Charity cost-cutting strategies

Cost cutting is often a reactive activity to a set of negative events. The response to bad news is to hack away at the “cost base” regardless of long-term sustainability and profile damage and short-term morale collapse. Usually, these cuts are carried out by people with little understanding of the service delivery requirement or long term consequences of the actions. Strategic cost control by its very nature requires that there is a planned and long-term approach that is underpinned with policies, procedures and most importantly, a shared culture of diligence. 

Successful organisations build into their organisational strategies regular application and review of all activities to ensure that services are not only effective but efficient. They do not lose sight of the core point of being a charity, they exist to improve the condition of their identified beneficiaries.  

Organisations need to foster an understanding, and the impact of language, of expenditure. Describing every form of expenditure as being a cost infers a malign identification that is not justified. If expenditure is described as an investment, it confers a far more positive identification 

All of this requires that charities understand every aspect of expenditure in the organisation, why it arises and what it does which then means that strategically the expenditure can be managed in a way that improves sustainability for the organisation and creates better outcomes for the users of the charity’s services.

In no order of importance here are some examples of a strategic approach to expenditure improvement.  

Often employment decisions are taken on short term considerations, person X will cost less to employ for the delivery programme than person Y. Yet person Y brings experience that means that the delivery programme is more efficient and effective, has a positive development input on team members, and could introduce new ideas and innovation for the long-term benefit of the organisation. Identifying Y as an investment rather than a cost could have a different recruitment outcome. 

Creating a safe environment where everyone in the charity can examine and challenge how services are delivered can lead to long-term cost reduction and improved outcome delivery. Often because of time pressure or reluctance to move out of the comfort zone programmes are delivered as they have always been, no innovation, no change, no regard to different more appropriate methodologies.

Many charities gold plate the services that they offer. This means that the service delivery has 10% or more resource cost built into it that has at best a marginal impact on the users. The gold plating is done to meet the requirements of the manager or management and is usually lost on the user. The user may well be happier with a bronze service and the saved resources can be used to increase the number of users supported or else elsewhere in the charity. Yet management egos do not countenance change, because they like to boast about the quality of the service to their peers.

Many delivery programmes contain additional resource input, not because it has a positive impact on the user, but because this additional activity, or resource allocation, is a sector norm, and the charity does not want to be seen as different from the crowd.  

In most organisations most employees know of the inefficient use of resources, but their complaints are ignored or not voiced because of the fear of retribution. 

Changing culture needs to be done when the going is good, it is difficult to create when a charity is under existential pressure. Yet most organisations relax vigilance when the going is good. They become colanders, leaking money as no one is too worried. Bad practices become embedded into the culture that are then difficult to reverse. 

Many of the controls that should be in place should be enforced and not relaxed, ever.

Questions to ask yourself:

• Can investment in technology reduce costs? 
• Can collaborative delivery reduce costs? 
• Can volunteers be better utilized? 
• What resources can be sourced on a pro-bon basis from corporates? 
• Can premises and utility costs be reduced? 
• Are all these memberships and subscriptions required? 
• Are contracts, insurance policies included, regularly reviewed for unnecessary cost commitments? 
• Are supplier services regularly retendered? 
• Are all employees creating value for users and/or the charity? 

Want to know more?

Uday will be at the Charity HR and Legal Conference on Thursday 7 August delivering sessions on cost-cutting strategies and another one on navigating risk. Learn more and register here.