Leaders in the social sector reflect on current trends and how their organisations are responding to them to be the most effective funders and service providers. Part 1 of 2.

Seismic shifts in the sector are impacting on organisations from small social enterprises to large service providers and philanthropic foundations.

These trends range from market deregulation to procuring for outcomes, from increased evidence-based practice to collaboration and place-based service design.

In a two-part series this and next month, we hear from leaders from a range of organisations around Australia about how they are responding to these trends – and the opportunities created – in their ongoing effort to increase impact. (Some of these organisations have been working with SVA to assist them in this process.)

The key trends that leaders identify are:

• Social and economic changes
• Market deregulation and increased competition
  – Customer-centric approach
  – Transfer of risk from government to non-profit sector
  – Sustainability of services
• Social/impact investment
• Procuring for outcomes

(Part 1)

• Evidence-based practice
• Innovation capabilities in organisations to drive change, learn and improve
• Place-based service design, and
• Collaboration.

(Part 2)

1. Social and economic changes

Social and economic changes have impacted the demographic and cultural landscape that organisations operate in.

“Changes in the Australian community include our ageing population, increasing rate of migration and growing inequity compounded by housing unaffordability and the changing labour market,” says Peter Worland, Executive Director (ED) of Uniting, the services and advocacy arm of the Uniting Church NSW & ACT. Uniting provides services in aged care and disability, community services to children and families, and chaplaincy.

“These changes in the community coupled with the market failure of deregulation for some groups in our community is forcing us to sharpen our purpose in bringing to life the Uniting Church’s mission. We are looking at new ways to target our work to priority communities and groups of people such as Aboriginal, culturally and linguistically diverse, LGBTI and homeless.”

… organisations are challenged to attract staff with the skills needed…

Emma King, CEO of Victorian Council of Social Service (VCOSS), the peak body of the social and community sector in Victoria, sees the effect of Commonwealth policy and cuts and the subsequent uncertainty as impacting on people facing disadvantage and vulnerability e.g. in housing and health.

Rapid change in the sector, as well as sector growth also poses problems of adaptation and meeting workforce needs.

“The pace and scale of change in Victoria’s social service system is unprecedented with the Royal Commission into Family Violence, Roadmap to Reform: strong families safe children and NDIS to name a few reforms. With the sector growing at such a rapid pace, organisations are challenged to attract staff with the skills needed, particularly in rural areas.”

… charities still enjoy high levels of public trust and confidence which provides an opportunity for stronger advocacy.

David Crosbie, CEO of Community Council for Australia, an independent peak body representing the interests of charities and non-profit organisations in Australia, sees the public’s diminishing trust in government as an opportunity for charities to advocate more.

“Declining public trust in national leadership finally reached a tipping point in 2016. However, charities still enjoy high levels of public trust and confidence which provides an opportunity for stronger advocacy. They can exert their influence, draw on their trust, and challenge governments, business, investors and others to better serve our communities.

“For example, Save the Children Australia put their credibility on the line against the government in arguing about the destructive impact of indefinitely holding children in detention.”

We are looking at how to effectively engage second and third generations in foundations.

Simon Lewis, Head of Philanthropy, The Myer Family Company (MFCo) which provides a range of investment and philanthropic services is dealing with ‘next generation’ issues as the inter-generational transfer of wealth looms and the next wave of philanthropists shape future giving trends.

“We are looking at how to effectively engage second and third generations in foundations. This involves understanding the different characteristics of family foundations, such as the role of the founders, the inclusion of family, the specificity of the mission and the style of engagement. This can help us to better advise families and philanthropists.”

2. Market deregulation and increased competition

By far the most frequently mentioned force of change in the sector is the reforms in government policy and funding that have resulted in market deregulation and increased competition. Organisations are responding to this trend in a number of different ways.

The resulting competition requires new business models…

Emma King, VCOSS

“There are transformational changes occurring because of the move to consumer driven service delivery i.e. NDIS and the marketisation of human services. This has generated funding uncertainty with the move from block to individualised funding. The resulting competition requires new business models for organisations to adapt and thrive in the changed environment.”

“As a result, organisations are upskilling themselves on the reform environment, and how to respond.”

Peter Worland, Uniting

“To be as competitive as possible, Uniting has focused on ensuring we have our cost base in the best shape possible, a new brand that captures our identity but cuts through to the customer, and improving levels of workforce productivity. We have also developed greater clarity on our customer segmentation and value proposition.”

… instead of causing crisis, it refocused our energy and commitment…

In WA, Marninwarntikura Fitzroy Crossing Women’s Resource Centre (MWRC) advocates for the rights of women and their families from the Fitzroy Valley’s five main language groups, and beyond. Its CEO, June Oscar is a Bunuba woman from the Central Kimberley region, a community leader and nominee for Australian of the Year 2017.

“Over the last three years we’ve seen a significant amount of federal and state funding removed from targeted program areas. This caused a massive upheaval in our funding structure. However, instead of causing crisis, it refocused our energy and commitment to consolidate our resources and target our investment to achieve the largest impact over the long term for the future of our community. This led to a drive in collaboration across our working areas and a deeper integration to our approach to empower women and families to overcome intergenerational trauma.”

Customer-centric approach

One of the other significant results of the sector reform has been the shift to a customer-centric approach.

Tracking the service user experience… ensures we consistently respond in a person-centred way.

Lyn Millett, Executive Director, Family and Community Services MercyCare, a leading Catholic provider of aged care, family, health, disability and community in WA, describes the unprecedented reform including the allocation of funding to service users as bringing a stronger focus on users’ choice and control.

“In response, MercyCare has embedded across the organisation a person-centred approach which places the user at the centre of the service delivery experience. Tracking the service user experience across their whole interface from initial contact until exit ensures we consistently respond in a person-centred way. Mobile outreach teams use flexible technology to reach and engage people with exceptionally complex needs in the community at places that are comfortable for them.”

Emma King, VCOSS

“We’re seeing a strong interest in co-design with service users to inform organisations and service delivery.”

Peter Worland, Uniting

“Consumer-driven funding models are bringing to the fore the centrality of the customer. To support this, we are making a considerable investment in our technology strategy to integrate disparate systems and improve our business intelligence.”

Transfer of risk from government to the non-profit sector

With this reform has come a transfer of risk from government to the service delivery organisations.

To deliver, we need to operate with increasing sophistication and scale.

Michael Perusco, CEO of Yarra Community Housing (soon to be Unison), a leading provider of affordable, long term accommodation options for low income Victorians (particularly single persons), describes his organisation’s drive to scale as a response to this greater risk.

“Increasingly governments are looking to the community housing sector to deliver large scale developments that involve more legal and financial risk, and greater complexity. To deliver, we need to operate with increasing sophistication and scale. This has led to a merger between Yarra Community Housing, with our focus on housing people who have experienced homelessness, and Urban Communities Limited which has a focus on mixed tenure communities and community building. We’re also looking at creating consortia with other community organisations to get to a scale where we can carry the larger risks.

“We’ve also been looking at how to create mixed communities that offer a range of opportunities within a place (place-based design); another reason for our merger between Yarra Community Housing and Urban Communities. Through this merger we’re thinking about how our new developments and current properties can support thriving communities, based on the places where they live.”

Sustainability of services

In the face of increased market competition, organisations are also aware of the need to plan more intentionally for sustainability.

Lyn Millett, MercyCare

“MercyCare has implemented a clear mission-based, strategic growth strategy to ensure that we are sustainable into the future. This includes partnerships, integration of new and expanded services and business growth opportunities. We have also worked to build our market presence and brand awareness and encouraged collaborative thinking within several sectors around service sustainability.”

… philanthropists now ask, ‘what will be left behind once the money has been spent?’

Gemma Salteri is Executive Director, CAGES Foundation which funds and invests in locally owned organisations committed to ensuring Aboriginal and Torres Strait Islander children have the opportunity to reach their full potential. She sees growing recognition of the need to fund capacity building to effect sustainable impact.

“Funding capacity building is emerging as philanthropy responds to the social sector’s need to find ways to deliver sustainable impact. This is challenging philanthropists to look at what they are funding in a new way and many philanthropists now ask, ‘what will be left behind once the money has been spent?’”

Emma King, VCOSS

“To help prepare the (Victorian) sector, VCOSS together with RMIT has developed the Future Social Service Institute. The Institute will design world-best education programs for the social service sector, help train the ‘workforce of the future’, research emerging trends and opportunities in social sector reform, and empower non-profits to reorient to a global market.”

3. Social/impact investment

One of the responses to funding reform has been greater questing for alternative funding and investment avenues.

… the lack of product is the bottleneck.

Ben Gales is Executive Director, Economic Policy Division at NSW Treasury with responsibility for the NSW Office of Social Impact Investment.

“The investor demand for impact investment opportunities is clear; the lack of product is the bottleneck. In 2017 we expect to see more impact investments come to the market, as well as growth in the scale of these investments, reflecting the sector’s growing maturity.”

We hope that social impact investors will accept a more moderate financial return…

Michael Perusco, Yarra Community Housing (soon to be Unison), sees the goal of attracting new finance into affordable housing as the holy grail for the community housing sector.

“The barrier is the gap between the return that investors require and what can be delivered while still providing housing that is affordable to people on low incomes. We’re looking at models that can bridge, but not close, that gap completely. We hope that social impact investors will accept a more moderate financial return in exchange for a very clear social return.”

Gemma Salteri, CAGES Foundation notes the rise of impact investing is challenging philanthropists to examine new ways of driving change.

“The emergence of social entrepreneurs and impact investing has philanthropists using capital as well as grant money to effect social change. Philanthropists are starting to use different structures to work with non-profit organisations that have the potential to make non-profits more sustainable.”

Simon Lewis, The Myer Family Company, suggests the opportunity to work with philanthropists as impact investors has room to develop.

“There is increasing pressure to produce the investment returns to meet the minimum distribution requirement of five percent of net assets for private ancillary funds (PAFs). While impact investing has piqued the curiosity of many of our clients, they remain cautious and we are looking for ways to introduce the right opportunities to the right clients.”

4. Procuring for outcomes

Contracting, or procuring for outcomes, continues to emerge as a trend that will shape the sectors’ engagement with government and other funders in coming years.

Ben Gales, NSW Treasury says “There will continue to be an acceleration in the move to measuring and paying for outcomes. Improved data analysis and applying an ‘investment approach’ will (continue) to grow. In turn this helps to identify the right outcome measures and where best to target scarce resources, and improve the effectiveness of essential prevention and early intervention services.”

“The increased focus on outcomes encourages innovation and continuous improvement. As well as improving organisational capabilities in these areas, this will also drive more collaboration between partner organisations and across sectors.”

Philanthropists recognise… they must invest in expertise with a focus on solutions…

In the philanthropic space, Gemma Salteri, CAGES Foundation observes a growth in funding solutions.

“Philanthropists recognise that, to address complex issues, they must invest in expertise with a focus on solutions rather than just funding programs with little evidence and a short-term view. This is breaking down the historical power imbalance that exists between philanthropists and the non-profit sector and more thoughtful and honest conversations are beginning to emerge.”

Social procurement

Social procurement is a potential driver of employment for disadvantaged cohorts. Toowoomba Clubhouse is making the most of this opportunity. The organisation which provides a non-institutional, restorative environment for people to recover from mental illness, has set up three social enterprises (Bounce Café, Ability Enterprises and Vanguard Laundry Services) to provide work opportunities and pathways for its clients.

Having a contract to deliver on has been a very effective way of building a social enterprise that delivers lasting social change.

Luke Terry, Toowoomba Clubhouse’s CEO, explains: “Toowoomba Clubhouse’s recent social enterprise successes have all been based around the social procurement model.

“Having a contract to deliver on has been a very effective way of building a social enterprise that delivers lasting social change. And one which investors, government and philanthropy want to support as they can see a pathway to sustainability.”

Part 2 explores the four other trends that contributors identified:

• Evidence-based practice
• Innovation capabilities to drive change, learn and improve
• Collaboration, and
• Place-based service design.

Read part 2 of Sector trends: stories from the frontline.