Key Strategic Issues Facing Sight Savers International - Case Study Example

Introduction

This report focuses on a case study of a global non-profit organisation, Sight Savers International based in the UK. Raymond (2013) states that the core objective of Sight Savers International is to prevent and provide cure to persons with visual impairment in developing nations. The organisation’s funds come from donations given by individuals and other originations. The report is designed to explore the key strategic issues faced by Sight Savers International, the differences between profit and non-profit organisations as far as budgetary control is concerned, challenges facing the organisation and many other topics.

Key strategic issues facing Sight Savers International

The organisation’s strategic issue focus on increasing funding in order to address the issues of beneficiaries adequately. While doing this, the organisation assess the portion of people in great need of being helped. Apparently, evaluating the number of people that need assistance enhance effective budgeting of the available funds and devising the means to acquire the deficit (O'Meara, 2013). The following include some of the key strategic issues that face Sights Savers International.

• The services offered by Sight Savers International in different regions of the world have significant impact on their business. It has been identified that trachoma is being neglected in many regions of the world thereby putting people and the risk of being blind. The water that most people use is not safe and may expose a large population to serious sight infections such as the blinding trachoma.
• Increase the organisation’s income through fundraising is quite challenging. The means through which the Sight Savers International get funds such as donations from well-wishers and grants from the government are quite uncertain. Radjou, Prabhu, & Ahuja (2012) argues that the competition for financial needs from donors and the government posed by other charitable organisations such as Oxfam present some uncertainties as far as the means of raising funds are concerned. In addition, restriction on fund usage by donors deny Sight Savers International financial freedom. Therefore, the organisation has to establish cognizant reasons for financial needs.
• Staff retention and recruitment of proficient staff members are human resource concerns that constitute key strategic issues. Sight Savers International has managed to attract competent employees to execute its responsibilities. However, the development of new control measures and planning requires the organisation to assign the staff training role to the different regions or countries where it operates since each country or region operates in a given particular system. According to Ries & Trout (2001), there do not exist a uniform training programme that can be used to train staff in all the countries where the organisation offers its services.

Recommended Key performance Indicators (KPI)

These refer to the approaches that can be used to evaluate performance and success of the different programmes that the organisation conducts. The key performance indicators for not-for-profit organisations concentrate on the goals and objectives (Pynes, 2013). They assess whether an organisation is able to attain its goals and objectives within the stated time. Moreover, the indicators evaluate the growth potential of the organisation. Some of the recommended KPIs for the Sight Savers International include;

• Total income and the growth: The indicator is based on cash flows and ratios. It can be determined by use of efficiency ratio. The efficiency ratio is determined by dividing a programmes’ service expenses with the overall expenses of the organisation. The indicator will aid in understanding the contribution of each programme to the attainment of the organisation’s goals and objectives.
• Fundraising income- includes funds from donors and government grants. It is calculated using fundraising efficiency ratio. The ratio is determined by dividing contribution with total fundraising expenses. The organisation’s management should ensure that most funds are allotted to the core programmes.
• Cost effectiveness: The indicator will aid to evaluate the value attained for spending a given amount of funds. Since the organisation does not intend to make any profits, funds and other resources should be spent in the most economical ways possible. The cost of giving a service should not exceed the value of the service.
• Cash Flows: the indicator outlines the required cash inflows and outflows to understand the organisation’s financial position. The cash flows provide insight regarding the viability of the different programmes undertaken by the organisation.
• Form of funds: the indicator is necessary to evaluate the feasibility of funds within given durations. As such, it provides an avenue to allocate sources and introduce new services to the target population. The forms of fund tell the kind of programmes that the organisation can undertake.

• Human resources. This involves an assessment of the quality of staff with the organisation. It includes the number of trained workers, outsourcing policies in case of insufficient expatriates. The indicator portrays the value of funds allocated for different programmes and its contribution to the success of the organisation as a whole. The indicator will reveal whether the available staff fits the present and changing needs of the different environments under which the organisation operates.
• Legislation: The operations of an international not-for-profit organisation involve a variety of legal issues that require attention (Chen, 2011). In this regard, Sight Savers International must consider the legal requirements to operate in different countries. The legislation indicator may provide the organisation with ample space for drafting an effective financial budget since it ensures that all the legal costs are factored in when planning on how to spend the available funds.
• Expenditure: The indicator shows whether there is a mismatch between expenses and the allocated funds for a particular project.
• Reserve: The indicator is to show the amount of funds available for use at one point in time. It facilitates the planning of the projects to carry out.
• Number of beneficiaries: This provides a measure of how effective a certain programme is to the targeted community. The viability of a programme is shown by the number of people who have benefited.
• The quality of staff: This shows whether the organisation will meet its goals and objects. The staff should be equipped appropriately and provided with all the necessary tools required in their respective duties.
• Staff satisfaction: This shows whether the staff members are happy and comfortable with the assigned task.
• Donor recruitment: The number of donors that an organisation has, determines its reserve needs and the nature of products it can undertake.
• Government support: the government role in facilitating the success of programmes run by a non-profit organisation is a key factor to consider.
• Operation restrictions: the regulations implemented by different countries on the operations of non-profit organisations is an important issue of consideration.
• Communication: the duration between receipt of information and giving the feedback affects the operations of an organisation (Doak et al., 2011).
• Awareness level: the awareness of people on sight related challenges is quite influential on the quality of performance.

How do the differences between profit and non-profit organisations affect the way in which they should employ budgetary controls?

Blazek & Blazek (2008) states that budgeting is based on principles and some formal guidelines that ought to be followed for efficient financial planning. However, there exist a significant difference between the budgeting approach adopted by the profit and non-profit originations.

Non-profit organisations prepare detailed budgets showing the various classification. It is usually difficult for a non-profit organisation to measure its output and therefore budgeting is based on comparing current expenditure to budget expenditure. The budgeting system is quite different from that of profit-making organisations since for the profit making bodies base their budget on the comparison between expenditure and the performance achieved. The budgets for non-profit organisations are complex to control since many of the operations and costs are controlled in different places. Moreover, the non-profit organisations are faced with the challenge of long-term strategic planning and resource allocation.

For the profit making organisations, budgeting is a bit straightforward since it is easy and possible to draw a comparison between the expenditure and the profits generated. In essence, the profit-making organisations focus on maximising the shareholders wealth and overall profits. In this regard, it is easy to evaluate performance through analysing quantitative data through factors such as profits and return on investment and thereby develop budgets that target performance against the competitors’ revenue generation mechanisms (Macnaughton, 2005). On the other hand, the non-profit organisations focus strategies that facilitate fulfilment of goals and objectives. In this regard, they do not serve the interest of any particular shareholders since their efforts are directed towards benefiting the public or the disadvantaged groups of people in the society. Therefore, it can be observed that non-profit organisations do not enjoy financial flexibility since they rely on donations, unlike the profit oriented organisation that depended on shareholders contribution and loans.

Apparently, the non-profit organisations have the responsibility to monitor their spending and comply with the financial budget requirements in different economies. However, the success of non-profit organisations cannot be assessed on how well they spend their budget amounts, instead the success is evaluated on the accomplishment of the various projects and programmes that the organisation has undertaken. In this regard, the major concern of non-profit organisation is assessing whether the available reserve can meet the aligned programmes. However, budgeting for the reserves to be maintained by the non-profit organisations is quite unpredictable since they depend on donor funding. In essence, the social needs of the community keep changing from time to time and therefore the allocation to different programmes can never be static.

The non-profit organisations do not operate under a rigid budget since the sources of funds and expenditure are influenced by the changes in the social needs of the society. For such reason, non-profit organisations should adopt a zero-based budget to mitigate loss of funds in unproductive projects. A zero-based budget promotes effective management of resources and proficient utilisation of the limited funds. Moreover, a zero-based budget provides a tradeoff between planning and allocation of resource thereby reinforcing the established strategies for adequate attainment of goals and objects. Unfortunately, the limited resources held by non-profit organisations cannot allow adoption of a full zero-based budget technique. However, the non-profit organisations can implement policies that accommodate partial Zero-based budget to enhance efficient use of resources and proficient planning.

It is important for organisations to have a clear understanding of their financial situation such as administration costs, operating costs and services cost. The non-profit organisation should have a strategic plan that defines the financial condition to facilitate informed planning of the available resources. In addition, it is necessary to assess the satisfaction of various stakeholders affected by the operations of the organisation. The perception held by donors, loyal supports and beneficially are largely influenced by the financial structure and performance of an organisation. In this regard, the efficiency of internal approaches related to activities such as measuring of costs and the impact of operations facilitates effective decision making on the things that should be done to address the various needs of the society. Essentially, it is imperative to measure the performance of the volunteers and staff members since they constitute a significant portion of the non-profit organisation’s resources.

Ways in which Sight Savers support the arguments stated by the ‘Beyond Budgeting Round Table’?

Sight Savers International revised its budgeting practices and eliminated the traditional budget in 1999. The decision to abandon traditional budgeting was reached after a number of criticisms were raised regarding its negative performance. The organisation replaced the traditional budgeting with Beyond Budgeting (BBRT) to enhance efficiency in the usage and allocation of resources. BBRT is based on the proponent that budgeting systems result in wastage of management time (Hope & Fraser, 2003). Adrian Poffley argues that the budgeting process is time-consuming and affects the decision regarding the charity programmes to undertaken and those to abandon. Poffley’s observation is a clear attestation that BBRT’s argument regarding time wastage during budgeting is factual (Hope, 2006).

BBRT adds that budgets negatively affect an organisation’s ability to respond to the unpredictable change of environments. The argument holds that budgets affect the flexibility of an organisation’s rapid response to the changing needs of the society. In the case of Sight Savers International, changes in key areas such as exchange rates and inflation levels are not addressed adequately since the budget does not give sufficient room for accommodating unpredictable economic patterns. The inflexibilities brought about by budgets lead to inconsistencies in Sight Savers since new opportunities cannot be explored.

BBRT points out that budgeting system is a one-year planning practice, which is too short to incorporate the many activities undertaken by non-profit organisations. Sight Savers adopts a three-year strategic plan that involves budgeting and planning on an annual base (Hope, 2006). Such a duration is not sufficient to facilitate a comprehensive evaluation of the various potential projects to warrant effective allocation of funds and other resources.

Sight Savers adopts the rolling forecast technique instead of budgeting. The technique facilitates diversification of operational culture and use of alternative approaches to respond to emergency financial needs. In addition, the strategy gives room for managers of the organisations to think exclusively of approaches that can be adopted to improve the quality of services offered in different areas where the organisation operates. The success of projects carried out by a non-profit organisation attracts donors and the higher the quality of the services provided by an organisation, the more the funding from donors.

Challenges and problems that remain, despite implementing changes to Sight Savers’ planning and control systems

One of the challenges that still remains in insufficient attention on matters relating to details on the implementation of policies. The senior management does not concentrate on training the staff on how to handle issues in different parts of the world. To address this issue, the management should focus on training the staff members so that they can work smoothly without the challenges associated with newly introduced policies and operational strategies (Congdon, Kling & Mullainathan, 2011). In addition, rolling forecast should be embraced fully to eliminate the drawbacks of traditional budgeting.

Another challenge is the disagreement between senior management and the staff members on empowerment policies. The staff members are required to provide detailed information on matters regarding the progress of the organisation activities. As such, the staff members are denied the freedom to operate without interruptions. This makes results in demoralisation and reduced quality of performance. In order to provide a remedy to the disagreements, the senior management should allow the staff members the liberty to make decisions so that they can feel relevant to the organisation.

Another challenge to Sight Savers International is the inability balance the costs with the budget allocation. The total expenditure for the organisation exceeds the budgeted amount and therefore a deficit in financial requirement is experienced most of the times (Blazek & Blazek, 2008). The senior management should use the key performance indicators to keep the organisation’s expenditure in line with the tight budget. Use of the key performance indicators would send an early warning on surplus spending and therefore, give the management an opportunity to come up with policies for averting excess spending.

Conclusion

From the Sight Savers International case study, it can be learnt that non-profit organisation operating in many countries experience a variety of challenges. Some of the challenges that global non-profit organisations face include lack of control of activities in different countries, limited finances, and management bureaucracy among others. Non-profit organisations rely on donations from well-wishers and grants from the government. To enhance financial stability, non-profit organisation should ensure the success of most of its projects so that they can attract more donors and afford to run projects in the various target areas. Big organisations such as the Sight Savers International should make good use of key performance indicators to enhance efficient use of resources and proficient planning. Both the senior management and the staff members of charity organisations play significant roles in enhancing the success of projects. In this regard, the management should establish policies promote friendly working relationship between the senior management and the staff. In addition, the staff members should be given adequate training on the emerging issues to ensure that they can execute their duties effectively under different circumstances. In summary, global non-profit organisations are complex to manage due to the number of activities undertaken and the vast operational space.

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