Part of my lockdown routine has been reading the New Yorker. An article by Siddhartha Mukherjee about coronavirus and the US healthcare system stood out. It starts with a story from 1997: a fire at one of Toyota’s key suppliers brought them to the brink of failure, because everything in their chain was produced “just in time.” With no stockpile and no production, they worked with new manufacturers – of sewing machines amongst others – who within three days were making parts for Japan’s best-known car brand.
The lesson wasn’t their speed and agility, although that’s impressive. It was what they learned about how their supply chain lacked resilience, and the long term work they then did to build a better system.
The article quotes an M.I.T. professor of supply-chain economics who talks through how enterprises respond to disasters and says “Cost is easy to measure. But resilience is much harder.” How true.
And how true of third sector funding also.
We do a lot of measurement of cost: salaries, equipment, overheads, of failure – or success – on public services. But there is much less measurement of resilience. Resilience of individuals, or support, or of third sector organisations themselves.
OSCR’s survey of the impact of coronavirus on charities reports that one in five face a critical threat to their financial viability in the next 12 months. Corra has been proud to be working with Firstport and Social Investment Scotland on the Scottish Government’s Third Sector Resilience Fund, which has made around £20m of grants in the last 12 weeks to third sector organisations. We saw from those applications how many were at the brink.
The fund received some criticism for focusing on organisations that had access to less than 12 weeks running costs. Organisations that had worked hard to build strong reserves felt penalised, and worried that they will be in financial difficulties later. I had some difficult conversations to explain decisions and listen to concerns. Yet I know that if a different prioritisation approach had been taken, organisations that had to close immediately because they couldn’t meet their running costs might have believed it was unfair that organisations with reserves had secured a grant. In trying to balance the many difficult situations, an approach has been adopted that focuses on those organisations at greatest risk of closure as a direct result of the pandemic.
Why were they on the brink in the first place though? The truth is, it’s really hard to build up reserves. And the way third sector funding works doesn’t help. The fragile financial resilience of many third sector organisations has, in part, been built by short-term project-based funding, and less-than-cost procurement.
There are other factors too – focusing on contracts and grants perhaps pulls third sector organisations’ away from building a base of support in their communities – public fundraising is the best source of unrestricted money. And some organisations have seen levels of need and demand that morally just must be met, regardless of the finances.
Better funding practice isn’t the only answer here. But the third sector funding landscape needs more unrestricted, core, long-term money. Corra Foundation is by no means perfect. But we have been listening, and in the launch of our ten-year strategy in March 2020 made a shift to five-year funding, unrestricted where possible, in our main small grants programme.
Back to the M.I.T. professor. He suggests two metrics for resilience:
‘The first is “time to survive”; that is, how long can an enterprise endure when there’s a sudden shortage of some critical good? The second is the “time to recover”: how much time will it take to restore adequate supplies of some critical good…In the future, their “time to survive” would exceed the suppliers “time to recover.” ‘
What we have seen in the Third Sector Resilience Fund is many organisations whose “time to recover” is longer than their “time to survive.” And the challenge for all of us is to build a better funding system and turns that trend around.