Narrative is taken from Investing in IT For a Better Bottom Line Podcast
We’ve worked with a number of organisations within the NDIS sector for many years now and we are very familiar with the pressures that are felt in the Not For Profit (NFP) and NDIS sector as a result of the National Disability Insurance Scheme. As such, we’ve become specialists in the care that we provide to these organisations in the form of technology services.
One of the issues that effects all the NFPs that we work with, including those within the NDIS, is the question of investment or overheads. People still see overheads as a cost, because there is a myth that the overhead ratio was the valid indicator of an NFP’s performance and efficiency. This was brought about years ago because they were trying to find the best way of measuring effectiveness and efficiency within the NFP sector.
Performance measurement, however, is hugely complex and can’t be measured purely by the spend on overheads alone. It’s the simplest way of measuring something comparable, but it’s dangerous to give just one piece of the puzzle. High overheads don’t necessarily mean poor management or the converse. In fact, we’ve realised that investment in things like IT Systems or good IT management helps to increase the impact of these organisations.
McKinsey did an independent pricing review on the NDIA. The government’s (unreasonable) cost model of the 9% overhead spend was viewed as unrealistic and unachievable by many providers and it could be quashed with the release of the true overhead costs of the industry.
We need to share this data and be more open about what it really costs to make a business impactful and efficient. Typically, the report showed that those who had invested in things like IT had, in fact, achieved greater efficiency in scale. Organisations are generally scared of exposing their true costs because it leads them to feeling vulnerable.
What I’m suggesting is that we use investment instead of cost. Invest in the IT. Invest in technologies that are going to make you more efficient and more impactful. Many NFPs in the sector share concerns associated with measuring organisational effectiveness by this imperfect and flawed metric. Competing to have the lowest overhead ratio and suggesting that the bottom line implies good governance has fueled miscommunication and actually made organisations under-invest in their core business operations.
That’s why, at BlueScale, we start with a plan to invest with impact, sustainability and an overall measurement in mind.
Want to find out how BlueScale can help your NFP transform whilst improving your bottom line?