Executive summary

An NFP sector primed for change is a dynamic sector.

As service delivery and sustainability take a digital turn, and funding sources diversify beyond government dependence, there presents many opportunities and challenges for the NFP sector. NFPs have not been immune to the national talent shortage. For NFPs to evolve and thrive in a rapidly changing environment, they will need to review their digital capability, governance frameworks and financial sustainability, together with continued consideration as to how they attract and retain the right talent.

Australian NFPs have the chance to reshape their sector during 2022 and beyond by addressing some of the immediate challenges highlighted by the survey respondents:

Strategic planning There is an increased need for strategic and financial plans together with risk management frameworks to be implemented.

People and culture Sector participants will need to better understand what employees want so they can attract and retain talent.

Funding sustainability The desire to diminish reliance on government funding, as organisations build alternate revenue streams for sustainability.

Investments Organisations are revisiting the way their capital reserves are invested given a more subdued investment outlook and broader stakeholder awareness.

Technology An increasing need for technology adoption and improvements to simplify processes.

An expansion in services and the desire to broaden revenue streams has been a primary focus in addressing strategic funding challenges and will set NFPs in good stead for realising future aspirations. Following Covid, much has been said about people reconsidering their work life priorities and looking to associate with for purpose organisations. However, the reality is NFP’s are struggling to attract and retain people given the budgetary challenges for salaries and benefits to remain relevant.

NFPs understand what is needed with governance frameworks and forward planning key priorities. They are focused on developing more diversified income streams and have an increased appetite for technology, such as websites and CRMs, which support fundraising and donor engagement. However, there is a risk in prioritising growth focused initiatives over risk management and controls (such as investing in cybersecurity), particularly when talent shortages may impact service delivery. The pursuit of opportunities must also be balanced against the potential for lower returns from capital reserves. The expectation of lower investment returns is placing some pressure on organisations to take on higher levels of investment risk, in order to meet funding requirements. As Board members are becoming more skilled and specialised, NFPs will need to consider recruitment methods that draw on a broader pool of talent.