OTT is evolving as an organisation. We started over a decade ago as a personal blog. With funding from the Hewlett Foundation, we grew into an initiative. And today, we are a global consultancy and platform for change. Our funding comes from a range of consulting projects and grants. This growth has required a mind shift and to move from a cost-recovery to a mission delivery financial model.
A cost-recovery model is one in which project or activity costs are recovered over time through revenue generated by that project or activity. It is a common model in non-profit, public sector, and civil society organisations to fund programmes and services.
A mission delivery model, on the other hand, is about planning your organisational finances on an annual basis, rather than based on available funds or a funding period. With this model, the organisation is constantly looking inward and to the future to see how it can better achieve its desired impact over time and sustainably. I like to think of the mission delivery approach as a proactive or entrepreneurial option.
Non-profit organisations often start their operations using a cost recovery model, which is fine. But over time, fundraising may become a challenge (especially for organisations without guaranteed funds like endowments) and their sustainability becomes threatened. If this happens, a cost-recovery model may become insufficient. Its shortcomings may be seen as a liability. When this happens, we argue that organizations need to pursue a mission delivery approach.
|Cost recovery||Mission delivery|
|Start: What is our cost structure?
Then: How can we generate the necessary income to cover our costs?
|Start: What is our desired impact and at what scale?
Then: How can we generate the necessary income and reserves to operate at an optimal scale and in a sustainable way?
And: What are the direct and indirect costs that will allow us to generate the necessary impact and income?
A mission-delivery approach creates space for rich discussion on a range of issues that every organisation should continuously be reflecting on: funds and fundraising, resource allocation within the organisation, programme or services design, the accumulation and use of reserves, and scale, among others.
So, if your organisation is facing fundraising challenges or struggling to deliver impact with its current financial model, here are some questions that you might want to explore:
Funds and fundraising
- What is our funding composition?
- Are there funding sources we haven’t yet reached and are we approaching them?
- Are we passive or active in our fundraising efforts?
- How much control do we have over our funding? How can we increase our control?
- Is our current model suitable to deliver our mission?
- Are we planning annually or based on availability of funds/or funding period?
- Does our model guarantee suitable staffing capacity and quality to deliver our mission?
Resource allocation within the organisation
- Is our current cost structure suitable for maximising impact?
- Is our level of indirect costs optimal and acceptable?
- Are we allocating resources in the best possible way? Or shall we revisit our costs and reallocate as we evolve?
Programme and services design
- Is our programme/our services still attractive to our funders?
- Are they still relevant in the current context?
- Are there any services we should add or develop to improve our fundraising efforts and impact?
- Should we explore other focus areas?
Sustainability and reserves
- Are we thinking short-or long-term? How cautious are we about the future?
- Are we fundraising/budgeting for future potential funding shortages?
- Are we accumulating reserves at the right level every year?
- How are we using those reserves?
- What is the optimal scale to pursue the desired impact and ensure sustainability?
- How may this scale evolve over time?
We might agree that mission delivery is not an easy approach. In fact, organisations that start with a cost recovery model may find themselves overwhelmed by the demands of such a mind shift. Non-profits are often running on limited resources that are consumed by the day-to-day of service or project delivery.
While introspection is never easy, for an organisation that wants to grow sustainably and remain relevant, it is healthy and necessary for every to take a chance and evolve over time.