Segments of the not-for-profit sector are facing significant challenges as a result of government policy decisions to expose the providers of human services to increased competition.

This has been particularly evident in disability, aged care and community health services.

The magnitude of change means that organisational leaders need to implement innovative strategy and change management processes. Most leaders can understand and plan for change in the more obvious areas, such as in disability and aged care, where costing and pricing disciplines have been identified as key provider capability gaps. Our assessment is that these are known gaps, and much work is being done to close them. However, other key areas are less obvious, so far less is being done to address them.

It is also vital that organisational leadership can develop innovative strategies in the areas of culture building, systems management and marketing.

Change of mindset

NFPs need to become more entrepreneurial. They must be more nimble, more attuned to identifying commercial opportunities, and better at assessing and taking commercial risks.

Increasingly, organisations are also seeking to strengthen other key cultural elements, including stronger customer-service cultures, innovation cultures and cultures characterised by more effective, self-directed leadership.

Diagnosing organisational culture is notoriously difficult, but there are tools to help. We find that many NFPs do not formally audit their cultures, define their desired cultural end-states or strategically manage to build those cultures.

Competition will increase the demand for talent, so NFPs need to focus on strategic culture-building to attract the best people, and to help them become more entrepreneurial and competitively resilient.

Technology the key

The prices offered in competitive human services markets imply that providers will become more efficient. The increased use of more sophisticated systems, particularly information and communications technologies (ICT), is key to realising those efficiencies.  

For example, the “co-design” and “co-production” of services – where consumers use technology platforms to package, order and engage with services – need to become more common and efficient to meet clients’ needs for for choice and control.

NFPs need more commercially disciplined approaches to ICT lifecycle management, particularly better project-management disciplines within standard IT service-management frameworks, to deliver the benefits promised by technology.

Cutting through

In block-funded human services, demand almost always exceeds supply. Under-funding human services has the effect of creating a “big funnel” of demand, with the result that providers do not need to compete to grab the attention of potential clients, convince them to sign up or to retain them.

With the National Disability Insurance Scheme (NDIS) and consumer-directed aged care (CDC), providers need to develop business-like marketing skills to cut through…

1. Market segmentation: logically grouping clients by shared characteristics and needs to target offerings and communications
2. Customer experience design: creating emotionally engaging, efficient and effective pathways for clients through providers’ service systems
3. Product design and packaging: presenting services as product units or packages so clients can compare them and buy them separately, as bundles or as complete, end-to-end services
4. Advertising, promotion and communication: promoting service benefits, points of difference and superiority through appropriate channels
5. Branding: aligning the total organisation, including its communications material and methods, service ethos and behaviours, culture and leadership, to consistently create desirability

Increasing competition will make it harder to lead and manage a great NFP organisation. NFPs will still face the demands of providing for the most vulnerable as well as the challenge of meeting a wider set of stakeholder expectations than is the case with most of their for-profit peers.

By focussing on “first things first”, proactive and innovative leaders will enable their NFPs to leverage their inherent advantages and grab the opportunities emerging from the growing human-service markets.

Jeff Davey is a senior consultant with NFP specialist firm Saward Dawson.  

This article originally appeared in the March edition of Third Sector magazine, click here  for more information.