This is no ‘rainy day’. Let’s not beat about the bush. The third sector is in deep, existential trouble. Incomes for some may drop 30-50% this year. Some household names may not see out the summer. By this time next year, the third sector may not be recognisable next to what it is today. And that’s not just me talking, but a respected, well-informed sector leader, Karl Wilding of NCVO, a good man, disinclined to hyperbole.
For CEOs and Boards it’s terrifying. We didn’t plan for this. Nobody did. Our reserves were for a rainy day, not a tsunami. But that is what we are facing. Added to this we don’t know when the Covid 19 restrictions on daily life will be over. Nor do we know quite what awaits on the other side of the virus. Which makes forward-planning for CEOs and Boards feel almost impossible.
So what is ahead?
Let’s start with the big picture. Depending on how quickly we get back to normal, the Office for Budget Responsibility thinks GDP will shrink by at least 13% in 2020. Many other economists put this figure much higher. Compare this to 6% drop in output in 2008 after the financial crisis and you get some idea of the order of magnitude.
The recession we are already in will be profound as households and firms hold on to cash. How will Government respond? According to Paul Johnson, of the Institute of Fiscal Studies, the Treasury taps will stay on in the hope that a rapid recovery obviates the need for fiscal austerity. But if the economy doesn’t snap back rapidly during then austerity would be re-introduced, but this time overlaying a decade of cuts from 2010.
But even with a reasonable bounce-back, there will shortly be a severe recession in which at least 2 million people will lose their jobs. Assuming libraries of research are correct, this will damage health, cause death and weaken communities. A new social settlement may or may not emerge from Government to ease conditions for the worst affected. But we need to accept that real harm to the social fabric is inevitable in the next 3-5 years.
Moving closer to home, in a sector with a combined income of about £48bn (NCVO), early surveys suggest that half of this is at risk and 80% of organisations fear they may go bust, according to Third Sector magazine. The Government rescue package of £750 million (£1bn if additional Lottery funding is included) is about a quarter of what the sector believes it stands to lose in the next three months alone.
There are no easy answers for charities. Trusts and Foundations rely on returns on investments that will take years to recover. Government will probably not ride to the rescue. Corporates will have less spare cash to back big sector initiatives.
Public sector-facing charitable and social enterprise organisations may fare a little better, but only those whose work complements the Government’s big priorities: the NHS, policing and education. Faring worse will be organisations dependent on giving from individuals as millions more households face unemployment and uncertainty.
These are fairly safe minimum assumptions. Things could, of course turn out far worse, in which case few of our organisations will come through intact. But we can be confident in the minimum-case.
So the only choice facing CEOs and Boards is to price the listed ‘knowns’ into their response to a rapidly and permanently changed landscape.
What should the CEO response look like?… Press Re-Start
What pressing ‘Re-Start’ means will depend on your organisation and sector. The impact of the downturn will reflect your income-mix, your assets and the areas in which you operate. But the advice here is probably universal, even if your organisation has the financial bandwidth to absorb the current crisis.
In the very short-term, pressing Re-Start is about doing some very difficult, tactical things that will give you a fighting chance to build back.
Here are our Top Ten ‘Do It Now’ Re-Start Actions. Take a deep breath.
- Collaborate. If you are not going to merge, collaboration needs to go deep into pooled sovereignty over investment, talent and operations. We have to see organisations serving the same community-of-need collaborating as never before.
- Consolidate. You may need to quickly merge or be acquired to maintain critical mass, relevance, voice and an efficiency of response in your sector.
- Downsize. If you are still to be here in 12 months, you need to plan for your organisation to be about half the size it is now. Think about what this could look like.
- Digitise. You need to plan operations as digital by default rather than by exception. Don’t go back to before. Any non-digital delivery channel should have a brilliant business-case to remain.
- Stay Virtual. You need to close most of your offices and radically embrace the virtual organisation. Meet only when critical. The lockdown has shown we can do it. Use shared workspaces for any meeting you can’t do on Zoom.
- Close the back-office. An important learning from this crisis is that we don’t need armies of people doing administration. What we can’t do ourselves we can now easily automate.
- Empower. Intermediate supervisory roles and the control-cultures supporting the need to disappear as your people self-manage and operational authority is decentralised.
- Focus. You will need to double-down on one or two powerful strategic goals and forget peripheral objectives. Having a clear strategy makes such decisions much easier.
- Choose who stays. Finally, you will need to make some tough calls on talent. You really can only afford people both in the Executive and Non-Executive / Trustee side who are going to help you. Some new blood will be needed at all levels.
- Look after those who go. Your care for those you can’t take forward is a measure of your leadership.
Re-Start your Strategy
So, you’ve bought yourselves some runway. You now, very quickly, need to reappraise how you address your core mission. This has to be fundamental. As though you were founding the organisation over again.
W hile painful, this may also be liberating. On reflection, would you have created the organisation as it looks today? Probably not.
See this aspect of Re-Start as a one-off opportunity to radically adapt the organisation for a new era. Be ambitious. Half the income shouldn’t mean half the impact. But only if you are prepared to go back to fundamentals of the difference you exist to make.
Then, with skilled facilitation, ask yourselves the following ‘Re-Start Your Strategy’ questions:
- ‘What’s our End-Game’? – the specific outcomes in our community-of-need we think we can achieve in the next 5 years?
- What is our new methodology or ‘theory of change’ to make it all happen?
- What top quality commercial strategy can we deploy to achieve that social goal?
- What are the talents, skills and partnerships we need to deliver on our new strategy?
- What kind of organisation culture, governance and ways of working will make us far agile and effective?
- What are the success-markers each year that tell us that our Re-Startis on track?
Don’t Bowl Alone
Re-Start involves imagination, honesty and courage. Before you carry on, you need, with integrity to ask yourself whether you are willing to go through this.
If not, it’s a good moment to step back as CEO. It would be an honourable thing to do if you knew, in your heart this wasn’t for you. If you stay, you will need some help.
Both parts of Re-Start are challenging. Many CEOs are finding help through peer networks like Social Club. Others are turning to their ‘Personal Boardrooms’of colleagues, supporters and professional advisers.
My advice would be to invest in a trusted advisor and facilitator to offer you first-class strategic, commercial and organisational development advice to successfully address both the Top Ten ‘Do it Now’ Actions and then the Re-Start Your Strategy questions.
To this end, we are, at Social Minds, assembling a small group of carefully chosen advisers, all of whom have deep experience as CEOs and as value-adding coaches and advisers. They have the gravitas and first-hand experience to help you steer your own version of Re-Start over a concentrated period of 12 months. Our trusted advisors all bring extensive, helping networks and Social Minds is able to draw on specialist advice, should it be needed from our key partners.
Costs for Re-Start will reflect the times we are in and will be contingent in part on success – but we guarantee that outgoings will be recouped many times over in permanent cost-savings on roles and functions no longer necessary to fulfil your mission.
Be Bold – Re-Start
You have got to the end of this piece because you are a CEO who
is determined to lead your organisation to a new future.
You still have choices – but only limited time.
Get the help you need to make the right short-term calls to buy yourself
a runway. And put in place a robust process to launch the organisation afresh to solve problems in the post-Covid world.