A guide to third sector trading - WCVA

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It’s an idea, but is it business? A guide to third sector trading 1: Getting started 2: First steps 3: Business planning 4: Legal and governance 5: Funding and resourcing 6: Financial controls 7: Managing growth 8: Management and governance 9: Social enterprise 10: Sources of support 8: Management and governance 8.1 Business management basics Many aspects of running a business for social benefit are indistinguishable from running good-quality grant-funded activities. So what’s the big deal? For organisations and individuals making the transition to trading, these similarities create a damaging sense of security. In fact, some aspects of good business management are not just different. They are so different that some people want to question the validity of running businesses for a social purpose at all. Resolving this is a challenge for management. Familiar issues: Many of the issues you need to deal with in managing your business should be familiar to non-trading charities and voluntary organisations. They are also covered in the WCVA publication Faith and Hope Don’t Run Charities – Trustees Do, and include issues such as: • responsibilities as an employer • health and safety • other management policies and procedures • making meetings work • good decision making • monitoring and accountability • personnel. Other issues for social enterprise: This chapter deals with further issues important to social enterprises, including: • quality control • managing risk • monitoring, reviews and evaluation • managing for sustainability • staffing and job creation 204
It’s an idea, but is it business? A guide to third sector trading 1: Getting started 2: First steps 3: Business planning 4: Legal and governance 5: Funding and resourcing 6: Financial controls 7: Managing growth 8: Management and governance 9: Social enterprise 10: Sources of support • succession policies • the roles of directors of social enterprises • board membership and officers • special constraints affecting charities. What qualities does the business need? The business culture shock: Many, but not all, non-trading third sector organisations work under the pressure of tight deadlines, exacting standards and limited resources (charities would let vulnerable clients down if they did not). But business applies the same pressures to everyone who is serious about generating income from trading. For some people the change is a severe culture shock. Business-like management: In many respects all trading and non-trading organisations in the third sector should be run in an equally business-like way. • This implies good control of finance and other resources, well managed staff, effectively delivered services. • In practice, running a business often produces a tighter, more focused and disciplined management style than in non trading charities and voluntary groups. • It may be driven by deadlines and the need to satisfy the demands of customers. It can become a busy, more demanding environment for all the staff. Lateness and casual absences may have more serious consequences, and may demand firmer management responses. • Trading demands a well-disciplined work environment which is sometimes perceived by staff to be at odds with what they have been used to in the non-trading third sector. This may be resisted and management must be prepared to deal with the fallout. Effective use of resources: Both trading and non-trading organisations should use resources efficiently, and may be forced to economise if there are reductions in income. But successful businesses should put a monetary value on all their activities. This is not because they are greedy, but because the people working in the business need to know how long tasks should take, how many people are needed to do them, how many spoons of mashed potato or how many sheets of paper they will use and at what price. Otherwise they cannot price their work accurately or ensure they do not work at a loss. 205
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