Charities' strategic thinking must evolve to prepare for a post-Covid world
Charities are at a critical point in their coronavirus response. Although it may not appear so, we are in a lull, a deceptive place of false possibilities. The response so far has focused on shoring up existing service provision, staffing, funding and scale but government support schemes like furloughing and business interruption loans are lifelines, not strategies. Trustees and senior management teams should not be tempted to think activity and funding will return to pre-Covid levels. There is no guarantee of that.
Trustees have duties to protect assets and funding, manage risks and ensure their charity's purposes are fulfilled, and senior management support them in this. Even in less extraordinary times, this is a considerable challenge and the need to balance charitable aims with commercial realities permeates the decision-making of a healthy charity. The additional pressures of Covid-19 are huge - for some charities they have already proved fatal - and we continually deal with charities facing very difficult choices over their future.
Whilst Covid-19 may be unprecedented, tough choices are not, and our experience suggests the way ahead and the type of governance which will get us there.
There's no hope of governing fast-moving and unpredictable problems unless your finger is on the pulse of finance, services, and other management information. Modern data and communications help us, and the Charity Commission has issued pragmatic guidance on meetings during lockdown. Trustees should meet (or video conference) often, perhaps even weekly, and keep in touch in between, making decisions responsively. Charities may need to streamline reporting and delegation to remain agile.
Charities may not be able to return to the nature and level of activity of pre-Covid, at least in the medium term. Many have seen funding decimated, staff made redundant, contracts terminated, leases surrendered, and services greatly reduced.
That cannot be reversed quickly. Rather than attempting to regain a lost position, many charities would be better off planning a radically reduced scale of operation or a different operating model. Do you need all those service lines or operating sites? Should service contracts be set aside in favour of grant making? If trading income is less reliable, should you budget on donations only until trading is viable again? Should you collaborate or merge with another charity?
Technology is our friend just now. Monitoring, risk management, meetings, communications and decision-making are all possible at great capacity and relatively low cost. This is a huge help in keeping charities healthy and preparing for an uncertain future. We must be alert to data protection responsibilities and cyber risks, but technology also helps us adapt.
Governance requires willing responsiveness to changing circumstances. If you can deliver services, obtain funding or structure staff differently, then incorporate this in your plans and monitoring. Legal considerations arise in such changes, but these are surmountable and the effort will be worthwhile if the charity succeeds. History provides no guarantee post-Covid. We cannot assume problems will disappear - we must plan for different possible operating models and be prepared to switch.
Many charities have seen or will see reductions in income, service provision, staff, volunteers, and reserves. As above, versatility is key, but there will also be opportunities as charities with reduced operating structures and costs seek to meet the community's needs post-Covid. Those with lean, scalable, operating models will be well placed to respond and grow. Trustees and senior management should plan now to be such a charity.
Some charities will not survive alone, yet this need does not mean failure. Collaboration has many origins and even where one charity needs support or rescue, a strong solution can preserve its name, services and finances. This can involve a collaboration agreement, a management arrangement, governance sharing, transfer of business or full merger. In most situations, continuity rather than calamity is the result.
Trustees and their advisors navigate difficult waters - if the ship needs a refit in preparation, that is no judgement on the past. Governance often requires boldness.
Chris Knight is a Partner in the Charities team at VWV, a national law firm with well-regarded charities expertise. To be kept up to date on legal, regulatory and governance issues, please sign up to VWV's free OnStream portal.