Worried about long-term finances? Three actions you need to take
As we face up to the initial challenges – programme, people, financial – of the impact of the virus, we’ve also got to start looking at the longer-term financial implications and how we’re going to manage them.
I suggest there are at least three things we need to be doing.
The first is, if we’ve had a reduction in income, we have to decide what we’re going to stop, or what we’re going to pause, and my encouragement is to do that really forcefully. Explore strategically with your leaders, take ideas, share them, but be forceful, be decisive and probably be more ruthless than you think you need to.
So often I’ve got this wrong by underestimating quite how big a challenge we had, and there’s nothing that undermines staff morale more than having to go round for a second round of cuts.
So, you also need to do it in a way that gives you space to spend more on those things that feel more important at the moment, even if you don’t need to make the final set of decisions on your choices until the picture’s a little bit clearer. Exploring them in April feels much more valuable than exploring them when we all get back to work.
The second is talking to donors about our restricted grants and contracts. Many are leading the way in having open conversations around restricting, so that the organisation can spend on what’s most important rather than what they previously committed to do. To really get that dialogue going with all donors feels worthwhile, but it needs to be an open exploration – “This is what we’d like to do. How might we do it?” – so if feels like a partnership rather than simply a request.
The third is using our reserves. There’s all too much danger when times get tough that our Treasurers and Financial Directors say, “We’ve got to conserve money,” but this is the time to be using our reserves wisely and appropriately. That means we can make choices that are applied over the long term, which is much more responsible than everything having to happen this minute; both to our beneficiaries and to our staff.
So freeing up some of the reserves with a clear plan to build them back over time, with milestones of what that might look like and the first set of thoughts – again to be refined over time – as to how we might do that – What cuts? What new sources of income? What balancing do we do? – feels a very responsible way of strengthening our delivery today, coping with the shocks and also giving ourselves a strong organisation for the future.
Mark Goldring is a former CEO of Oxfam, Mencap and VSO, now working as a mentor and consultant.