For charities, community organisations and social enterprises, the recession presents opportunities as well as difficulties. As in any other sector, there is no single solution to the problems we face. Extensive differences exist between organisations in the third sector, from the majority that are small, with turnover under £5m, to the few large, well-known charities with turnover of over £100m. In common, they generally exist for a social purpose, with any 'profit' reinvested in their activities, to improve and increase the outcomes for their beneficiaries.
Third-sector organisations began the year in very different circumstances, with some holding strong reserves, others working predominantly with public-service contracts as grants rapidly declined, and many dependent on income from voluntary donations. The first challenge has been to manage the uncertainty of the past year as the fall into global recession gathered momentum. Some grasped this early on and began the cycle of tough scenario-planning, which will continue for some time.
So what does this mean for the future? It is vital for any leader to understand the specific risks they face and keep these constantly under review. Those who do will be able to take critical mitigating action early enough to minimise any damage. Those with good skills in 'situation sensing' will be ready to anticipate what is ahead - both in the immediate context and, more widely, in terms of broad scanning. It is all the more important now to lead with confidence, clarity of focus and smart readiness to change.
The challenge of maintaining funding will affect the sector in many ways. Major appeals such as Children in Need and Comic Relief have attracted record support, but there are other, less high-profile causes for which keeping up voluntary contributions is more difficult. Where longer-term strategic partnerships have been made, the relationships will be more resilient, whether with individual donors or corporate sponsors. Creating partnerships is difficult, but will be critical as we work through recession to secure the position on the other side of it.
Those dependent on public funding have a year's grace before spending cuts begin to bite. This is most likely to be felt after a general election next year, whichever government is in power. Leaders who prepare for this situation now will be ready to make their case. They will also be well positioned to seek other sources of funding, including building strategic delivery alliances with others in the third and private sectors. Never has it been more important to have good performance management with clear objectives, outcomes and evidence of effectiveness, including cost efficiency.
For many in the third sector the recession is bringing a huge surge in demand, with very limited additional resources to support this. It has particularly affected those providing support and advice for people whose personal financial situations are unexpectedly difficult. But anyone working with vulnerable people will find increased pressure and stress through this period.
This is why the third sector must continue to influence and campaign in areas where its beneficiaries risk being overlooked. Politically, the coming year, as we run up to the next general election, will be a key time to seek to ensure the right priorities are set for the period after 2010.
The people who work in the third sector, both paid employees and a huge number of volunteers, are very committed to their beneficiaries. They are, however, always expected to manage change. There is significant underinvestment in skills in the third sector. I am pleased that the Government has recognised these gaps and enabled the UK Commission for Employment and Skills to fund a new body, Skills - Third Sector, to secure a recognised contribution for third-sector employers with the Alliance of Sector Skills Councils. The third sector needs to make the most of this opportunity.
There's a big financial challenge for the governance of many third-sector organisations. As well as the strategy and business planning, trustees need to oversee the management of any investments, in particular those held as reserves and in pension funds.
Now is not the time to make drastic changes, but lessons have been learnt - sometimes the hard way - about the importance of spreading risk and keeping sufficient access to cash. The professional advice of auditors and others needs to be considered robustly by those with both governance and management responsibilities.
As others have pointed out recently, a recession is a crisis that allows action over difficult issues that are much harder to address in times of growth. Many in the third sector, as elsewhere, have attacked their cost-base. The complexity of stakeholder interests, which often conflict, can make it particularly challenging to stop specific activities - but now is surely the time to be rigorous about strategic focus.
Those in the third sector who innovate and change in the tough times will emerge from the recession resilient and in the right place for what will eventually follow.
CV - DAME MARY MARSH is director of the Clore Social Leadership Programme for aspiring third-sector leaders. Previously, she was chief executive of NSPCC and headteacher of two comprehensive schools. She is a non-executive director of HSBC Bank, interim chair of Skills - Third Sector (the new third-sector skills body) and a member of the National Council of the Learning and Skills Council.