Hi, I’m Steve Billot! Consultant and Lecturer at the Centre for Charity Effectiveness (CCE) on the Charity master’s programme. In a previous role I worked as the National Head of the Business Review Team at a large firm of accountants. I had to carry out many reviews where the fear was that the organisation was in serious trouble. I developed a method for looking at the whole of the organisation to understand why they were in their present position, what that was and where they were planning to go.

Having the opportunity to sit outside an organisation and consider all of the many parts is a real privilege. It is easier to see the whole picture when you are not on the inside also trying to do your day job. For many, the opportunity to understand the problem and work through the challenges was really helpful and I’m pleased to note that the overwhelming majority survived and continue to serve their communities.

I want to share with you my process for conducting a business review of a charity, hopefully giving you some ideas and this may spark some thoughts about your own organisation.

Step 1: Start with your purpose

The starting point is always to look at the purpose of the charity. It is really important when working with a charity to revisit the purpose and mission of the organisation. I have met many where, over time, they have slowly but steadily moved away from their original goals. A few years ago, I worked with one which had been established over 30 years ago to serve a specific group within their local community. It soon became clear that the group they were set up to support had moved away and the new residents no longer saw the charity as relevant to them. The unfortunate conclusion was that the purpose could no longer reasonably be met and the best thing for the organisation was to close in an orderly way.

This only serves to show me that the first thing you always have to do is to sit back and ask, is the purpose still being served and also capable of being continued in the future?

Step 2: Review the four key areas

Once the purpose is reaffirmed, a structured review examines four key areas:

• 1.People & Politics

This is frequently the area where many disputes arise and those can, in turn, lead to distraction and disruption within the charity. The sector has many different operating models including unincorporated as well as incorporated entities. Therefore, the first task is to map the chain of command and understand where the real power lies.
If the organisation is a membership body, are the members fully aware of the challenges that the business may be facing? What are their views? I recently worked with one organisation where at the AGM, attended by over 250 members, there was huge distrust of some of the management team and when it came to voting for new trustees there was an unusually high level of dissent.  Membership  organisations can unfortunately be driven by division and that can, in turn, carry through to the trustees and even to the management group.

Disputes and disagreements at a senior level will inevitably ripple down the organisation and lead to uncertainty and even confusion amongst those who are charged with managing it. Therefore, it is essential to understand if any of these issues are really the cause of the challenges you are starting to deal with. There will be no point identifying a need for a business to change if, at the heart of the problem, the trustee group or management body is unprepared for, or unwilling to accept that change.

Therefore, the politics behind the organisation’s structure is an absolutely essential starting point for you to understand. You will have to spend time listening to many people’s views. People are the heart of any charitable organisation and by listening and understanding them at all levels you will be able to put the people and politics part of the puzzle together. Then you can move on to look at how the business operates both financially and operationally to move towards your ultimate conclusions.

• 2.Risks & Regulations

Charities often operate under strict regulatory frameworks, and failure to meet compliance requirements can have severe consequences. Key areas to examine during a business review include:

●Reporting accuracy, data collection and transparency
●Adherence to charity commission guidelines
●Safeguarding and legal responsibilities associated with the organisation.

• 3.Beneficiaries & Benefactors

Charities exist to serve a purpose and a specific group of people, but those needs evolve over time. As mentioned in the example earlier of the community that had moved away, regularly reassessing beneficiaries ensures continued relevance and a guarantee for the future of the organisation.

You must also be hyper-aware of your funding sources to ensure their sustainability and future. Who are the key donors, grant providers, or revenue streams? Is there a reliance on a single stream of income? A diversified funding base mitigates risk and enhances stability for the future[CS1.1].

• 4.Finances & the future

The final area to explore when looking at a review is to understand the finances and to look towards the future.

Finance people when conducting business reviews tend to dive into the details and can, unfortunately, miss the point. This is why I look at this last and not first. You cannot do a review only through the lens of the finances, otherwise no charity would ever operate! However, if you do not understand the financial imperative, as great as the charity is, it will fail when the cash runs out.

It is all too easy to create complex spreadsheets using many templates for analysis which then come up with an idealistic solution which makes perfect mathematical sense but in practice is entirely impractical. All forms of service delivery are eventually a compromise. They cannot deliver everything perfectly as the financial implications for that, together with other resource limitations, would make that unrealistic. Therefore, the inevitable compromise carries consequences. The financial modelling of a business and the services it delivers is an art in itself and can only be built from solid information, which is why it should be the last part of a review of a business, and not, as many do, the first.

Without understanding what the business does, where and why it does it, the model will not make any sense. However, the model is an essential part of any business decision making. Failure to anticipate the funding requirements is all too often the cause of a business review to be needed in the first place.

It is when the cash runs out that everyone starts to worry! In reality, they should already have understood the direction of travel and the way in which they are operating would eventually lead to the cash running out.
An integrated model which has income and expenditure showing a surplus (or deficit), a linked balance sheet and cashflow forecast is an ideal output. This will also allow capital expenditure to be clearly shown.

Step 3: How do the puzzle pieces fit?

The final step of the process is bringing together all of the areas and findings to see how they fit together. You will have to ask yourself do all the parts fit together to tell a coherent story? If not, why not? Which parts clash or fail to really fit in with the agreed purpose?

The most important thing will then be to go back to the beginning. Why are you here? What was your brief and what initial explanations and thoughts were shared with you when you agreed on the scope. People will frequently allow their own perceptions of the problem to become part of the initial brief and this can contaminate your role if you are not careful.

Only at this stage should you start to bring it all together into the output documentation you have agreed on, whether that is a long report, a presentation, a workshop or some other agreed output.

In conclusion, there are many reasons why an objective review may be needed. If you ever need one, I hope that this will help you to understand what, for me, are the key ingredients.

If you would like support on doing a business review for your organisation, please email CCE@citystgeorges.ac.uk. We would be happy to discuss how we can help.