How to improve efficiency for charities and nonprofits

4 December 2024 / Insight posted in Articles

When considering ways to respond to changes in your nonprofit organisation’s financial circumstances, efficiency is often the last thing on the list. But, when resources become scarce, it can be too late to make significant changes.

While eliminating wastage is a common goal in the nonprofit sector, some may view a drive towards efficiency as too harsh. But, regularly asking challenging questions about resource usage is a responsible approach. These resources include people, buildings, money, and time, and during financial challenges, it is even more crucial to use them well.

Culture reigns supreme

It is critically important that everyone takes ownership of improving efficiency. Trusting people to want to be more efficient is key. Good ideas often come from the grassroots, where frontline staff see the issues and can ask challenging questions about efficiency if they are empowered to do so. But, in a blame culture or where people believe something is ‘above their pay grade,’ change can be stifled. Therefore, it is important for charity leadership to demonstrate that empowerment is real and to reinforce that improving efficiency can be positive for everyone.

The efficiency toolbox

At Moore Kingston Smith, our approach is to look at the tools available to charities. These include process mapping, outsourcing, and procurement. Process mapping involves examining people, processes, and technology. It starts with stakeholders mapping out what they do, where they make decisions, and where there might be wastage. In the nonprofit sector, there can be a tendency for people to take responsibility without accountability and vice versa. A process review looks at how processes have evolved and can reset them in ways that make better sense. An efficient process can be quicker, enabling people to be more meaningful with the time saved.

Technology is the next area to consider. AI is currently a buzzword and can help improve processes by removing repetitive tasks. However, it is better to start by reviewing the process and then look at tools to improve it, rather than starting with the tools and deciding how best to use them. Using technology efficiently may involve investment, and if efficiency is the goal, that investment needs to generate a positive return over time.

Outsourcing

‘Give me a week to complete a task, and it will take a week.’ Parkinson’s Law about work expanding to fill available time is true, and most people would accept that they don’t work at maximum efficiency. This is especially hard to monitor when all charities don’t use timesheets. Outsourcing the more manual/data entry-heavy parts of certain roles ensures that you are only paying for what you are getting from the outsourcing provider. For example, paying an outsourcer per one hundred transactions means that you are only paying for the time you need rather than the time it takes. This doesn’t necessarily mean cutting staff, as outsourcing could instead be used to free up staff time to do more value-adding activities, much like improving how we use technology.

Value for money

How do efficiency and value for money interlink? Being more efficient means that you can deliver more and therefore increase value for money. You can also look for value for money in terms of gaining the most output from each element of cost. For example, we all use car insurance, but insurers don’t all charge the same amount for the same service. Seeking the best value for money can be a time-consuming process. As best practice, undertake a procurement review of services every three years, but for some areas like energy supply you may benefit from reviewing annually.

Top Tips for Improving Efficiency

  1. Split strategic from tactical. Empower your grassroots people to make tactical decisions.
  2. Regularly revisit key business processes to make incremental improvements.
  3. Consider which processes would be better outsourced.
  4. Make sure that you are shopping around to get the best deals when procuring goods or services.

To conclude, improving efficiency for nonprofits and charities is not just about cutting costs or eliminating waste; it’s about creating a culture where everyone is empowered to contribute to better resource management. By leveraging tools like process mapping, technology, and outsourcing, and by fostering a culture of continuous improvement and accountability, nonprofits can navigate financial challenges with more efficiency. Remember, efficiency is a journey, not a destination. Regularly revisiting and refining your processes will ensure that your organisation remains agile and resilient in the face of change. Let’s embrace efficiency as a positive force for growth and sustainability.

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