NFP aged care: making it in the market

For many aged care not-for-profit providers, the need to compete in a market-based system presents a profound challenge – how to maintain commercial viability while fulfilling their mission. Two advisors tell Australian Ageing Agenda why a focus on purpose should be the primary driver.

With not-for-profit organisations increasingly feeling the need to become less reliant of government funding many are actively pursuing new commercial avenues while others are forming umbrella groups to tender for government contracts.

That’s according to Darren Fittler, lead lawyer in Gilbert + Tobin’s Third Sector Advisory Group and Lali Wiratunga, national marketing manager social sector banking at Westpac, who will tell the upcoming Better Boards conference that as NFPs seek to secure their sustainability it is essential they remain faithful to their purpose.

Speaking to Australian Ageing Agenda ahead of their joint presentation, Fittler says that NFP organisations are increasingly becoming “innovative and creative in finding new revenue streams,” investigating what commercial activities they can engage in without contravening their charitable purposes.

“They’re also asking how they join with other others – everything from do we merge or enter into MOUs, joint ventures, alliances – in order to work collaboratively so they can provide a broader service, reach more people or have complimentary services,” says Fittler.

Wiratunga says that the primary sources of funding for NFPs – government, philanthropic trusts and foundations, community and corporate donations – are all experiencing constraint. “In the face of this, those organisations are looking to answer the question – how do we make up for that?” he says.

In addition to exploring partnerships, NFPs are also examining how they can expand funding efforts and, in some cases, are looking at utilising reserve funds to cover shortfalls while long-term initiatives come to fruition, says Wiratunga. “All those conversations may happen at some level within these organisations.”

While the supply of funding might be narrowing, the demand for services is increasing as the population ages. This will further change the dialogue between NFPs and their funders in terms of how the impact of that growth in services is articulated, says Wiratunga.

“In some cases that might mean looking at how we measure the impact; if I’m working in a competitive environment the people who fund me recognise they have a choice, and where they put their dollars will be based on the best articulation of impact,” he says.

The question for NFPs then becomes how they manage their resources in a way that enables the optimum delivery of programs, with measurement of the impacts and effective delivery of the outcomes, says Wiratunga.

“We will see an increase in tension between cost and impact as we move into an increasingly free market,” adds Fittler. “An organisation that has great impact and is more expensive, compared to someone who has a slightly lesser impact, might find that they are more successful in finding the funding.”

All about purpose

The overarching challenge for NFPs will be balancing the need to compete and commercialise against their obligations as a mission-based provider. The message from Fittler and Wiratunga is simple: stay true to your purpose.

“An organisation’s purpose is what should fuel its strategic plan, it should fuel everything,” says Fittler. “Why are we here? What is the organisation’s goal? Is it to return good dividends to shareholders? Or is it to provide great inclusive affordable caring services to whoever needs them?”

Fittler says that organisations can experience what has been termed “purpose drift”, where they continue operating on the same purpose that was put forward at the time of their creation – which may have been 50 or 100 years ago. He says:

“If people don’t continually come back and re-focus on their purpose they can find they’re actually operating in a completely different way. It’s fine if your purpose is challenged or changed, as long as you’re aware of that.”

It is recommended an organisation’s constitution should be reviewed once every three years given strategic plans are often three-year terms accompanied by a one-year business plan.

A review of purpose will not only challenge the strategic operation and direction of the organisation but will also “rekindle the passion” and remind staff why they do what they do, says Fittler.

Common purpose is a unifying factor that is important not just for the board but for every staff member and volunteer, adds Wiratunga. “By exploring that ‘why’ factor you can uncover your shared passion, your values and your purpose.”

Being clear on purpose also helps inform the organisation about who it should employ, Fittler says. “You want to employ people who share that purpose and passion. You can teach skills but you can’t teach a commitment to purpose as easily. There is not enough emphasis in many organisations in ensuring that one’s employment strategy includes some purpose matching exercise,” he says.

Fittler says a clear understanding of purpose also flows into how successfully an NFP can merge or enter into a partnership with another organisation. “It’s difficult for you to find and have a successful collaboration with another organisation if you can’t even identify what your own purpose is,” he says.

“Purpose is the critical piece and it cannot be overstated,” adds Wiratunga. “For partnerships to be sustainable and to deliver the right outcomes the respective leaders must strip out ego, strip out the needs of individual organisations; they must articulate the common purpose, the shared values and the resources that can be collectively brought to bear,” he says.

Strength in numbers: peaks and umbrellas

Across many sectors the Federal Government is moving away from having numerous contracts with a large number of providers, Fittler says. “We see a bit of a scramble among organisations to unite in some way, even incorporate their own new peak entity to be the contracting body with government.”

In other instances NFPs are forming more informal groups and appointing a lead agency as head contractor to act as a funnel through which government funds are distributed back to individual members. This new entity effectively acts as spokesperson, negotiator and contract manager, says Fittler.

As an example, Wiratunga points to the NeuroCare Network in Queensland, a network of nine NFPs representing 35,000 adults and children living with progressive neurological and neuromuscular diseases in Queensland. Within the forum, member organisations explore ways of working more effectively and efficiently, and they discuss common issues such as funding, policy, legislation, service delivery, as well as national developments such as the NDIS. Last year the network’s founder, Lincoln Hopper, won the Westpac Community Leaders Awards 2014 in the Partnerships for Purpose category.

Elsewhere, Fittler and Wiratunga confirmed that Westpac and Gilbert + Tobin are working on an updated guide for community board members, which is due for release in late 2015.

The Better Boards conference takes place 24-26 July at Brisbane Convention and Exhibition Centre. Australian Ageing Agenda is the conference media partner.