we need to get serious about the crisis in service provision …
For nonprofits providing services to the public sector, times have never been tougher. In many cases, fees have hardly increased for years, and the incoming employer NIC increases are likely to push a whole load of providers over the brink.
The thing is, this isn’t a new problem. It might feel incredibly acute right now, but it’s been brewing for well over a decade. Last year alone it’s estimated that charities subsidised public sector contracts by £2.4bn. That’s almost 10% of the sector’s entire earned income.
It might sound harsh, but at the root of that problem, is charities allowing their services to become commoditised. Finding themselves bidding against each other for lowest-common-denominator contracts that barely break even, because they’re dependent on the income to keep the doors open.
Every one of those contracts is a tactical decision that no doubt appears to make sense on its own. But this is not a tactical problem. The crisis in service provision is a strategic problem. And strategic problems require strategic solutions.
When the value of entire markets, like ours, shows signs of collapsing, there are four ways to strategically respond. They are these:
Differentiate: Find your niche and own it. To succeed in this, you need to be crystal clear on what you do best, why you do it better than anyone else, and which of your buyers or commissioners will value the difference. Allowing yourself to become interchangeable with other providers is a recipe for ruin.
Educate: Educate your buyers. Never assume. Listen carefully to understand what’s most important to them right now and work out how you can educate them on why your offer is in their best interest. Step one is always to understand and align with your buyer’s agenda.
Extricate: Make a concrete plan to exit all the relationships, products and services, where you’re heading for a loss. Fees aren’t going back up, and if you’re already subsidising services it’s only going to get worse. This is a huge decision for any nonprofit, but it’s one you can’t keep avoiding.
Innovate: Where you have buyers who are forward-thinking enough to value what you do, use them. Use them for everything they’re worth. They are the ones who will tell you your strengths and help you build on them. Play it right and they’ll give you the space to innovate and improve, and the chance to create all the evidence you need to go back into the market and educate the others.
All four of these depend on one key capability: your people being able to develop strong relationships with their counterparts. Which means, now more than ever, you need sales teams who have excellent interpersonal skills.
And yes, I said sales teams. Whether their titles are business development or contract management or something else entirely, is irrelevant. If they don’t see themselves as salespeople, with a clear goal of developing and maintaining financially viable, if not profitable business, that’s probably a big part of your problem.
There is, of course, a fifth option. Muddling through. Fundraising or salami-slicing to keep your head above water. Subsidising contracts with voluntary income, using more volunteers, piling more pressure on staff. And various other tactical solutions that might buy you a year or two but won’t address the strategic elephant in the room.
This crisis in service provision is creating huge pressures for us all, and it’s not going away.
And these are big decisions, I get that. So, if you want to talk about your situation, just drop me a line. I can almost certainly help, even if that’s just by giving you 20 minutes of free advice.
But you also might want to sign up to the seminar coming up on 12th December, that I’m hosting with two fantastic CEOs, both of whose organisations are almost entirely reliant on commercial income. Come and listen to what they say, and see if it helps – you can register here for free.