The Sector

Third Sector Can’t Afford to Buy and Firm’s Can’t Afford to Provide

Data from Statistics Canada’s 2006 “Report on the Volunteer & Charitable Sector,” shows that of the organizations which fall within the standard distribution of the annual revenue of Ontario’s volunteer and charitable organizations (i.e. the Third Sector), 54% have annual revenues under $100,000; 35% between $100,000 to $1,000,000 and 11% over $1,000,000.

The organizations which fall under the “small” and “medium” classifications above, represent the Third Sector. Within the non-profit sector in Ontario, there are approximately 70,000 of these organizations.

These organizations are non-profit organizations and generally seek to spend 80% of revenue on programming and 20% on administration and fundraising. While at times the procurement of management consulting services could fall within programmatic spend, it is most likely found in the administration sections of the operating budgets making only 20% of the total revenue figures stated available for the purchase of management consulting services.

A review of 100 consulting services contracts revealed the ranges of deal-size for contracts awarded to The Big Four are:

1. Small: $50,000 to $149,999 36%

2. Medium: $150,000 to $2,999,999 46%

3. Large: $3,000,000 and up 18%

The average range of an engagement overall was $2,100,000, making these services for the most part, well out the range of purchase for the Third Sector.

From the evidence, it becomes clear that finding economic efficiencies in social services, which will yield a return on the investment already made in the digital transformation of Government, is a natural evolution of the relations between Government and the Third Sector. And as stated, the assumption is made that the lead agent of this change is a “digital transformation and that this will require involvement of consultants. As there is a limited provincial budget, the consultant fees will have to be found via a reallocation of funding.

#MBA #socialinnovation #consulting #digital #government #wbs #bradfordturner #impactinvesting #nonprofit #toronto #thirdsector #impact #policy #socialfinance

The Sector

Government Buying “Technical” & Consulting Firms Selling “Technical”?

The chart below illustrates that the vast majority of dollars spent on management consulting services are spent on “information technology” followed by “management” then “technical” then “research & development” then “policy & communications.”


Auditor Generals Report, 2018

This is a particularity revealing figure as it shows the level of investment that is being made into the consulting services addressing “digital transformation” of ministerial systems in government.

In the 2018 Annual Review, the Auditor General took the position that consultants can be cost-effective for short periods, to perform specialized services, or for their expertise. However, that cost advantage over permanent employees disappears for longer-term projects. In 2016, the Treasury Board Secretariat compared the cost of information technology (IT) consultants to similar full-time staff, and determined that an IT consultant costs $40,000 a year more (30%), than similar full-time staff, after factoring in employee benefits (Auditor General, 2018).

Twenty-two percent of the competitively procured contracts reviewed in the audit had amendments greater than $10,000, even though the contracts either had no provision for amendments or specified maximum amendment amounts that were exceeded. Most amendments were between $100,000 and $500,000, with two for $1.5 million. The additional services in these amendments were not competitively procured (Auditor General, 2019).

The Market for Consulting Service to the Third Sector

Data from Statistics Canada’s 2006 “Report on the Volunteer & Charitable Sector,” shows that of the organizations which fall within the standard distribution of the annual revenue of Ontario’s volunteer and charitable organizations (i.e. the Third Sector), 54% have annual revenues under $100,000; 35% between $100,000 to $1,000,000 and 11% over $1,000,000.

The organizations which fall under the “small” and “medium” classifications above, represent the Third Sector. Within the non-profit sector in Ontario, there are approximately 70,000 of these organizations.

These organizations are non-profit organizations and generally seek to spend 80% of revenue on programing and 20% on administration and fundraising. While at times the procurement of management consulting services could fall within programmatic spend, it is most likely found in the administration sections of the operating budgets making only 20% of the total revenue figures stated available for the purchase of management consulting services.

The Sector

Sinzer & The Sector Inc Specialize in Impact Making, Impact Measurement and Impact Management.

We believe that organizations can achieve more positive change through continuous learning from impact data. That is why we work with Sinzer’s methodologies and tools to guide our customers step by step with a pragmatic and tailor-made impact management approach that suits their needs. We help organizations understand and maximize their positive impact and reduce their negative impact based on insights from data. Our team is dedicated to continuously support our clients to implement the best strategies and methods to improve their impact.

Impact Strategy

We help clients to tackle social challenges. A ‘Theory of Change (ToC)’ provides insight into how change happens. We assist organizations in developing a ToC and to create an Impact Road Map so that they can align their operational activities with their impact ambitions.

Data collection

Our consultants have extensive experience with research and data analysis and use both qualitative and quantitative research methods. We support clients in developing a monitoring- and data collection plan and provide advice in setting up a workable, simple data collection system.

Analysis and reporting

The Sector leverages Sinzer’s specialized in data analysis and impact reporting for small projects, long-term and complex programs and for entire organizations. Sinzer has been pioneers in the field of impact measurement and management since 2008. Both our teams draw from extensive experience with different types of data analysis and is up to date with the latest knowledge of research methods and reporting standards.

Impact Maximization

Data can offer all sorts of new insights. We help clients to make sense of their data and show how these insights can contribute to more positive impact. To enable continuous improvement, we support clients in setting up simple and manageable data collection systems that facilitate learning. Lastly we provide advice on how to convert this learning into concrete actions. This way your organization can have even more positive impact on society.

The Sector

Third Sector Digital Transformation: The Third Sector Can’t Afford the Big Four…

Management consulting firms are in businesses to make a profit. For firms to provide digital capacity-building services to the Third Sector, it must be commercially viable which currently it is not. Third Sector organizations (with few exceptions) cannot raise investment capital or generate profit-margins from developing economies-of-scale in market-competitive product offerings; and unlike the government, they cannot levy taxes on the population to be invested in the growth of the organization. In short, Third Sector organizations do not have the available working-capital to match the price-points of Big Four service offerings (which here, have been analyzed from available consulting services contracts of The Big Four) (presented later in detail) (Supply Chain Ontario, 2019).

Context Behind the Hypothesis: Government Spending (A Market Analysis)

There are several, interdependent, markets which required definition, in order to properly test the hypothesis: the market for social services in Ontario; the market for consulting services to government; the market for consulting services to the Third-Sector.

Government Spending on Transfer Payments: The Market for Social Services

Ernst & Young’s 2018 report Managing Transformation A Modernization Action Plan for Ontario, classifies the non-profit sector into sub-sectors – the grouping representing the Third Sector being labelled the “Community and Social Services Sector” (Ernst &Young, 2019). Analysis of transfer payments received by this sub-sector, serves to illustrative the size in monetary terms and the nature of the transactions which define the market for social services.

The Ontario Government provides “transfer payments to recipients external to government to fund activities that benefit the public and are designed to achieve public policy objectives” (Government of Ontario, Open Government, 2019). Currently transfer payments from the provincial government to Third Sector organizations, make-up approximately 73% of the sector’s revenue (Imagine Canada, 2006).

Total government expenditure for a fifteen year period has grown from $95B to $144B in real terms; transfer payments grew by $46.3B (CAGR of 3.4%), interest on debt grew by $2.4B (CAGR of 1.4%), and direct OPS expenditures grew by $0.1B (CAGR of 0.0%) (Ernst & Young, 2018).

Government spends a very significant amount on transfer payments but nearly all of this funding is allocated toward “core” operations with little to no room for strategic investment in innovation and efficiency i.e. digital transformation. Ontario faces a series of deficits which have occurred grown in correlation to the growth of the Third-Sector. Both Ernst & Young, the Auditor General, C.D. Howe Institute, The Mowat Centre, and more, agree that sustainable government spending lies in reform of “the delivery of public services that not only contribute to deficit elimination, but are also desirable in their own right.” (Commission on the Reform of Ontario’s Public services, 2012).

In the next post, we will provide a view of the major sectors and breakdown of each sector spent directly by the OPS and through transfer payments.

The Sector

The Sector Inc. partners with Sinzer

The Sector is growing its capacities as a social innovation and resource development consultancy, specializing in aligning priorities of cross-sector teams, to unlock new capital and resources.

The Sector scales organizations that will change the world and with the Sinzer tool for impact management they add a technology-based robust solution to their tool box. The Sector uses several methods in their services such as collective impact-framed business planning, relationship brokering, deal structuring, social finance and impact investing, and they have added serious bench strength to issues of monitoring and evaluation.

Together with Sinzer, the Sector designs, facilitates, and manage toward continuous improvement, collaborations that allow local, municipal and regional governments to partner with civil society, corporations, impact investors, and high impact not-for-profit organizations, in Ontario and around the globe.

What is Social Return on Investment?

So, up until now we have learned that Social Return on Investment (SROI) is a framework for measuring and accounting for this much broader concept of value. SROI measures change in ways that are relevant to the people or organizations that experience or contribute to social value.

This shows how change is being created by measuring social, environmental and economic outcomes and uses monetary values to represent them. This enables a ratio of benefits to costs to be calculated. For example, a ratio of 3:1 indicates that an investment of € 1,- delivers € 3,- of social value.

SROI is all about value. And not so much about money. Money is simply a common unit and is as such a useful and widely accepted way of communicating value. But in the same way that a business plan contains much more information than (future) financial expenses of a business, an SROI analysis is much more than just a number. It is a story about change, on which you can base decisions that includes case studies and qualitative, quantitative and financial information.

There are two types of SROI:

1. Evaluative, which is conducted retrospectively and based on actual outcomes that have already taken place.

2. Forecast, which predicts how much social value will be created if the activities meet their intended outcomes.

Forecast SROIs are especially useful in the planning stages of an activity. They can help show how an investment can maximize impact and are also useful for identifying what should be measured once the project is up and running. A forecasted SROI can be followed with an evaluative SROI to verify the accuracy of the predictions.

A lack of good outcomes data is one of the main challenges when doing an SROI for the first time. You will need data on outcomes to enable an evaluative SROI to be carried out, and a forecast SROI will provide the basis for a framework to capture outcomes. It is often preferable to start using SROI by forecasting what the social value may be, rather than evaluating what it was, as this ensures that you have the right data collection systems in place to perform a full analysis in the future.

#sinzer #wbs #warwickbusinessschool #social #socialinnovation #MBA #impactmeasurement #innovation #unitednations