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A snapshot of the third sector in Scotland

The Scottish third sector is facing unprecedented challenges. Increasing demand for services due to recession, an ageing population and the persistence of inter-related and intractable problems of inequality and vulnerability in our communities, combined with resource constraints imposed by the financial crisis, mean that organisations must find ways to do more with less. At the same time, people’s lives continue to change; new technologies and new behaviours emerge. This shifting context means that services that may have worked well before are no longer effective in improving outcomes or efficient in operation. The Christie Commission recognised the current system of public service provision is unsustainable. Over 40 per cent of public service spending is directed towards dealing with the consequences, not the causes, of social problems, and inequalities in areas of income, employment, health, learning and safety remain or have widened.  The landscape of public service provision across the public, private and third sector organisations is fragmented, unclear and overly complex, making it difficult for effective collaboration. Organisational and partnership strategies tend to be formed on a top-down basis and so can be unresponsive to individual and community needs. Strong professional dominance of public services can lead to outdated attitudes and approaches and risk aversion in relation to innovation. The Commission called for all public service organisations to work together to redesign services built around communities using assets-based approaches grounded in people’s lives, involving everyone and recognising that individuals and communities are part of the solution. It recognised that tackling “failure demand” and shifting expenditure towards more sustainable, early intervention will mean genuine and deep engagement with individuals and communities to develop reasoned, shared understanding of how outcomes are achieved. This outcomes-based transformation will require strong leadership across the whole system to enable innovation and to redesign roles, structures, systems and processes to support new services. Scottish Government’s report The Opportunities and Challenges of the Changing Public Services Landscape for the Third Sector in Scotland: A Longitudinal Study Year Three Report (2009-2012) stated that most third sector organisations (TSOs) had carried out some kind of organisational review (ranging from fairly informal reflection by senior managers and boards, to formalised strategic reviews). This had resulted in:

  • Refocusing, in some cases, of their mission and identity;
  • Diversifying funding sources, through developing enterprise activity; increasing fundraising activities, and/or seeking social investment;
  • Restructuring to achieve cost savings and improve competitiveness including cutting staff; rationalising assets, and mergers with other TSOs;
  • Campaigning to raise their profile or influence policy on issues affecting their client groups;
  • Forming partnerships, such as consortiums, to improve access to funding, particularly on a larger scale.

The report goes on to highlight that policy changes can take up to three years to filter down to TSOs.  Significant changes in policy in Scotland and Westminster have impacted most TSOs and there is a tension between adapting to ever-changing policy priorities and maintaining organisational identity and mission. The third sector in Scotland is very concentrated. Research conducted by The Office of the Scottish Charity Regulator showed that 95 per cent of sector income goes to only 7.1 per cent of charities and 82 per cent of charities have income of less than £100,000. More rigid and complex procurement and tender processes have disadvantaged smaller organisations that lack the resources necessary to participate.  Larger charities dominate these more complex funding channels, sometimes then redistributing funds to smaller charities, adding additional layers of complexity and reducing transparency and accountability. It would be misleading to assume that organisation size is equivalent to social impact.  Many smaller organisations are part of the fabric of the communities they work with, providing vital support in specific localities.  While financial constraints will act as a driver for further consolidation, the challenge for smaller organisations is to provide funders with evidence of impact and design services that can extend impact without necessarily increasing costs. Against the background of financial constraint, system failure and calls for reform, TSOs must work towards meaningful and effective change, redesigning their services and reconfiguring their organisations in different ways if they are to be sustainable in the longer term. While some organisations have made significant steps in this direction already, many lack the strategic vision, adaptability and resources to manage innovation and change. This is particularly the case with small and medium-sized organisations. This challenging contextual landscape leads to uncertainty amongst third sector organisations and BIG’s research confirms this. 47 per cent of organisations are uncertain about their future; 45 per cent are concerned about their organisation’s capacity to meet new challenges; and 44 per cent are unsure or concerned about their board’s capacity to meet new challenges. BIG’s research also shows that 67 per cent of third sector organisations are planning to develop new services over the next year. This more positive finding highlights a responsiveness and willingness to change that we hope to harness through Better by Design.

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