How To Be Sustainable

Transcription

1 Business guide and toolkit for disability service providers October 2012

2 This publication was developed by the Nous Group in consultation with community service organisations registered under the Disability Act 2006 to provide disability services to people with a disability. Published by the Victorian Government, Department of Human Services, Melbourne, Victoria. Copyright, State of Victoria, Department of Human Services, 2012 This publication is copyright, no part may be reproduced by any process except in accordance with the provisions of the Copyright Act Authorised and published by the Victorian Government, 50 Lonsdale Street, Melbourne, October If you would like to receive this publication in an accessible format, such as large print or audio, please Disability.Services@dhs.vic.gov.au This document is also available on the Department of Human Services Funded Agency Channel website at

3 Contents Introduction...1 Step 1 Assess current position Operating environment Value proposition Financial viability Resources and capabilities...9 Step 2 Assess future options Service users needs Financial sustainability Operating model...12 Step 3 Determine the impact of decisions Legal structure Governance structures Staff and organisational structure...15 Conclusion...17 Appendix - The business toolkit...18 Step 1 Assess current position...19 Step 2 Assess future options...21 Step 3 Determine impact of decisions...22

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5 Introduction The environment in which disability service providers 1 (DSPs) operate is rapidly evolving and becoming more complex. The implementation of a National Disability Insurance Scheme (NDIS) will give people with a disability greater control and choice over the services they receive and will involve fundamental changes to the way disability care and support is provided in Australia. DSPs are facing higher expectations from service users, families and carers, other organisations and business and policy leaders regarding their services and supports. Changes in Victorian legislation, regulation and government policy, such as the implementation of the Disability Amendment Act 2012 (which makes minor changes to the Disability Act 2006,) and the Charter of Human Rights and Responsibilities Act 2006 have altered the operating environment for DSPs. This guide provides a useful starting point and signposts for smaller DSPs in assessing their sustainability. It provides a framework for DSPs to assess their current organisational capability, consider future options and put in place strategies to strengthen the organisation to meet the needs of service users. A number of valuable resources already exist to assist DSPs with their business planning and governance. This guide is a resource that complements a range of other tools and provides references to more detailed advice. It does not seek to reproduce or serve as a substitute for those resources. It is also not intended to be a substitute for professional advice, such as legal or accounting advice. It is intended only to be an accessible starting point to alert DSPs to issues which may require their attention and to assist them in focusing on the areas they see as most pressing. This guide is structured according to three steps for preparing DSPs for the future, specifically: Assess current organisational position Assess future options Determine the impact of decisions. An illustrative scenario is presented in each step to give context to a particular aspect being considered. These are fictional scenarios derived from real experiences of DSPs. However, they do not document the experience of any one individual organisation. A toolkit is provided as an Appendix to this guide. The toolkit presents key questions from the guide for DSPs to consider. It provides a sample position related to the question that reflects a sustainable DSP. DSPs can rate their own organisation against this sample position to prioritise their areas of focus. The toolkit also provides references to additional resources related to each question to assist DSPs investigate matters in more detail. This guide was developed with input from the disability services sector. It was tested with sample organisations, together with the business toolkit, which is an integral part of the guide. 1 For the purpose of this document, the term disability service providers (DSPs) relates to community service organisations registered under the Disability Act 2006 to provide disability services to people with a disability. The reference does not include the Department of Human Services. 1

6 Step 1 Assess current position The first step to ensure an organisation is sustainable is to assess its current position. A useful framework for understanding an organisation s current position is the organisational architecture depicted in Figure 1. This framework considers various aspects of an organisation in reference to the organisation s strategic direction, operations and supporting infrastructure. The organisational architecture is a powerful framework to assist in maintaining an overarching perspective of how all the aspects of an organisation fit together, while also drilling-down into detailed aspects of the organisation. This section begins with consideration of the operating environment which consists of: the broader operating environment of legislation, government regulation and policy the local environment of potential partners and competitors. This is the environment in which the organisational architecture will be understood. Step 1 then considers the organisation s: value proposition financial viability resources and capabilities. The following sections will not delve into all parts of the organisational architecture framework. Instead, the framework will be used to tie together key aspects for taking a snapshot of the organisation s current position. Strategic Direction Strategy & Purpose Business Model Operations People (capability & job roles) Processes (coordination & communication) Culture (demonstrated behaviours) Supporting Physical Organisational Structure (coordination & communication) IT Figure 1 - The organisational architecture 2

7 1.1 Operating environment Key questions How does the organisation sit in the broader operating environment? How does the organisation sit in the local operating environment? Business planning requires detailed understanding of the operating environment and organisational strengths and weaknesses. Therefore, the first aspect of determining the organisation s current position is to understand its operating environment (Figure 2). The broader operating environment The broader operating environment can be thought of as the direction of State and Commonwealth legislation, regulation and policies which affect the organisation, such as the Disability Act and the NDIS. It is important to be aware of any performance standards or measures prescribed for DSPs under the Disability Act. In terms of policies, the first of these to consider are those directed at the sector in particular such as funding arrangements and reporting requirements for the delivery of services the organisation offers. The shift to self-directed approaches gives people greater flexibility in choosing the services they want and who provides those services. It also provides opportunities for organisations to explore new ways of doing business and provide more creative and responsive support options. The shift to self-directed approaches requires organisations to adopt a more business-like approach to their operation including having a more precise approach to pricing, financial monitoring, invoicing, debtor follow-up, cashflows and reporting. Organisations also need to put in place systems that enable them to know how much of a person s funding has been used at any given time and be able to report on this to the person. Organisations need to have transparent unit based pricing for the services they offer. While primarily based on the unit prices funded by the department, organisations may need to charge a different rate. If they do so, however, they must be able to explain to people what they will receive in return for the price they pay. Organisations need to work within an environment where revenue may be less predictable than under a block funding arrangement. This revenue variability can be offset by organisations ensuring they provide high quality services that attract and retain people (along with their funding allocation) and having appropriate invoicing and follow-up systems to ensure that cashflows are maintained. Pa 3

8 Broader operating environment (State and Commonwealth policy) Local operating environment (Competitors and potential partners) Strategy & Purpose Business Model Add text here People (capability & job roles) Processes (coordination & communication) Culture (demonstrated behaviours) Physical Organisational Structure (coordination & communication) IT Figure 2- The Organisational Architecture within its operating environment Requirements for financial statements, evaluations of services offered and meeting accreditation can all vary depending on legislation, regulation and government policy at both the State and Commonwealth levels. The potential impact of implementing a National Disability Insurance Scheme is another factor to take into account when considering the broader environment in which the organisation operates. example, in sharing administrative support services or fundraising activities. Monitoring what other community-based organisations are doing is important as it helps to understand and provide services to the community. The local operating environment The local operating environment refers to competitors and potential partners that serve the same local community as the organisation. When considering the local operating environment, remember that a competitor may also be a potential partner that is, look at the environment as a whole, not as a series of particular organisations. Consider the organisations that provide different services or operate in a different sector. There may be significant benefits to both organisations, for Pa 4

9 1.2 Value proposition Key questions Do service users and other stakeholders see the organisation as offering a service that they value? How is the organisation different from others in the area? A value proposition relates to the apex of the organisational architecture (Figure 3). It is connected to the organisation s strategy and purpose by clearly articulating the benefits the organisation creates for its service users. An organisation s value proposition is critical to realising the intent of the organisation. A mission statement or purpose articulates the reason the organisation was created. The value proposition enables this ideal to be turned into specific programs and services. The value proposition is the means by which organisations stay relevant to their local communities 2 and should be developed through communication with the local community. Value propositions should not be static, as the needs and expectations of the community may change over time. Reviewing the value proposition should enable the following questions to be answered: Who is your organisation trying to support? What are their needs and expectations? How can your organisation create value for them? Be clear and specific about who the organisation is trying to support. The clearer the organisation is, the better it can tailor services to meet those needs. People s needs and expectations change. Be sure to ask service users what they need, what they want and what s missing from the service offered by the organisation (and others). Be clear about how the organisation in particular can provide value for service users. The organisation s unique capabilities and attributes let it provide a targeted and valuable service. By understanding clearly how the organisation is differentiated from other providers in the area, unique programs and services can be offered and provide greater value for service users. Strategic Direction Your value proposition Strategy & Purpose Business Model Operations People (capability & job roles) Processes (coordination & communication) Culture (demonstrated behaviours) Supporting Physical Organisational Structure (coordination & communication) IT Figure 3 - The value proposition in the organisational architecture 2 Adult Community and Further Education Board, Victoria: Building Sustainable Community Businesses: A strategy for success, April 2006 Pa 5

10 Creating value is about more than the cost of service. It includes the quality of services, the range of services and the level of confidence in what is being delivered. In addition to knowing the value proposition, it is also important that this value proposition be communicated to and recognised by service users and stakeholders. Perceived value is critically important because it is through this that programs and services will be taken up by the people the organisation wishes to support. Furthermore, by communicating the value proposition and then listening to how the local community perceives the offer, the cycle of refining the value proposition to meet the community s needs can continue (Figure 4). Develop a targeted value proposition Listen to your community do they see value in what you offer? Ask your community what they need and expect Communicate your value proposition to your community Figure 4 - The value proposition cycle Pa 6

11 1.3 Financial viability Key questions Does the organisation have a sound financial position? Is the financial position sustainable in the short to mid-term? Understanding financial viability relates to both the strategic direction and operations aspects of the organisational architecture (Figure 5). The broad direction and fine detail of the organisation s business model can only be effective if processes are in place to record and regularly communicate the financial position to management and the board. Consider if appropriate systems are in place to collect financial information and report on it regularly and accurately. Sound reporting systems will help identify and track any changes in the organisation s financial position. In addition, check if the reporting systems will work sufficiently in the future environment of unit pricing and individualised funding. Understanding the current financial position involves consideration of a number of factors, including assets, working capital, expenditure and liabilities. In liabilities, be sure to include such things as accumulated staff leave and advanced payments for the future provision of services. Before assessing the current financial position, begin by assessing reporting methods. This involves more than expenditure approvals. Strategic Direction Strategy & Purpose Your financial viability Business Model Operations People (capability & job roles) Processes (coordination & communication) Culture (demonstrated behaviours) Supporting Physical Organisational Structure (coordination & communication) IT Figure 5: Financial viability in the Organisational Architecture Pa 7

12 A full picture of the organisation s financial sustainability involves considering the short, medium and long terms. In the short term, sustainability refers to cashflows is money on hand to pay debts when they are due? In the medium to long terms, sustainability requires that the organisation is not regularly operating at a loss and, when considering assets and liabilities, the organisation is in a sound position overall. The full picture of financial sustainability involves considering the organisation s cashflow statement, profit and loss statement and balance sheet. Sustainable organisations understand the relationship between these key documents and use them all when assessing their financial viability. Services DEF improves its financial monitoring A few years ago, Services DEF found itself in a difficult situation. The organisation had been providing services in its local community for years and had grown considerably. Unfortunately, it did not have reporting structures that allowed its board to have regular and accurate financial reports upon which to make strategic decisions. An unchecked error in the Services DEF balance sheet put the organisation on the edge financially due to unexpected debts. This situation was brought to the board s attention by the Australian Tax Office. After some difficult decisions and the sale of some assets, Services DEF was back on track. Learning from its mistakes, systems have now been put in place for regular internal audits and clear financial reports to the board. However, these improved systems uncovered another potential problem for Services DEF cashflows. The forward-looking board realised that new funding models could result in more volatile cashflows. Systems were needed to better track revenue sources and expenditures. The improved monitoring allowed the organisation to better understand details of what it costs them to provide their services at a user, staff member and location level. The organisation can now let its service users know precisely where their funding is being spent and charge appropriately for variations in services. They can also plan more strategically for providing their services in the future. Pa 8

13 1.4 Resources and capabilities Key questions Who does what in the organisation? What systems are in place to help them? Understanding the resources and capabilities of the organisation is fundamental to laying the foundation of the organisational architecture (Figure 6). Who does what in the organisation? Clearly documenting who does what is the first step in understanding current resources and capabilities. Consider business continuity, risk management and planning. Do you have a risk management plan? What information management procedures are in place? Does the organisation have a chart that includes the board, management, staff and volunteers and how they relate to each other? If not, a good place to start is with developing such a chart as it identifies everyone who contributes to the organisation s resources and capabilities. This organisational chart is only the first step. Once all the contributors to the organisation have been identified, the next step is to document their roles and responsibilities. Once these two tasks are complete, a good understanding of the people in the organisation can be communicated to the organisation s stakeholders, both internal and external. Systems to support people A variety of systems are required to enable organisations to operate effectively. Such systems may need to become more sophisticated with the move to individualised funding and unit pricing. In general, the systems can be divided into three categories: staffing such as payroll, rostering tracking for example, asset registers, evaluation of services reporting for example, financial reports, and key performance indicators. Strategic Direction Strategy & Purpose Business Model Operations Your resources and capabilities People (capability & job roles) Processes (coordination & communication) Culture (demonstrated behaviours) Supporting Physical Organisational Structure (coordination & communication) IT Figure 6 - Resources and capabilities in the organisational architecture Pa 9

14 Efficient systems won t treat these categories as mutually exclusive. For example, staffing systems should work with tracking systems to know how much of a service user s funds have been used to date. Both of these should generate various reports for service users, management and the board. Good systems will be integrated with each other to support business or operating efficiencies. A useful way to understand the current position in terms of the people systems in place is to create a systems table (Table 1). When making a systems table, be sure to include not only the systems the organisation has, but the systems it needs to acquire or develop (such as for service user attached funding and costs). The systems table will map the types of systems needed to those actually being used. If the organisation makes a systems table and sees gaps or many isolated systems, it s time to think about establishing some more efficient systems. System 1 (e.g. MYOB) System 2 (e.g. MS Excel) System 3 (e.g. online survey) etc Staffing Rosters 1 Payroll Tracking Service user funding Service evaluation Reporting Financial reports Balanced scorecard = should be established 1 = established but isolated 2 = established and connected to other systems Table 1 Sample systems table for gap analysis Pa 10

15 Step 2 Assess future options 2.1 Service users needs Key questions Who are the people in the organisation s service user group? How will the service user group change over the next 5-10 years? DSPs know their service users, however, going through the process of explicitly documenting the characteristics of the service user group and what they want from services often helps an organisation plan for the future. To understand the service user group in detail it can be helpful to answer the following questions: From what geographic area does the service user base come (for example, does the organisation provide services specifically in the local town or more broadly across the region or state)? What are the drivers for use of services (for example, does the organisation provide services for people with a particular disability or level of support needs)? What are the demographic characteristics of service users (such as the distribution of age groups, gender, and education level)? Having understood in detail the nature of the service user group and what they want from the organisation, the organisation can consider how it is likely to change in the future. The changing nature of the service user group Does the organisation expect the service user group to change in terms of size? For example, as service users age, will they move from disability services to targeted aged care services? Alternatively, as their primary carers age, will new groups enter services? The organisation may also want to consider broader demographic changes occurring within the geographic area it serves. Is the overall population increasing or decreasing? Are government policies likely to result in changes in the size and demographic structure of the broader population? If so, how will this affect the size of the service user group? The changing expectations of service users In addition to considering the above changes to the service user group, the organisation may also want to consider changes to its expectations. Will the shift to service user empowerment and selfdirected approaches result in a need for more tailored and adaptable services? Is there competition for service providers in the area? Will service users expect more types of services? What service quality expectation do people have? For example, service users may expect an increase in services at nights or on weekends. As technology becomes more broadly embedded, will service users expect more online services? Will they expect to access such services through a variety of media (such as computers or smart phones)? Engaging regularly with stakeholders and monitoring other service providers can help the organisation understand the changing expectations of service users. This enables it to respond to needs and offer services that are continuously improving. 11

16 2.2 Financial sustainability 2.3 Operating model Key questions How does the organisation plan for predictable revenue changes to funding models? What other potential sources of revenue are available to the organisation? Improving existing financial management Organisations can improve their financial sustainability by critically assessing their current financial arrangements such as: decreasing costs improving efficiency Key questions Could working with another organisation improve the sustainability of both? Consideration might also be given to sharing administration effort and costs with another organisation(s) in a partnership arrangement. There are many ways to partner with other organisations. Clearly consider the options available to determine the best approach. Options can include a simple agreement to share the costs of back-ofhouse systems, creating an umbrella group across organisations to have shared management or boards, or a full merger into a single entity. ensuring timely issuing of invoices and banking receipts following up late payments. Other potential sources of revenue Organisations may also consider supplementing the income they receive from Commonwealth and State sources from additional revenue sources. This might include new services (such as online services) and new commercial operations. When considering new operations, it is important to recognise the skills and advantages the organisation has beyond direct service delivery and consider if new revenue could be generated from these. For example: If the organisation is providing job placement services to service users, could this be expanded into a commercial service? Could new business offers be developed using the broader skill sets of staff? Could the organisation use networks to combine with others to develop a high-profile fundraising event? Developing innovative ways to leverage the organisation s strengths and broadening revenue sources will help prepare the organisation for the future. Figure 7 - Types of potential partnerships with other organisations Each option has its own pros and cons depending on the organisation s point of view. Some key considerations when deciding on the right partnership model are: the importance of the organisation s identity to service users the importance of the organisation s identity to other stakeholders (including internal stakeholders) staffing matters such as equal pay across organisations and potential redundancies the potential trade off between locally tailored services and economies of scale. Pa 12

17 Most importantly, if a partnership is being considered, all organisations involved should have independent auditors perform a due diligence check on the organisations involved. It is also important to consider whether a proposed partnership may involve the use of personal or health information (such as sharing between organisations) and take steps to ensure that any proposed use of such information is consistent with the organisations respective obligations under the Information Privacy Act 2000 (Vic) and the Health Records Act 2001 (Vic). XYZ CommServ teams up with others XYZ CommServ is a small organisation that doesn t have the money for big administrative software systems to help it run more smoothly and efficiently nor the experience in how to use such systems. However, XYZ CommServ does have a wealth of experience in providing day services to people in its local community. This experience is very valuable to a much larger organisation that was looking to start providing such services in a different part of the state. After a few meetings, both organisations realised they could each benefit from teaming up. Both organisations had long established recognition and goodwill in their communities so they decided to form an alliance rather than join into a single organisation. The alliance went well and XYZ CommServ gained much valuable experience through using the more sophisticated administrative software. In addition to this, XYZ CommServ now understood that teaming up need not mean losing their sense of identity. With this in mind, XYZ CommServ decided to approach some other small organisations in neighbouring communities to see if they would be interested in a similar alliance. Two were, so an umbrella organisation was formed across all three. All the organisations are now benefiting from efficiencies ranging from having a single board composed of members from all three, to pooling their resources to buy better administrative software. Pa 13

18 Step 3 Determine the impact of decisions 3.1 Legal structure Key questions What is the organisation s legal structure? Does this support future directions for the organisation? Having considered options for the organisation, does the current legal structure support the future direction? While a number of options are available, most DSPs choose between being an incorporated association (under the Associations Incorporation Act 1981 (Vic)) or a corporation (under the Corporations Act 2001 (Cth)). Ultimately, it will be a matter for your organisation to determine the most appropriate legal structure, having regard to the organisation s particular circumstances and both current and future needs. The legal structure of the organisation may have a variety of consequences. The organisation should consider seeking professional legal advice as to the most appropriate legal structure. 3.2 Governance structures Key questions What changes to the governance structure will position the organisation for the future? Does the board have the right mix of skills needed for the future? Establishing sound governance structures throughout the organisation will help ensure that the strategic direction it adopts is realised. roles, responsibilities and communication of management and boards. Governance structures can be divided into two (interrelated) categories: external governance concerned with the direction and external reporting requirements of the organisation internal governance concerned with the performance of staff and volunteers and the internal culture of the organisation. While the governance divisions are not always clear, in general the board will be concerned with external governance matters while management will focus on internal governance. External governance Some key questions related to external governance include: Is the board strategically (rather than operationally) focused? Does the board regularly review the strategy of the organisation? Does the board have a mix of members with the right range of skills? This includes service users and business experience. Does the board have strategically focused subcommittees with clear roles and responsibilities for subcommittee members? Internal governance In positioning the organisation for the future, it is essential that resources and capabilities reflect the needs of the organisation s future direction. Internal governance structures, including staff performance targets, should encourage this direction. Internal governance issues relate closely to the resources and capabilities issues discussed in Section 1.4. For example, a significant expansion in an organisation s revenue sources may require new governance structures associated with each new stream of revenue. Similarly, changes to the operating model may require careful consideration of governance across organisations, such as the Pa 14

19 A more diverse WYDDS Victoria board WYDDS Victoria had a board with the best of intentions. Made up mainly of parents of clients, nearly everyone on the board shared the same perspective on how the organisation should run and the direction it should take. However, after a while, the board s single-mindedness led to an inward focus. Board members were not open to other views of how services could be provided for their clients and the need for letting their funders know where their funding was being spent. What began as the board s greatest strength its close connection to the organisation s clients became its biggest weakness. Conflicts of interest (either real or perceived) began to arise in the distribution of funding and board members weren t aware of their business responsibilities. This led to some poor operations and eventually an administrator had to be appointed to manage the service operations and establish new governance structures. The immediate problems were fixed and the forward-looking CEO convinced the board to make changes to prevent poor business and governance decisions in the future. Using their local networks and advertising in the local press, new board members were recruited to achieve broader community representation. The board now includes people with business experience. Having a variety of views on the board has resulted in WYDDS Victoria providing valuable services to more people. 3.3 Staff and organisational structure Key questions Do staff members have the required skills? How can the organisation be structured for sustainability? Once the organisation has decided on its future direction, it should consider the following to ensure it continues to achieve its goals: Does the organisation have the right mix of skills, knowledge and experience in its workforce? Are employee resources allocated across the organisation s core activities to meet its objectives? Are employees offered development opportunities to meet new challenges? What support is provided to staff during a time of change? Right mix of skills Assess the workforce s capability against the organisation s vision by comparing current skills, knowledge and experience with those required of staff in the future. This will reveal whether there is a skills, knowledge and experience gap, enabling the organisation to plan relevant training and development initiatives and pursue the recruitment of any required staff. Employee resource allocation The organisation may need to restructure the number of full time equivalent (FTE) resources allocated to various business activities in line with new goals. This mapping process provides insight into where resource gaps exist and where consequent realignment may be required. Pa 15

20 Resource allocation against FTE can be mapped for the organisation as shown in Table 2. Using a resource allocation matrix will help ensure the organisation is structured sustainably and will help compare the human resources available to the human resources required for targeted services. Activities Service delivery Respite care Outputs Skills and training Administration Strategic planning Table 2 - Resource allocation matrix Developing employees Leisure activities Organisational investment in employees can have many advantages to the organisation and to individuals. It may be beneficial to train employees in core skills to develop transferable skills across the organisation, whilst other skills may be more relevant to specialised roles. When considering the organisation s structure, two key aspects are: organisation culture organisation formal configuration. Creating and sustaining an effective culture for the organisation When considering changes in organisational direction or processes, it is important to address the organisation s culture (that is, the way things are done, acted upon, and the way people conduct themselves). The organisation s culture determines outcomes at the individual, group and organisational levels. For example, culture has been found to be associated with: satisfaction, motivation and stress at an individual level teamwork and inter-unit cohesiveness at the group level product and service quality at the organisational level. Employees can be engaged in forming an innovative and sustainable culture by being encouraged to express their views and share ideas. Allocating time for new ideas during staff meetings can help encourage employees to innovate. Some organisations facilitate this by also having a five minute rule. During the first five minutes of discussion, comments about the idea may only be positive. This encourages people to present ideas and to be more open to change. The ideas generated can feed through to reports to the board to ensure that the entire organisation is continually thinking about how to make things better. Other options for encouraging innovation include creating a wiki page for all employees to contribute and share, or even an old fashioned suggestion box. A key part of encouraging innovation is to act on good ideas. If people do not experience outcomes from new ideas, they will be less likely to present any in the future. 3.4 Organisation business models Key questions How can the organisation change its business model to realise identified revenue sources? Does the business model address the risks of different approaches? By developing a business model with realistic targets and considered risk management, the organisation can position itself to realise new revenue sources. Business models should be informed by realistic targets that result in sufficient revenue to meet an organisation s break-even point (where revenue = fixed costs). Risks also need to be taken into account when developing the business model. For example, if the organisation expects revenue streams to be uncertain or lumpy, it may wish to operate with a flexible staffing structure. The organisation may also consider moving towards a social enterprise model for employment and whether this would present an increased commercial risk to the organisation. Pa 16