How can charities face the challenges posed by Covid-19?

Covid-19 has had an undeniable impact on the charity sector. Charities across the country are facing huge economic pressure, with the National Council for Voluntary Organisations estimating that a minimum of £4.3 billion in income has been lost because of the pandemic. Some charities will, inevitably, close and those who survive will face a struggle to adapt to decreased funding, and new ways of working set against high levels of demand for their activities.

However, there will be opportunities for this hugely diverse sector to respond positively to these challenges. Alex Skailes, a Director at the Centre for Charity Effectiveness at Cass Business School, outlines the three main challenges facing charities and discusses the steps they can take to ensure they are well-placed to survive in the current crisis, and thrive beyond it.

What do you think are the main issues facing charities in light of the pandemic?

“Many charities – but not all – will face devastated finances both now and in the longer term and this is being set against huge increases in demand for their services. The irony is that for a long time we have been advocating how charities should seek to diversfy their income streams to safeguard their sustainability, but on this occasion all income streams are being hit at the same time, be it earned through membership fees or trading, voluntary donations or investment. With income significantly reduced, there will be a need to use reserves but, the longevity of this crisis will mean that many have insignificant reserves to carry them through.

“For some charities, an inability to take the commercial decisions at speed that need to be taken – their passion for the cause understandably getting in the way of what needs to be done to try to remain sustainable - will be a problem in the longer term. I am hearing that many of the smaller charities are focusing so hard on delivering their services that I fear they may leave it too late to address longer term cashflow issues. Charities with commercially experienced board members may fare better, as will those where there are strong Chair/CEO relationships and a really effective top team of senior management and board members.

“Across all sectors there is a real challenge in trying to 'become comfortable with the really uncomfortable' and to plan amongst so much uncertainty. This will inevitably take its toll on leaders, their staff and volunteers and its so much harder for leaders to look after their teams remotely. For the smaller organisations a lack of investment in technology may hamper their ability to work remotely, to safeguard the wellbeing of staff and volunteers and to reach out to service users.

What helpful steps do you think leaders can take to ensure that their organisations are able to cope?

“Charity boards and leaders need to have absolute clarity of vision and maintain an unwavering focus on the unique contribution their organisation can make.

“This is a time to concentrate on the charitable purposes of the organisation – so, think about the best interests of the beneficiaries and services users rather than the best interests of the organisation – both now and longer term. There is a need to assess what must be protected as organisations move forward through the crisis, what can they 'lifeboat’ for the future and put aside for a while. The really hard decisions will be around what to stop doing. It will be equally important not to pare down so hard that there is no flexibility and ability to restart.

“Leaders and managers should be realistic and not let the uncertainty stop the hard decisions. It’s good to embrace change. I was hearing only this morning at one of the Cass CCE Leader’s breakfasts that the crisis is opening up a real opportunity for change and at a speed that is being driven by the external environment. The challenge for leaders is how to carry others with them, at a pace such that they can take advantage of these opportunities.

“When there is time to draw breath, I’d recommend investing time in strengthening governance and leadership – charities with diverse boards and a strong mix of appropriate skills and expertise are proving to fare better than those who don’t. There will be a need to rebuild team culture after remote working, furloughing or redundancies.”

Are there any opportunities for the sector during the crisis?

“Charities are making a real and visible difference during this crisis. This is an opportunity for public awareness to be raised about the role charities play in all our lives, for the significant under-valuation of the contribution made by civil society to the UK economy to be redressed and for a renewed energy in community spirit.

“We are seeing so many examples of great collaborative working – be it partnerships across sectors and other forms of collaborative working within. We may see some of these collaborations being built on through an increased number of strategically driven mergers, that will have potential to contribute to systemic change and greater social impact.

“There is space for greater pace and agility – we are seeing this happen and it is likely to continue. I also think there will be enhanced crisis management and more of a focus on risk management which will lead to better resilience in the future.

“It’s also important not to let the increased social capital which has been built during the crisis disappear. The community spirit, the wave of volunteering and the collaborative relationships being built need to be nurtured and not allowed to fade away.”

Alex Skailes is a Director at the Centre for Charity Effectiveness at Cass Business School. An experienced strategy and finance director, with a successful track record of advising and leading clients in the nonprofit and private sectors, her research focuses on mergers and acquisitions in the charity sector.

The Centre is a leading nonprofit and philanthropy centre in the UK and overseas and delivers a world class blend of postgraduate master (MSc) degree programmes, research, consultancy and leadership development programmes both in the UK and overseas. Find out more about its work here.