Strategic Analysis of the Network

Strategic Analysis of The Network

Contents

1)Executive Summary

The Network is a not-for-profit community services organisation that has been operating in the Perth Hills area since 1983. Started as a volunteer organisation to meet the need for community services in the Mundaring area, The Network began providing in home support, and day centre activities for older people, and people with a disability in the local community.

Today, The Network has over 400 employees, 70 volunteers, and provides a service to over 2000 people across the entire Perth Metropolitan area. The has an annual income of over $25m from 6 different income streams, and is an industry leader in the community services sector in Western Australia. The supports people to maintain their activities of daily living, to access the community, and to live an amazing life.

The human services sector has changed substantially with the implementation of the National Disability Insurance Scheme (NDIS), Western Australia’s dual NDIS trials and Consumer Directed Care (CDC). The has positioned themselves by developing:

-Healthy appetite for risk and growth

-Highly skilled and experienced leadership group

-Diversified range of services and funding sources

The Network could further cement their position as an industry leader by implementing key strategies to boost their brand, and further diversify their income streams into the private sector. These strategies could include:

-Social enterprise (specifically for the Youth department)

-Market Leadership development for the rest of the sector to capitalise on the skills of the leadership team

-Developing a forward facing role who generates business and sells the brand and services

2)Background

In 1996 The Network began operating a Mental Health program, funded through the Mental Health Commission (a completely separate funding stream) and added a specialist Youth Services division in 2007, so they could provide community support and group programs for youth at risk and people with mental health conditions.

Over the years The Network moved into supported accommodation (now owning and operating 22 group homes for people with a disability), social housing (190 properties rented to people living with mental health issues), adult day centres for the frail aged, and a purpose built home to support young women who are victims of domestic violence and their children, named Kira House.

Today, The Network has over 400 employees, 70 volunteers, and provides a service to over 2000 people across the entire Perth Metropolitan area. The has an annual income of over $25m from 6 different income streams, and is an industry leader in the community services sector in Western Australia.The supports people to maintain their activities of daily living, to access the community, and to live an amazing life.

3)PESTLE Analysis

The community services sector is in a significant period of change that is having a large impact on the way in which services are being delivered, and organisations are coordinating their business (Lord, and Hutchison, 2003) (NDS, 2017). This is largely due to the implementation of the National Disability Insurance Scheme (NDIS), which has ‘reconfigured a continuation of individualised payments and care package policies, which has had international significance in terms of how new policy is formulated and also implemented in this controversial field’ (Fawcett, and Plath, 2012), and the introduction of Consumer Directed Care (CDC), which is similarly individualised services for frail aged members of the community. The biggest operational challenge that the NDIS and CDC bring, is the fact that consumers now, for the first time, control their own individualised funding, and it is no longer in the hands of the organisation.

2.1) Political

Australia’s disability services sector has been redefined by the introduction of the NDIS, but none more so that Western Australia, who after 12 months of running 2 separate trials (a State and Federally delivered scheme), has decided to implement a State-run disability service and abandon the NDIS system. The implication of this for organisations in the sector is uncertainty around individualised funding (so planning for services, budgeting and strategic planning is a challenge), the abolishment of previously block-funded programs, and uncertainty around the sustainability of the program if the State government changes.

Similar to the individualisation of disability services, is the 2017 individualisation of aged care community packages. Historically aged care packages have been distributed amongst organisations and the market was non-competitive; however in February 2017 ‘Consumer Directed Care’ was launched and every older person in the community was given their own funding allocation and can choose their providers. This increase of choice and control is empowering for consumers, but means again, organisations are unable to accurately predict their income, clientele, and strategically plan for the future.

2.2) Economic

With a competitive consumer market, comes the pressure for competitive rates, a pressure that was once not felt by human services organisations. Prior to 2014, organisations set their prices and this information was not accessible to the consumer, as it was a service paid for directly by the government. The individualisation of services means that consumers have access to the pricing framework of each organisation, and unit pricing is now a factor in choosing a provider. The NDIS released a ‘Unit Pricing Guide’ which details the maximum that organisations can charge for each service, and these rates were up to 30% lower than the prices previously paid to organisations by the Disability Services Commission for the same services (NDIS Pricing Guide, 2017). As a result, a number of smaller providers have been forced to amalgamate, and many service providers have been unable to offer their full suite of services. The TheNetwork leadership group foresaw the changes, and had restructured the organisation to be able to accommodate the new areas for growth, and bear the reduced unit prices. As a result of the new economic climate, The has merged with two other services, grown into two new geographic locations, and secured over $2m in new client packages

2.3) Social

The Network, much like most other human services organisation, front line workforce is primarily migrants (see figure 1 – The Annual Report 2015-16). Restrictions to 457 VISA and Australian Immigration laws could make attracting and retaining staff (in a typically migrant dominated industry) more of a challenge, and will force many organisations to review the way in which they attract and retain staff. The Network’s staff retention is very high, with only a 4% turnover in 2016, but the constant growth, means a constant need for frontline staff.

2.4) Technological

The changes to the aged and disability sector have seen an increase in the use of technology to not only promote services, but also to access clients, and deliver services. The CDC system, saw aged care allocations move to an online portal that required someone to ‘pick up’ the client – this has seen many organisations employ sales team whose targets are based on the ‘picking’ of clients from these systems. The NDIS has moved from block-funded services (where the organisation is given lump sums from the government every quarter) to a delivery-based system, where the organisation needs to provide the service, then claim for each individual hour through an online portal. Again, this has seen many organisations need to employ administration staff who can submit claims and monitor each client’s plans. In response to this drive, The Network has committed to a $2m upgrade to their IT and Client Management systems, to give staff the resources to do their job well, and has employed a small team of IT specialists to lead the project.

2.5) Legal

There has been significant changes to Equal Opportunity legislation, and Privacy and Freedom of Information legislation which has had a significant impact on the disability sector and not-for-profit organisations. The Network has, like all other organisations, reviewed policies and procedures to ensure that their service, facilities, and employment is inclusive, accessible, and compliant with legislative changes. This involved significant expense in the design and development of their new premises in Cockburn to ensure an accessible workplace so that The Network can employ staff with a physical disability.The also has a strategic objective to increase their employment of people with a disability, and expand their Aboriginal workforce; which will help to meet legislative requirements, and add to corporate social responsibility.

2.6) Environmental

Climate change, and pressure for greener and more sustainable practices impact on the way that The delivers their services, both internally and externally. The Networkaims to reduce printing costs and through the new IT project; slowly eliminate the need for hard copy files and resources. Shut down procedures in all offices involve processes to reduce energy usage and create a greener workplace.

4)SWOT Analysis

Strengths

-Highly capable and experienced leadership group – Changes to the sector have resulted in a number of not-for-profit groups recruiting for business/ finance specialists to support the organisation through the new competitive market. The leadership team at The Network already possessed these skills, which has resulted in substantial growth at a time when the conditions were unfavourable, and strong strategic direction.

-Diverse service streams – The Network provides supports to clients who have a disability, suffer with Mental Health issues, are frail aged, or are considered youth at risk. This diversified service stream means that no matter what your funding is, or what causes you to need support, if you need help -The can help. This is in contrast to the majority of the competition who only provide services in one field e.g. aged care.

Weaknesses

-Rise’ brand and services are not promoted widely –The currently relies on reputation and word of mouth. Marketing and promotions are low key, and localised, and this prohibits The from attracting new clients who have not had a long history in the sector, and therefore have not heard of Rise. Rise’ competitors are using television advertising, and FM Radio to promote services, which are areas The has not ventured into yet.

-Change management –The has not implemented any specific party to manage the change. The organisation is undergoing significant growth, restructuring, unheralded change, and a culture shift. If not managed well, this is a threat to Rise’ positive culture; and currently there is no change leader to steer the team through the change. There is also no clear communication strategy implemented to date.

Opportunities

-Expand into organisational mentorship and corporate support services – The Network has a high calibre of executive leaders, and the potential to market this resource. By expanding into corporate support, mentorship and training, The could add another income stream and promote themselves as an industry leader

-Diversify service offerings into niche markets – The does well in the mainstream market, which is competitive and dominated by the majority of suppliers. However, there are still niche markets (e.g. clients engaged with the justice system) that are devoid of suppliers, and provide opportunity for increased clients, revenue, and the opportunity to promote The Network as an industry leader and specialist provider.

Threats

-Growth at a cost to quality – The Network currently runs the risk of growing too fast, or becoming too diverse and risking the quality services that are offered (Greiner, 1972). Sustainable and measured growth is the preferred model to ensure growth and maintain quality.

-New competition entering the market – The NDIS and CDC have generated a lot of interest in the sector, and thus new, private and publically listed entities are coming into the market. These competitors have high capital, less restrictions than not for profits, and highly experienced and educatedleadership teams who can generate and maintain business.

-Consumer’s self-management – The opportunity for clients to forego an agency (which was once essential to secure funding), and self-manage is a threat to Rise’ growth and sustainability. As technological advances enter the market, and self-management becomes easier and more accessible, the number of clients requiring agency managed supports could reduce.

5)VRIO Analysis

See Appendix 1 (Cardeal, and Antonio, 2012)

6)Porters 5 Forces Analysis

(Porter, 2008)

Threat of new competitors to the market place – Moderate

-NDIS expansion has led to a larger number of competitors to the sector. There are now 92 providers in the lower south west, an area that once had only 12 providers (WA NDIA, 2017)

-There is also the growing instance of clients who are choosing to self-manage and employ their own staff (foregoing the need for agency intervention). Ultimately, there will always be room for large providers, as many people with complex disability do not have the capacity to self-manage.

Threat of substitutes – Moderate/ High

-The NDIS can created the opportunity for individual contractors (frontline workers who can market themselves to people with a disability who self-manage their funding). Individual contractors are significantly cheaper (approximately 50% less expensive) than any organisation, and more accessible due to new online platforms enabling their success.

Bargaining power of suppliers – Low/ Moderate

-The bargaining power of suppliers is reduced in the new model, but it is across the board – so there is no advantage for one organisation or the other. Suppliers have however, lost bargaining power and position with the grant makers due to rigid cuts to government funding, and tighter constraints on existing grants and funding streams. The has negated this risk by diversifying income streams and reducing reliance on government funding (Chang, and Tuckman, 1994).

Bargaining power of consumers – Moderate

-The NDIS and CDC are competitive markets, where the consumer has control and ultimate bargaining power (Purcal, Fisher, and Laragy, 2010). The reduced risk in this field is due to the fact that a majority of organisations have similar prices, so consumer’s choice is based on quality rather than cost.

Intensity of competitive rivalry – Low/ Moderate

-Changing from one supplier to another is challenging in the DSC and Western Australian NDIS model, so there is reduced intensity in rivalry (Changing providers required the Commission to generate an ‘end of service’ agreement that can take up to 12 weeks)

-The industry does not currently have an overcapacity, and the consumer pool is growing steadily as more people are accepted into the system

7)Recommendations

-The Network capitalises on the growing demand for respite accommodation in the southern corridor. A 5 bedroom respite home generates a potential $1,650 per night in income, and there is significant demand in the south for residential respite.

-The Network capitalise on the strength and experience of the leadership team and market corporate services to other organisations for training and development.

-The Network develop a forward facing role who generates brand awareness and relationships with external referral agents - this will increase referrals and release Managers to be able to focus on service quality and service design

8)Conclusion

The Network has cemented an excellent position as a key provider in the disability and human services sector. The Network has leveraged their position as a leader in the industry and attracted high calibre leadership and human resources team; who support the organisation to succeed. The changes in the industry have created significant opportunities for The Network to expand their current services, move into new geographical locations, and diversify their services into training and organisational development.

References

Cardeal, N., & Antonio, N. S. (2012). Valuable, rare, inimitable resources and organization (VRIO) resources or valuable, rare, inimitable resources (VRI) capabilities: What leads to competitive advantage?

Chang, C. F., & Tuckman, H. P. (1994). Revenue diversification among non-profits. VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations, 5(3), 273-290.

Fawcett, B., & Plath, D. (2012). A national disability insurance scheme: What social work has to offer. British Journal of Social Work, bcs141.

Greiner, L. E. (1972). Evolution and revolution as organizations grow.

Hettering, K (2014) Strategic Management for Nonprofit & Public Organizations. Accessed 10 Mach, 2017 @ 9:23pm at

Hubbard, G., Rice, J., & Galvin, P. (2015). Strategic management: Thinking, analysis, action (5th ed.)

Lord, J., & Hutchison, P. (2003). Individualised support and funding: building blocks for capacity building and inclusion. Disability & Society, 18(1), 71-86.

Lord, J., & Hutchison, P. (2003). Individualised support and funding: building blocks for capacity building and inclusion. Disability & Society, 18(1), 71-86.