Don Macdonald, a trainer, trustee and former charity CEO, is writing a series of New to Management blogs for us. His new book, Twenty First Century Skills for Nonprofit Managers, published by BEP, is available to buy now.

As charity leaders and managers, we have all received rejection letters or emails from funding agencies or trusts, some of which in turn threatened the future of our organisations. The first duty of a charity is to survive, and according to management consultant Peter Drucker, management is obviously instrumental in leading the organisation through difficult times and ensuring survival.

There are recent lessons from the private sector about this. Provident Financial radically changed its business model, switching over sales staff and customers to Internet use, and changing from local part-time staff to full-timers. Debts rose and profits fell drastically because traditional customers were averse to this approach. The shares crashed out of the FTSE 100 and the CEO had to leave.

Why do charities collapse?

There are numerous reasons why charities collapse or close down, some of which overlap.

• The need which they were set up to overcome no longer exists, or never really existed in the first place;
• The need still exists but the funding disappears e.g. training charities after the introduction of the UK Work Programme;
• The business model is all wrong;
• Malpractice or mismanagement.

One of the most destructive cases is when a founding CEO directs the organisation on the wrong track. An example was Novas Scarman, founded in 1998 as a care and homeless charity, which crashed from a 2008 turnover of £21 million to closure in 2012, with redundancy for 300 staff.

However this also happens to long-established organisations. The English YWCA, set up in 1855, has virtually disappeared, yet the YW pioneered really interesting youth work in the 1950/60s, including outreach work with young women and men. The YW also provided 4,000 beds for young woman, centrally managed in 1996. After this, the YW was hit with a huge demand to install essential fire precautions in its hostels; it had not saved sufficient funds for these, so they sold all their hostels and carried on with youth work, rebranding as Platform 51 in 2010. Two years later, as Civil Society reported, ‘Platform 51’s spending ... (had) outstripped its income by more than £1m each year since 2008.’ So in 2014, it transferred its remaining youth work to another charity and became a small research and lobbying organisation.

Yet if you take the right action at the right time, it is possible to rescue an organisation from severe deficits. The UK Outward Bound Trust had a deficit of £3 million on a turnover of £8/9 million in the 1990s and was ‘close to insolvency’ according to its current director. It was turned round by an interim CEO, who had run the Duke of Edinburgh Awards, through a process of restructuring and offering shorter courses.

Do’s and Don’ts

So what should a manager or leader do to prevent such issues?

• Show leadership, be resilient, don’t panic and seek help and advice;
• Always keep on top of the finances;
• Think long-term, stay well-informed to predict trends, and produce a realistic work plan which should be regularly updated to look ahead for at least three years;
• Do not put all your eggs in one funding basket - diversify so that if one fund winds up, you have other options;
• Do keep evolving, but change a winning formula gradually - not so radically that success is destroyed;
• Carry out a regular risk analysis and save for emergencies.
  
  

Please share your views and comments below, or join the conversation on Twitter.

Julia Worthington MinstF(Dip) is a Fundraising Leadership Coach and Mentor based in the north of England. Find out more about her here.

Here’s a quick quiz question. It’s Friday night, and you’re just putting your coat on when your boss comes in, and asks you to stay late to finish a report. You’ve made plans to go out for dinner with your family. How do you respond? Do you sigh, and take your coat off again – after all, the report must be important and your family are sure to understand? Or do you politely but firmly say that you have other plans for tonight, but you’re happy to come in a little early on Monday?

If you’d always choose to stay and do the extra work, your response might not be as helpful as you think it is, nor does it demonstrate great leadership. Setting clear boundaries at work helps to make you more productive, and saying ‘yes’ to everything isn’t always the best response.

Some of the leaders I work with say ‘yes’ to working at an evening event when they have a night class or circuit training, or they say ‘yes’ to completing reports or extra work on their own because nobody else volunteers. Whilst this can be a successful short term solution, it is not effective over months and years.

While constant demands on your attention and focus might make you feel in demand and successful, they can also drain your focus, positivity and productivity, leaving you feeling like you’re not in control of your own life.

If you continue to be the person who says ‘yes’ all the time, no-one will appreciate your sacrifices as they’ll think you genuinely don’t mind being permanently on call– and they’ll keep asking you.

Each time someone makes a request, think about it based on individual merits. Is it a genuine, unavoidable emergency where it’s all hands to the pump, or could it be rescheduled? Is someone else better placed to deal with it, can you delegate it?

How can you avoid always agreeing? Instead of automatically saying ‘yes’ to every request, say you’ll check your diary and get back to them. This will not only give you a little thinking time, but will also help break the reflex ‘yes’ habit.

For conditioned people pleasers, saying ‘no’ (or even ‘not yet’) can be difficult. Safeguarding your personal time is essential to achieving a good work/life balance, and makes you more productive during the times you are at work. Setting boundaries really will help you to be a better leader, and surprisingly the sky doesn’t fall in.