In tough economic times, not-for-profit does not mean made for loss – Monique Forbes

A number of not-for-profit organisations had come to the attention of the Serious Fraud Office at one stage.

Opinion

THREE KEY FACTS

• To qualify as a non-profit organisation in New Zealand, you cannot carry activities for the profit or gain of your member.
• An income tax exemption is provided to charities for non-business income.
• In 2018, there were 115,770 not-for-profit organisations.

Auckland-based Monique Forbes (Tainui, Ngāti Hikairo, Ngāti Hounuku) sits on the InZone Education Foundation board and is a Future Director on the board of the Institute of Directors.

OPINION

Those in the not-for-profit (NFP) space will be the first to tell you that what may have worked in the past is now dated as we find ourselves operating in a volatile, uncertain, complex and ambiguous world where the pressure is on businesses and organisations to make do with what they have in a tough economic environment.

But the sad part of this picture is that the people and communities who rely on our services most will be hit the hardest by the financial squeeze.

Monique Forbes.

Businesses across New Zealand are scaling back as they either dip into their own reserves or protect their surplus to prepare for a rainy day.

That day is already here, bringing with it the kind of storm that means pro bono work is a luxury where companies can no longer stretch their own resources to assist the likes of NFPs on projects that benefit communities, and the fear of ‘going without’ informs the need to hold on as tightly as you can to what you currently have.

Wellington government job cuts have compounded the hurt across the community – businesses that were once mainstays in the capital are closing, or have closed, their doors. This is happening at seemingly breakneck speed where the domino effect is visible and felt by more than those businesses.

No doubt, this will later impact tourism and we’re already seeing how tough economic times are impacting our tamariki and their families nationwide.

Nonprofits v Not-For-Profits.

This kind of change is unforgiving and creates urgency and a need to act. As directors on NFP boards, it is our responsibility to adapt to the changes playing out in front of us, or else become surplus to requirements.

Not-for-profits are hit significantly under tough economic conditions. Our traditional operating models that once kept us afloat are now being challenged. And while there have never been guarantees of corporate sponsorships or grants, reliance on the generosity of others to ensure our survival will contribute to our undoing. Like many other businesses, we also feel the pressure to rethink how we meet stakeholder needs in an unpredictable economy.

As boards, we are constantly challenged to consider the future, and now that what we fear is on our doorsteps, we have to be brave enough to address the change required and look for ways to develop more sustainable operating models for our organisations. To move forward, at least from my perspective, is to “disrupt ourselves”, because significant change or sustained growth can’t, or won’t, be possible without a disruption of our own business models.

Thinking outside the box is one thing, but to have the courage to step beyond our comfort zone is what’s needed more than ever – and on the bright side, we are not without opportunities.

With technology at hand, we can look for ways to diversify our revenue streams to become less dependent on donations and funding, especially at times when it is no longer available. There are also alternative funding options to consider that have never been part of our vernacular: crowdfunding, peer-to-peer campaigns, fee-for-service programmes or initiatives, and social enterprise initiatives – all potential options for NFP boards to explore.

More importantly, we need to find ways to release our organisations from a future that is heavily reliant on others and become self-reliant and self-sustaining.

This requires a blend of innovative thinking, enabled through technology to grow opportunities and allow our organisations to thrive. Yet we can’t discount the very real challenge we’re faced with; while corporate entities and private companies have the capability to move fast and invest in technology, reaping the productivity benefits as well as lowering costs, our reality is in stark contrast.

In the day-to-day running of many NFPs, tasks are often paper-heavy and manual. While automation is an option, this will incur an immediate and substantial cost to implement, which could put a strain on cashflow. Building up capital is paramount to be able to reinvest.

A board’s role is to make decisions based on the information to hand. Data and analytics will support boards to make decisions fast, in keeping with the pace of change. Utilising data and analytics as “predictive tools” will help us to safeguard our organisations, enabling boards to see what’s on the horizon by using existing information to paint a picture of what has happened in the past.

Non-Profit Organisations exist to further social good.

The latter is also crucial for those of us who are not only time-poor but volunteering to contribute to our organisations. Which brings me to the importance of capitalising on diversity of thought at the table.

With time as an obstacle, using it wisely to hear different perspectives and to pose challenging questions that drive towards solutions that we might not have considered before will empower boards to make the best decisions. There is also another opportunity for NFPs to tap into their network of dedicated and passionate volunteers and consider how best to utilise them in different ways.

Importantly, directors need to be willing to look for the gold nuggets. These could be hidden in places you never expected to find them. But this also requires taking the risk to find them – and the time is ripe for risk-taking and experimentation. As we head into a future in which our population’s demographics are changing, new approaches are needed to attract stakeholders, the best talent and smartest young minds coming through the ranks.

Thinking innovatively means we will encounter speed bumps and barriers along the way, but the winners will be those who aren’t afraid to take risks. A big part of this process is acknowledging that we can’t stay as we were. With an unsustainable business model, we risk the thing we fear – to cease existing. And if the day ever comes that our services are no longer available, the underlying issues that created the need in the first place won’t disappear but will become magnified.

Our role as directors is about creating the framework for forward momentum, renewal and regeneration. With smart people around the board table, together we can produce impactful solutions. But without challenging our current models, we will never know the infinite and unexpected possibilities that lie before us.