Nonprofits’ response to today’s digital transformation challenges

Only a few years ago, many charities and nonprofit organizations lacked agile digital working practices. The pandemic changed everything, and these organizations were forced to adopt digital solutions to make sure they kept afloat. With the increased pressure of rising demand for services, a shortage of resources, and reduced funding streams, came a greater understanding of how digital transformation had to be part of an overall strategy if nonprofits were to survive in the future.  

What does digital transformation mean for the nonprofit sector?

Digital transformation is a journey. It means taking steps to move away from manual processes and using outdated legacy systems or spreadsheets to moving towards using software solutions to allow people to work smarter and more efficiently. This could include automating repetitive back-office processes, enabling teams to share information across departments, improving ease of access to information, and reducing team admin time so they can focus on what really matters.

Since the start of the pandemic, nonprofits have had to spend a significant amount of time changing processes to enable remote working, introducing videoconferencing to engage with their teams as well as donors, and allowing cashless and contactless donations. 

What are the main challenges facing the sector today?

The nonprofit sector continues to be a dynamic, ever-changing landscape. Demand for services increasing, funding decreasing, and ongoing scrutiny of costs has meant nonprofits are spending a significant amount of time changing their processes, developing new digital strategies and working models, and embarking on the digital transformation journey. All of which present a challenge.

1. Increase in demand for services

It is not only the aftermath of the pandemic that has increased the demand for services for many nonprofit; as household bills rise, the current cost of living crisis will also add to the demand for help.

2. Funding drop

The funding gap in the nonprofit sector is cause for concern for almost all organizations; only a few have not been impacted by the disruption of the last few years. Maximizing income streams is vital in what has been referred to as a cost of giving crisis. Understanding income streams while remaining compliant is critical to survival.

3. Data integrity

Nonprofit s’ databases have been eroded since the GDPR rules were tightened. Legacy siloed data in spreadsheets and databases has hindered effective decision-making. In a similar way to businesses, nonprofits now need to invest in modern, secure systems to store data and make sure it’s up to date and accurate as a single source of the truth. This has caused some nonprofits to postpone or delay significant campaigns, which affected income and donor numbers.

4. Talent recruitment

Having the right team is essential and attracting and retaining key people is a never-ending process. Finances are stretched, and motivation remains a key driver, so nonprofits need to find new ways of attracting top talent through flexible working, well-being programs, career progression, discounts, and rewards systems, alongside the increased job satisfaction nonprofit sector staff gets from their wider contribution to society.

Nonprofits can address these challenges in several ways, but digital transformation has the potential to tackle many at once. Organizations can meet increased demand by freeing up team members from time-consuming admin work. The ROI of cloud-based technology systems can counter a drop in funding. And the scrutiny of costs is much easier to manage when the data clearly shows what you are spending and where and is accurate and reliable.

Why do many digital transformation projects fail?

• Unrealistic expectations – common across all business change projects, not just digital transformations. A silver bullet does not exist. A one size fits all solution does not exist. It’s a complex project that needs a good deal of planning, not least selecting the right solution provider.
• Resistance to change – it is easy to focus on the systems, but the users are the most important part. You need buy-in and belief from all your people to make the project a success. Be open and honest and constantly communicate and consult with your teams to help them understand the project's benefits.
• Poor project management – make sure time and resources are allocated correctly to maximize efficiency and the chances of success. Poor project management can come from a lack of experience, so make sure your project team understands what it takes to complete a total end-to-end digital transformation. And choose a solution provider who will partner with you throughout implementation to understand your current processes

Steps for a smooth digital transformation

Digital strategy

Develop a digital strategy to make sure your organization remains responsive and competitive. Ensure cultural buy-in from your people through full training and engagement. Consider digital payment systems to help increase funds and donation rates. Could you partner with other online platforms to encourage donations? Are your website and social media presence boosting brand awareness and reaching potential donors? It’s important to understand where you are now, so do a deep dive into how your nonprofit currently works, looking at every function carried out to deliver your services. This will help to avoid too much customization when you choose your new software solution. This analysis could include evaluating:

• Human Capital Management: Core HR, payroll, talent, learning, compensation planning, and competency management.
• Accounting: Accounts receivable, payable, reconciliations, fixed assets, and sales orders.
• Projects: Budget and forecasting, project staffing, time and expense management, project invoicing, revenue recognition, and project accounting.
• Procurement: Vendor management, invoicing and payments, contract management, purchasing, and catalog management.
• Financial Planning and Analytics – Corporate performance, analytics and reporting, financial consolidation, planning, budgeting and forecasting, and sales operations.

Now you can look at how your nonprofit should look in the future. Map out improvement opportunities to get to where you want to be. Use this as a reference when selecting what systems to implement while being mindful of end-user experience. This deep understanding of what you want to achieve helps fully assess solution options and ensures you get a product that meets your nonprofit 's needs.

Gain buy-in

Digital transformation will mean many changes from back-office functions to the delivery of services. These changes need backing at board level if they are to have any hope of being adopted. Leading from the top shows a strong commitment to the project, which is ultimately about securing your nonprofit’s future.

Partnerships

Although digital uptake has been slow across the nonprofit sector, many are moving towards digital ways of working. Reach out to and partner with similar or complementary organizations with the same digital aspirations as you. If they have already started their journey, then all the better; they will be able to reassure and guide you through any pitfalls or lessons learned.

Allocate resources

Often, all departments are involved in the digital transformation process. This requires a lot of time out of the day-to-day running of your organization. Consider the likely cost of any system and the support needed to implement it properly. Not only from a vendor viewpoint but also an internal one as teams work on getting to grips with any new software.

Training

Before you go live, make sure all your teams have adequate training. Everyone will need a base level so they can do their job, but you also need experts to provide support and answer questions. The right training will also encourage people to use the new system and get them excited about the difference it will make to their working lives.

How Unit4 can help your organization

For all nonprofits, increasing financial resilience and closely monitoring income levels will be vital going forward. Technology and utilizing your data will help achieve this, such as a modern cloud platform with extensibility. 

With Unit4’s comprehensive cloud-based ERP, HCM, and FP&A software for people-centric organizations, you can adapt and optimize how your people work to help you manage complexity and focus on the things that matter. Unit4’s next-generation smart ERP software solutions are built for people in the business of helping people. With us, you can ‘Experience Real Purpose’ with an adaptable solution that’s right for your business, now and in the future.

To discover more, click here to book a demo and see what our ERP solution can do for your nonprofit organization yourself.