Tackling Upheaval in the Not-for-Profit Sector

The not-for-profit (NFP) sector is entering a period of unprecedented disruption.

Economic and geopolitical volatility are stretching resources and increasing demand. The dismantling of the US Agency for International Development has come at a time when many European Union member states have also pared back foreign aid programmes.

Catholic Relief Services has stated that the 50% reduction in funding from federal cuts will remove critical aid for more than 20 million people worldwide. The Danish Refugee Council has claimed that an additional 6.7 million additional people are expected to be newly displaced around the world by the end of 2026.

At the same time, NFPs are having to adapt to evolving regulatory requirements such as the introduction of new international accounting standards (INPAG) and new guidelines on fundraising and governance at a local level. The sector is also being pushed to keep pace with a fast-moving technology landscape in order to meet the changing needs of donors and ecosystem partners.

It all adds up to a perfect storm of challenges for NFP organizations. In order to understand the tactics and approaches they plan to adopt in response, PAC and Unit4 undertook a survey of more than 200 strategy leaders at NFPs based in Europe and North America. The organizations that participated in the study represented the four main groups within the NFP segment: humanitarian; environmental & animal welfare; faith-based organizations; and health & human services.

Among the headline findings were that the majority of NFPs are braced for a rise in both costs and demand this year. Humanitarian NFPs expect the greatest strain on their services, with 40% expecting a strong or very strong increase in demand, evident in their response to the new and escalating crises in Myanmar, Syria and Sudan.

The study also found that this situation is driving interest in a more transformative approach to improving efficiency and freeing up cost to invest in frontline services. One area of renewed interest is the development of shared services functions, with more than 40% of participants having already centralized their IT and HR functions. A significant proportion plan to follow suit, and the study looks at the example of UNICEF which has gained significant benefits in both efficiency and service quality through the establishment of a Global Shared Services Centre.

The NFP sector has been slow to fully exploit technology due to constraints in budgets and resources, and 45% of executives highlighted a dependency on legacy applications as a blocker to change and innovation in their organization. One area in which many are looking to drive improvement is their ability to harness the potential of their data. Becoming “data-centric” is something that we hear about from more and more strategy leaders in the NFP sector, but the reality is that most have a good distance to travel to achieve this goal.

The study found that more than a third of NFPs have only a partial view of data at best, as it is held across multiple silos across the organization, while 5% have such a limited view that they tend to base key decisions on gut instinct. As a result, 70% said that they plan to increase their spending on digital initiatives this year, with finance, CRM and compliance systems among the priority areas.

The study highlights several successful examples of organizations that have successfully taken steps to become more data-centric. The British Heart Foundation has implemented a formal data strategy which has improved the way it uses, shares and works with its data, underpinned by a refresh of its finance, retail and CRM systems. This has enabled it to connect its enterprise data together and drive, what it calls “ insight-led operations.”

The full report, which includes many examples of current initiatives and projects at NFP organizations, is available for download for free at the following link.