Charity Toolkit 1: Strategy - SWOT And PESTLE Analysis For Non Profit Fundraising And Business Planning

Charity strategic planning toolkit - SWOT and PESTLE analysis for your non profit fundraising and business plan.

Why Strategy Matters For Fundraising & Business Planning

We can't change what's happening in the outside world, but we can respond the threats and exploit opportunities.  This toolkit does the spadework for you.    

  • Part 1 – What the future might hold for the charity sector. 
  • Part 2 – How to find the emerging opportunities.
  • Part 3 - How to create your charity's strategy.

How effective are charities at strategy?  The Charity Sector Data Store strategy indicator is at amber, showing that the majority of charities report they are not doing this well.  Weaknesses include, not assessing funding needs effectively, a lack of realism in target and objective setting, not focussing on delivering impact and not engaging people in the strategy. To find out how to make your strategic planning more effective, complete the CEF Strategy questionnaire. It takes 2 mins to register here and 30 mins to do so; everything is free.   

What are the sector's key weaknesses?  Of the 21 top level indicators, 3 others are also at amber.  Sustainability will come as no surprise, but weak management of fundraising and ineffective planning might.  More positively, communications has moved from amber to green, over the course of the year.       

PART 1 - PESTLE: What The Future Might Hold In Store For Charities

The impact of the crisis was and will continue to be felt unequally across the sector.  Use this sector PESTLE assessment to identify the issues of most importance to you. 

Government

The economy had a huge bounce back, post lockdown, but whether this will translate into a sustained recovery, or not remains to be seen.  However, the March budget projections estimated that the long-term damage from Covid will leave the economy 3% smaller in 5 years’ time. Moreover, the budget made no allowance for pandemic-related spending after next year and a further £4 bn in cuts were announced.  The Institute of Fiscal Studies was sceptical that these cuts are deliverable. 

Substantial NHS funding has been made available, but is still far short of what’s needed and the recent tax increase was the largest since 1975. This, coupled with the cut in universal credit and rising energy costs, may make this a hard winter for many.  Our staff are often low paid and this may well impact them too.  

The Chancellor will unveil the autumn budget and Spending Review on 27 Oct, and provide details of how he plans to balance the books over the next year. In Sep 21, the Culture Secretary said charities 'should not become overly reliant on government grants' and the tax increases announced were the largest since 1975.  There is also a risk that the Spending Review may see a return to austerity for the sector. 

These factors create a risk of increased demand for services (and costs), impact on staffing (wellbeing/recruitment) and funding. 

Charity Sector

A Charity Commission report (Trustee Research 2021) found that quarter of charities had to draw on their reserves during the crisis.  That's what reserves are for, but we are now less resilient to any further shocks and these will have to be replaced in due course.  Around 4 in 10 charities suspended some of their services, while 1 in 7 ceased all activities.  

A Pro Bono Economics Civil Action Report (Nov 20) found that civil society is under-valued and overlooked, and 35% of the public think charities are wasteful and 31% that there are too many. More positively, trust in the sector has grown to its highest levels since 2014 (Charity Commission, Public Trust In Charities 2021), but it's been falling for years.  Is that just a Covid blip and how might we build on this to make sure it isn't? 

Tackling the long standing abuse and lack of diversity would be a good start.  It not only damages public trust, but also our single greatets asset - our people.  They don't need any more apologies, commitments or reviews - they need action. 

Other Emerging Challenges And Key Risks

New risks are emerging, but the existing risks have not gone away and, if anything, may even be more urgent.  

UK Strategic & Business Risks

Government Budgets.  With the focus on the economy/jobs, more funding for the sector seems unlikely and departmental budget cuts may well both reduce income and drive increased demand.  A British Academy Report (March 2021), predicts a “Covid decade” of social and cultural upheaval and that failure to deliver change will result in a rapid slide towards poorer societal health and more extreme patterns of inequality.   

Brexit   

  • Economic Risk - an LSE report (July 2020) found that Brexit will deliver a double shock to the economy.  
  • Funding Risk - the UK benefitted from a range of EU funds and it remains to be seen to what extent the funding gap will be met by new UK funds. 
    • Erasmus (£130m) has been replaced with the less well funded Turing Fund (£100m) and;
    • The £1.5bn EU Structural Funds (ESF) are to be replaced by the UK Shared Prosperity Fund, but possibly not until 2022.  Charities received about £500m pa of ESF funding.  
  • Risks To Specific Charities - For some, there will be risks in areas, such as medicine and justice/security. 
    • For example, loss of access to the 24 European Reference Networks will negatively impact charities supporting the 4m UK people, with rare diseases.  

Longer Term.

  • Inflation.  We've had very low inflation for a long time, but consumer price inflation will reach 3.9% in early 2022, almost double the Bank of England's target, but should fall back to 2% the year after if interest rates are increased.  Higher inflation would make the huge public sector debt more expensive, putting further pressure on departmental budgets.  
  • Emigration.  ONS figures suggest that a million people left the country in 2020.  If that doesn't bounce back, there might be less pressure on housing and public services and more job vacancies, but also fewer tech start-ups and creative industries – the most dynamic sectors of the UK economy.  Jonathan Portes, professor of economics and public policy at King’s College London. 

Emerging Global Risks

2020 was the worst economic decline since the Great Depression of the 1930s.  The IMF has predicted global growth in 2021 will be driven primarily by countries such as India and China. Recovery in big, services-reliant, economies, such as the UK, is expected to be slow.    

  • Climate Change - is already having an economic impact and will also lead to increased conflict and humanitarian disasters.  
  • China - its increasingly belligerent stance adds to the risk of global instability.    
  • US/UK Trade Deal - we are likely to come under pressure to accept reduced animal welfare/food safety standards.  The US is also likely to target drug price setting and, accepting that, could drive a substantial increase in the cost of NHS drugs. There will be a significant power imbalance, in favour of the US, in these negotiations.   

PART 2 - Finding Strategic Opportunities

A crisis is a catalyst for new ideas and better ways of doing things.  Finding and exploiting these gives us a way forward.  And whether an issue is a threat, or an opportunity, may well depend on what you do about it. 

Some opportunities are now becoming apparent, but there will be others that we don't yet know about, and some of these could have a huge impact in the longer term.  Which will matter will vary from charity to individual charity.  Ues this analysis to identify what is, or may be, important to you. 

How To Plan For That

We need to recognise, at both sector and individual charity level, that we would achieve far more by working in a genuinely collaborative way, to identify and share the emerging opportunities and new ideas, work to develop and roll out scalable models, and funders need to be willing to invest in making this happen. 

Let's admit it, collaboration is often superficial.  The all too frequent competition hinders the exploitation of new ideas, wastes scant resources and splinters our voice to Government.  

The Big (But Important) Unknowns

  • Societal Economics is all a bit theoretical, but may potentially be very important.  Will this change our market driven economics, by placing emphasis on what real value is?  Society has seen the men that make deals and money, as those we value, but.....  
    • Key Workers. Before the crisis, people like immigrant care workers were underpaid and seen as of little value by many.  When COVID arrived, the public began clapping key workers in the streets.  They kept us safe and the country running, whilst the hedge fund managers sat at home. 
      • Will this change become permanent and might that change the public's view of a sector, whose primary aim is to deliver social value, from too often being seen as 'nice do gooders' to being really valued and to be properly invested in? 
    • But. Our boards are actually less diverse than the commercial sector.  That matters, not just because of equality, but also because diverse boards are more effective (McKinsey May 2020). 
      • We need to stop the endless talk and act to address this.  
    • Public Trust in charities has been falling for some years and key stakeholders, such as Government and the Charity Commission, respond to this. We must engage them. 
  • Society. COVID saw a surge in domestic violence.  That's another tragedy, but might there also be upsides? 
    • Quality Of Life - Will lockdown and greater flexible working in future be better for families and the job market be a bit less harsh on carers (often women). 
    • Valuing Each Other - will the often rigid cultures and hierarchy in organisations (including charities) loosen up a bit in light of Zoom meetings in T shirts, that are interrupted by children/pets, and lead to us valuing each other, maybe just a little bit more? 
    • The Gender Gap - women bore the brunt of extra childcare during the initial lockdown and were disproportionately impacted by the economic fallout.  However, social movements can be accelerated during crisis (WW2 moving women into work).        
  • Government Policy. The Government’s economic recovery plan, changes to the Civil Service, debate over a possible break-up of the UK, and suggested devolution to regions will cause disruption and may (or may not) work, but will create new opportunities and threats for some.  

Emerging Strategic & Business Planning Opportunities

COVID has created changes, some of which will change the way we work in the future.

  • Home Working – increased talent pool, reduced need for offices and lower rents.  Might that offer better recruitment and working practices, and a move away from the largely London centric sector leadership?
  • Perceptions and Priorities. 
    • Government & The Public - some areas are now much more on the agenda- the BAME community, climate change, mental health and social care. 
    • Funders - remain more focussed on food banks and other front line services, but less so in areas such as IDO and animal charities. 
  • Funding.
    • Changing priorities - for the Government, public and charitable funders
    • Trusts - will the greater focus on core funding, quicker bid turnaround times, simpler applications and less focus on registered charities, seen during Covid, become a long term change?
    • Trust competition - there's no robust data, but competition appears to have significantly increased - trust success rates seem to be down.    
  • Regular Giving - in response to the crisis, nearly two thirds of charities changed the way in which they communicate and half said they intended to continue to use these new channels in future.
  • Changes might include increased focus on supporters, strategic diversification, innovative approaches and greater investment in digital.
  • Digital – Opportunities include online delivery, greater reach, streamlined services and increased efficiency. 

Charity Sector

  • The Charity Commission - the sector needs a strong effective regulator, but one with some commonality of purpose with us and a relationship based on mutual respect and listening.  The appointment of a new chair offers an opportunity for that to happen, but there's no indication of that so far.      
  • Structural Changes.  Large charities are few in number, but already take the lion's share of the funding.  With their often strong balance sheets, executive expertise (or at least ability to buy it in) and very capable, large fundraising/digital teams, they may be more able to weather the crisis than smaller charities. 
    • Will we see Warren Buffet's 'deepening moats', if they emerge with even greater competitive advantage?  These are commercial concepts, but we're all competing for a too small amount of available funding.
      • The WPNC Donations Report (Apr 21) found a very large increase in online donations over the last 12 months, the bulk of which went to charities with income £5m+. 
    • Looking more widely and long term, what will the deepening moats of mega companies like Amazon, and the rise of AI and block chain mean for the world of work?    

Charity Sub Sectors

Others may be specific to certain charity sectors or even individual charities.

  • Environmental Charities – impetus for a Green Deal to restart economies, the election of Joe Biden, the Government's 10 point climate change plan and it's hosting of COP26 in Nov 21.
  • Health Charities – investment in vaccines, transferable advances in medical treatment and the COVID19 ‘Washing your hands’ campaigns that will impact much more widely than just the virus.

Unexpected opportunities - Ash found that a million people have given up smoking since the crisis began. 

A Brexit opportunityEnvironmental Land Management (ELM), replacing EU farm subsidies, will pay farmers to prevent floods, plant trees and protect wildlife. 

PART 3 - SWOT Analysis: Creating Your Charity's Strategy

There isn’t enough funding and there isn’t going to be.  Boards that act strategically to the emerging threats and opportunities, will be far more able to mitigate risk, and find new ways of working to increase their impact and use resources more effectively.   

The Strategic Planning Process

Strategy is about making the best decision you are able to, based on the best evidence you have.  It doesn’t have to be complicated, but you do need to have a logical, structured process, challenge positively, be prepared to think about new ways of doing things, take people with you and make decisions based on the available evidence. 

We cannot control the events in the outside world, so effective strategy isn’t about deciding what we want to do, but rather understanding how that may impact your work, and focussing our resources to exploit the opportunities and mitigate the threats facing us.  

SWOT Analysis - External Threats & Opportunities 

These are the O and T in your SWOT. What the threats and opportunities may be for your organisation, depend on a range of factors specific to you and may appear at global, national, regional or even local level. 

You need to be looking outwards to identify, and then assess and respond to these. Think through what the issues above may mean for your charity.  

SWOT Analysis - Internal Strengths And Weaknesses

These are the S and W in your SWOT.  If you’re a trustee, download the CEF Board Bingo game for your next meeting to find out what yours are.  

Strengths

We’re usually feel able to identify our strengths, but it’s always worth thinking through this.  

  • Known Strengths - We are really great at x, but might that be partly based on what we do that we personally value, rather than an actual strength? A case in point is that I know Scotland has the greatest football team on earth, despite the fact that (sadly) there isn’t a huge amount of evidence to support this.
  • Unknown Strengths – Sometimes other capabilities that aren’t really thought of as strengths, might now be very useful, in light of the changes COVID19 has created, or sometimes have just been overlooked.

Write down every strength you can think of, then test each in turn by asking yourself what measurable evidence do we have that demonstrates that to be the case?  Identify the key ones.    

Weaknesses

Even the very best amongst us have weaknesses, but many find identifying these the most difficult aspect of strategy.  But, these are usually the best opportunities we have to achieve more.   

Sector Weaknesses - The CEF Data Store aggregates all user data anonymously to create Big Data for the sector.  The metrics at amber are strategy, fundraising, communications, sustainability and how realistic we are in our planning and target setting.  That is the majority of charities do not do these well.  Are you one of them?

Challenges - We have fantastic people, but people are often resistant to change and talking about ‘weaknesses’ almost always makes people react defensively.  I find that approaching this as looking for opportunities to achieve even more helps.  

How Use Your Charity SWOT Analysis

Bring your Strengths and Weaknesses together with you Opportunities and Threats to create your SWOT analysis. If you wish to, you could identify those that are particularly important or urgent. Then use this to create your strategy.   Watch this Charity Excellence ‘How To’ video (3 mins) for how to do your SWOT really well.

This image at the top is an example, which highlights those that are particularly important, or urgent.  The arrows show linkages that can be used to create a strategy; using strengths to exploit opportunities, and/or to address weakness, and/or to mitigate/avoid threats. Or better still, could you turn a threat into an opportunity? 

Implementing Your Charity Strategy

However, strategy isn’t a plan, it’s what an organisation does and that involves everybody, ideally from the outset.  It’s important to engage people and turn your plan into the timetable, budgets and  actions needed for them to deliver it and your progress to be monitored.  

Whatever you do, don’t do nothing.

Fundraising Strategic Planning

To build on this to create your fundraising strategy, use Toolkit 2

Theory Of Change (ToC)

Strategy can be confused with Theory of Change.  These are similar and can support each other so, if you're thinking about incorporating ToC into your strategy, this Charity Excellence resource enables you to understand what it is, how it works, how to do it and the key points on ToC. 

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