Singapore

Challenges NPOs Face and the Role of Professional Services in the Ecosystem

Based on our extensive work with the charity sector, we can condense the multitude of challenges that Not-for-Profits Organisations (“NPO”) today face into three points:

  • Attract and retain talent
  • Address disclosure and transparency
  • Measure and report impact

These are problems NPOs face regardless of size, maturity and outreach segment. Whilst some larger and more mature NPOs may have sufficient expertise to handle these issues in house, newer and smaller NPOs can benefit from experiences and insights that professional services firms bring. These firms do not only bring expertise into the implementation of solutions, they also offer insights gained from working with other organisations in the social sector and commercial industries.

Talent Management

Tackling talent management is not a straightforward task. NPOs must realise that recruitment and talent retention may present challenges. The pull factor to work with NPOs is not strong due to various reasons, such as the tight market for talent, budget and compensation packages. Even if we cast aside compensation, the working environment in an NPO can be a challenging one. The reason why staff are leaving NPOs or are resistant to join an NPO is largely due to dissatisfaction with work processes or outdated and inadequate systems. The poor infrastructure makes it harder to meet the ever-increasing demand from stakeholders.

In recruitment, the salary differentiation between what the private sector and the third sector are paying makes it harder for NPOs to recruit. More than one-third (34 per cent) of the respondents to the “Singapore Non-profit Capability Survey 2014” say that they  struggle to recruit new blood  in a vibrant job market, competing with rising salaries in both the private and NPO sectors.  Despite the need to keep an organisation lean, NPOs must offer the appropriate career development opportunities to show new hires how they can advance.

Whilst staff retention is something that NPOs continue to grapple with, finding a recruitment firm that acts as a trusted advisor could just be the solution to help NPOs navigate the recruitment challenges. The advisor should be able to take away the pain from the recruitment process by offering close-and-personal service, deep industry knowledge, and simplifying the whole recruitment process. The advisor should have a deep understanding of the charities landscape, their challenges, and the trends they are encountering. These can only come from active involvement and participation in NPO activities.

NPOs are already getting support from schemes like Sun Ray Programme to professionalise its operation. In addition, the Programme also provides mentorship and career progression opportunities for individuals. Professional services firms with the right expertise can also play a part in helping NPOs become more professional through training and coaching. For example, RSM Advisory advises and conducts training for boards on effective board oversight, corporate governance, risk management and strategic assessment. One of the things NPOs has to do is to take stock of what they need and seek out professional services firms that can assist them in the long road.

Disclosure and Transparency

The issue of disclosure and transparency ultimately aims to ensure accountability for using funds in the purpose that is aligned with the NPO’s mission and vision. Stakeholders and partners are increasingly demanding. In the article “Building Trust” published by the Charity Council on their webpage on 24 October 2019, Chairman of the Charity Council, Gerard Ee, highlighted the importance of trust. The sustainability of any charity is dependent upon the continual support of its various stakeholders. When there is trust, donors are generous with time, money and support. Through trust, NPOs can demonstrate to stakeholders and partners, especially donors who fund their operations that there is a robust structure and process for strong sense of accountability within the organisation so as to ensure a sustainable stream of funds to continue and further their efforts.

Management has a key role, to catch up with the hustle and bustle of running day-to-day operations, accountability could become a lesser priority that eventually falls through the cracks. NPO boards are usually capable of and must provide an overview on accountability through effective governance. Whilst operations have been delegated to the management, accountability remains the board’s responsibility.

There are several tools available such as enterprise risk management exercises, corporate governance and internal audit to help boards ensure the organisation to remain aligned with its mission and vision. For boards of smaller and newer NPOs, it may be a challenge to look inwards for resources and to harness these tools. However, it is worth noting that many professional services firms have NPOs practices that can help bridge this gap. Having professional service firms within the social services ecosystem does not only serve to motivate NPOs to align with best standards, thereby improving accountability, but also inspires trust from stakeholders when they are made aware that NPOs are serious about mission accountability. There are some areas that NPOs can look into to begin with.

First, Enterprise Risk Management (“ERM”) exercises are useful. NPOs have to contend with risks associated with strategies, reputation, governance, volunteers, staff, programmes and events, services offered, donations and funding, data protection, technology, and financial management. These risks should be periodically identified, assessed, monitored and mitigated to ensure objectives can be met and are aligned with the vision and mission of the NPO.

Second, the Charity Council has also put in place the Code of Governance for Charities and IPCs (“the Charity Code”) to help NPOs implement a good framework of governance. Going beyond compliance, setting a baseline will set a foundation for effective governance practices in the future. Being aligned to the Charity Code also helps boards to manage the overall direction, effectiveness, supervision and accountability of the organisation.

Third, NPOs should employ the “three lines of defence” model that is critical to risk management and internal controls.

The management as the first line of defence is responsible to implement adequate and effective preventive measures by establishing policies and procedures.  

The second is to establish adequate and effective monitoring and detective controls through quality reporting and independent performance, risk, and compliance monitoring. In the context of NPOs, the role of the relevant committees is vital in ensuring the effectiveness of the second line of defence.

The third line of defence needs to provide independent assurance to the Board and senior management. This usually constitutes an internal audit function; it could be internal or outsourced to a professional services provider.

All these seek to simplify and provide consistent reporting for effective risk oversight, reducing gaps in risk coverage, and reduce control redundancies.

Measuring and Reporting Impact

A key challenge to any NPO is to measure and report impact meaningfully. Impact is difficult to measure for a variety of reasons. A NPO might not measure impact because it considers itself so unique that it cannot be compared with any other organisations. At the other end of the spectrum, the NPO measures whatever is easiest to see, which may not be adequate or relevant to the impact. An easy way to report impact is to report the number of beneficiaries of a programme, but more meaningful disclosure should also include the qualitative aspects of the impact of the programmes.

In 2019, the Commissioner of Charities introduced the PARENT framework as a guide to communicate impact. Of the 6 areas covered, NPOs can consider using Evidence when reporting; the testimonies of the beneficiaries to tell their stories and communicate with stakeholders is a good start. Another part of the framework is showing Results. For a start, this could be statistics on outreach, fundraising and donations. Going further, NPOs also can extend this to include how the statistics relate to their KPIs, to show both achievement and areas for improvement going forward.

Whilst there may be not be a benchmark for all NPOs, the need for impact measurement disclosure remains important. NPOs can start by setting goals base on desired outcomes. The outcome can be measured on efficiency of resources used or performance based such as Key Performance Indicator (“KPI”). Good NPOs create a want for donors to donate. It is important to strike a balance when setting goals – NPOs do not solely get resources based on performance, they do not get money for good intentions either. Donors provide resources where the results are, therefore, it is important that goals are not set on lofty ideals nor should they be based on quick wins.

Once the goals are set, NPOs should subsequently focus on performance. High performing NPOs are not a product of luck, coincidence and serendipity. Performance must be planned.  NPOs have a multitude of constituents each with veto power, and each has its own objective. The challenge is to gain buy-in on long-term goals that the constituents have agreed upon. To do this, the senior management needs to define the fundamental change that the NPO wants to make in the society, and project that goal into concerns of each constituency. Goals must create impact on the cause and not the symptoms of problems faced by the beneficiaries. For systemic, entrenched or institutional problems, develop micro-level goals that can achieve success on a grander scale.

So where do we go from here? There is no single measure of success and no generic set of indicators that will work for all NPOs.  The best NPOs can do is to try to concisely define its mission so that progress can be directly measured. Programmes and activities must be closely aligned with success measurement systems that are relevant to the NPO’s vision and mission. If there is any doubt, NPOs must invest in research to determine whether its activities actually do help to mitigate problems or to promote benefits that the mission involves.

Professional services companies stand ready to help if needed, and there are countless benefits that can be unlocked through working hand in hand with consultants. NPOs that have been effective in disclosing impact can also reap the benefits. The Bain & Company and CNPL (“Centre for Non-Profit Leadership”) 2015 study shows how transparency and disclosure are effective tools in helping the Children’s Cancer Foundation (“CCF”) and Food from the Heart to increase their outreach.

At CCF, fundraising partners are regularly informed about fundraising policies, and it is fully accountable to all its donors with its strong corporate governance and financial management. These help boost donors’ confidence.

Similarly, its commitment to transparency has enabled Food from the Heart to boost its fundraising drives as well as recruiting more volunteers, resulting in an increased food distribution to the less fortunate in Singapore. An annual summary of activities and independent audit, detailed in its annual reports, builds trust with its large, growing group of donors and partners.

Singapore’s NPO sector will continue to face challenges, but the integration of professional services firms into the NPO ecosystem will allow them to tap into expertise and best practices of Singapore’s advanced private sector. Subsequently, through effective collaborations, NPOs in Singapore will be prepared to meet the challenges of both today and the future.

To find out how our NPO team can assist you, please consult our specialists:

Woo E-Sah 
Partner & Industry Lead 
[email protected]
T: +65 6594 7843

Sovann Giang 
Senior Director & Deputy Industry Lead 
[email protected]
T: +65 6594 7892