Seb Elsworth: Foundations and social investors can collaborate to grow resilience in the sector

Understanding the factors that play into resilience can help charities rebuild from the Covid-19 crisis

The resilience of charities and social enterprises has been tested like never before over the past 18 months.

While the sector is full of amazing stories of organisations rising to the challenge of the pandemic, it has come at great cost to the sector’s reserves: of energy, as well as of cash. 

However, the more resilient an organisation was going into the pandemic, the more likely it was to successfully adapt and survive. 

One lesson from Covid-19, then, must be to enhance our understanding of resilience, and to prioritise investing in it over the long term, not just when a crisis hits.

A helpful addition to our understanding of resilience comes from recent work at the Charities Aid Foundation, which published a learning report from its Resilience Programme that ran from 2017 to 2020. 

The programme supported 10 charities around Britain with a combination of grant, advisory support, a learning community and – crucially – an open and responsive relationship with the funder. 

It aimed to create space and time for the leadership of the organisation to reflect and achieve change, strengthen infrastructure and build networks of support. More than 80 per cent of the grant budget was spent on core staff time to enable these changes to be delivered.

From analysing the impact of the programme on the 10 participant organisations, the team at CAF has identified six characteristics of resilience:

  • A clearly articulated and widely understood charity mission and purpose.

  • Effective leadership from both the board and senior staff.

  • Awareness of the external environment in which they operate.

  • Networks and partnerships that support the charity’s mission and purpose.

  • Finances and operations that are fit for purpose. 

  • An ability to capture and communicate their theory of change and charity impact.

Building these helped the organisations involved to be better-placed to make decisions, and to be more optimistic about, and in control of, the organisation’s future.

They also helped improve cohesion and motivation in the staff team and build positive relationships with funders. 

The report includes some lessons to funders looking to build resilience in the organisations they support.

Deliberately funding resilience in the organisation should be a bigger part of the way the sector is supported, building on some of the flexibility many foundations introduced during Covid-19, it argued. 

Another lesson was that trust in the relationship between funder and funded is key, as is the recognition that results will take time to materialise. 

CAF’s work is a helpful perspective on the nature of resilience in the sector and a welcome challenge to more funders to fund in this way.

For me, though, its definition of resilience underplays the importance of a clear understanding of the organisation’s business model: the spread and sustainability of different income streams, where cost drivers sit, and how these both relate to the impact the organisation is seeking to create. 

Building financial resilience in this way is a primary goal of many social investors and the social investment sector is getting better at measuring it.  

Social Investment Business recently published a resilience dashboard for the Futurebuilders fund, via the Social Economy Data Lab. It shows how the resilience of 180 programme investees developed in the years after the investments were made across a range of financial indicators. 

The dashboard is a significant data set because of the long time frame that can be analysed, although the investees were largely working in public sector markets. 

It shows there is a range of financial metrics that add up to an overall picture of financial resilience. Looking at just one is unlikely to give you enough of a picture. Increasingly, social investors are aligning around common ways to measure it. 

Crucial to achieving this is clarity on what the investment is actually being provided for. This is harder than it sounds: some organisations acquire a building to save money on rent, others do so to lease space and generate an income. 

However, work at Big Society Capital to develop a new taxonomy of reasons to take on investment and of uses of the cash is a very helpful step forward. 

There is a good deal of positive work to draw on, and a strengthening knowledge base of what resilience looks like and how to grow it.

As we collectively support the sector’s recovery from the pandemic, grant funders and social investors should increasingly collaborate around building resilience and grow our common understanding of what it looks like.

Seb Elsworth is chief executive of Access, a foundation that helps to widen access to social investment for charities and social enterprises

Topics:
Finance

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