USING DATA AND TREND ANALYSIS CASE STUDY: HOW DATA AND TREND ANALYSIS INFLUENCED STRATEGY FORMULATION AT CRISIS Who are Crisis? • National charity for single homeless people • Dedicated to ending homelessness by delivering lifechanging services and campaigning for change. • Innovative education, employment, housing and wellbeing services address individual needs and help people to transform their lives. • Ambitious plans for the future and are committed to help more people in more places across the UK Background to the strategy formulation process • Old strategic plan ended in June 2008 • New plan runs for five years from 2008 to 2013 • 1 year development period involving staff, trustees, service users, donors and other key stakeholders • Included outline 5 year financial plan How can the Finance Director add value? • Seven key areas where we used data to improve the strategy development process: – Analysis of historical trends – Benchmarking – Development of KPIs How can the Finance Director add value? (continued) – Financial evaluation tools – Scenario planning – Risk profiles – Analysis of how financial information will be presented externally Historical trends • 3/5 year trends • Sensitivity analysis • Performance against budget • Ability to meet operational targets • Analysis of gaps in trend history Development of KPIs Financial KPIs can be used to: – extrapolate outline future costs when applied to strategic plan ambitions and, – Set targets by which you can measure success against the strategic plan Development of KPIs (continued) Examples of KPIs might include: – Services - cost per outcome / location / activity – Fundraising - static or investment ROI – Support costs - cost as %age of total expenditure, or cost per head/sq ft, response/processing speeds etc Benchmarking Benchmark KPIs to assess critical areas of performance against: • Current competitors • Future competitors decide whether to compete / do nothing / cooperate / collaborate / merge / take over Benchmarking (continued) Consider using the following resources to help you benchmark: – Peer groups – Commercial benchmarking services • Agenda Consulting - Finance Count/People Count • Fundratio/CAF – DIY • RCM top 3000 charities • Annual reports and accounts Benchmarking (continued) • Crisis benchmarked it’s fundraising function against the rest of the sector. • Two KPIs were benchmarked: - ROI - Balance of sources of funding • Two benchmarking sources were used to ensure consistency • Several areas for improvement were identified, as well as some areas where we were significantly ahead of sector averages • Investment and growth decisions were made on the basis of that information Benchmarking (continued) Fundratios 25 charities, 2005/06 Other 17% Donations 36% Public Grants 19% Rent & Investments 5% Trading 0% Shops 2% Mail Order 0% Legacies 21% Benchmarking (continued) CRISIS 2006/07 Other 2% Rent & Public Grants Investments 16% 4% Trading 1% Shops 0% Mail Order 0% Legacies 1% Donations 76% Financial evaluation tools Use tools to assess the likely viability of new projects or investments where an associated cash flow is involved Eg: • • • • • NPV IRR Break even ROI Cost / benefit analysis Scenario planning Scenario planning can be used in two contexts: – To inform horizon scanning and option discussions at the start of the process – To test options identified, provide financial parameters and make data more robust Option testing scenario planning – an example Crisis were discussing two models of service delivery for a particular project: 1. Involved subcontracting to various partners 2. Involved a 10% increase in staff recruitment Scenario planning identified: • The direct cost implications of both options • Impact on support services – tipping points were reached in IT and HR on option 2, necessitating additional support staff • Impact on physical resources –our office was already at maximum capacity, so additional office space was required for option 2 • Management structure and skill set – option 1 would have necessitated additional management training on managing partnership working; option 2 necessitated a change to existing management structure Risk profiles Consider – risks – limiting factors – Sensitivity analysis External presentation of financial information Differences between management and SORP accounting: – Cash vs accrual accounting – Allocation of support costs – Gifts in kind and donated goods and services – Reserves calculations Crisis SOFA CONSOLIDATED STATEMENT OF FINANCIAL ACTIVITIES For the year ended 30 June 2007 INCOMING RESOURCES Incoming resources from generated funds: 2007 £m 2006 £m Voluntary income Donations, legacies and similar income Grants Gifts in kind Donated services and facilities 6.8 1.4 0.5 1.7 0.5 0.7 11.6 5.6 0.6 0.4 1.0 0.5 0.6 8.7 Activities for generating funds: Other income Total incoming resources RESOURCES EXPENDED Costs of generating funds Charitable expenditure Governance costs Total resources expended 3.7 5.8 0.1 9.6 2.7 5.1 0.1 7.9 Net incoming resources and movement in funds 2.0 0.8 Crisis Management vs Statutory Reporting In management reporting, Crisis: • Cash rather than accrual account • Do not allocate support costs • Do not record gifts in kind • Do not account for governance costs separately Conclusion Data and trend analysis are critical at all stages of strategy formulation: – During early brain storming phases to provide historical context and the data to influcence scenario planning – During drafting of the plan itself to provide financial realism on the cost of ambitions and identify risks – During the translation of the strategic plan into roadmaps Any questions?