December 02nd, 2021
A new analysis of the Australian not-for-profit sector has identified three essential capabilities – talent growth, execution excellence and system shaping – that distinguish the nation’s healthiest organisations.
The McKinsey & Company report, Building from purpose: Unlocking the power of Australia’s not-for-profit sector, said that for organisations to reach “robust health’’ they needed to achieve effectiveness in all three categories, but the research showed that most organisations faced challenges in at least two of the areas.
The analysis finds that for the first capability – growing talent – many organisations show an ability to recruit talent that is not matched by its capacity to foster growth in that talent. The second capability – execution excellence – revealed that there was a significant number of employees who wanted a greater emphasis on “efficiency’’. “Organisations need to see operational effectiveness as critical to the delivery of social impact at scale,’’ the report said.
The third capability – shaping the system – was a strong performance indicator for many organisations in the sector but there were issues around the inconsistency of driving and scaling deeper innovation. “The sector has the potential to capitalise on its deep connections with partners and community to driver greater innovation,’’ the report said.
The report acknowledged that even the healthiest organisations find that efforts to build their capabilities has limits. In an attempt to provide the support and help for not-for-profits to embrace opportunities and overcome barriers, the report identified 10 cross-sector ideas that range across the three major categories.
The ideas include expanding sponsored leadership development, expanding access to coaching, and mentoring on critical practices, upskilling in digital practices to unlock data’s power, taking action on risk management, and investing in evidence collection and dissemination to improve innovation.
The report identified the impact of the COVID-19 pandemic’s impact on the sector, in both making the sector’s value clearer than ever, but also the increased demand on not-for-profits without an accompanying increase in revenue. “Leaders in the sector have had to focus on the short term, reducing the time and resources they’re able to invest in broadening organisational capabilities, from people to technology,’’ the report said. “In short, performance has been strong, but the underlying health of the sector has suffered.’’
The report’s recommended approach to support the not-for-profit’s future success stressed the importance of cross-sector collaboration, which, it said, had been historically impeded by tough barriers. “This makes it all the more important to galvanise investment and support with the specific goals of driving collaboration, growing capacity and shifting incentives,’’ the report said.
It also invited philanthropic leaders to reflect on several key questions, including: “Are you paying what it takes to ensure organisations have access to required development opportunities and enabling systems? And: “Are you practising outcomes rather than activity-focussed grant making, and establishing the management systems to support it?’’