Some exciting opportunities are looming for disability services organisations in Western Australia. The National Disability Insurance Scheme is finally being rolled out, transforming the way governments fund disability services. For many organisations, challenges that had been perceived as the domain of future strategy and limited to part of the business are becoming day-to-day concerns for most of their business.
While debate will continue about the pricing model and its applicability to Western Australia, all providers need to prepare for the prospect that the current structure prevails. Fortunately, the later start in Western Australia means that savvy organisations have a last-mover advantage, so can learn from the experiences of their counterparts in the east, while building on the WA experience of individualised funding and WA NDIS.
Organisations have been busy responding to this changed paradigm for several years – investing in systems such as finance and customer relationship management tools, recruiting people with new skills, redesigning their services to reduce costs and acquiring customers through activities including marketing and branding. Nous has worked with several organisations on these developments.
Now is the time to take the next step.
This needs to be done in an environment in which many service providers lack scale and so are seeking to drive change with limited resources. In 2016/17 we know that 53 per cent of disability service providers made a profit or surplus, while 20 per cent broke even and 27 per cent posted a loss.[1] This environment means that many staff are wearing many hats in the effort to build a new future for their organisation.
It is often said that necessity is the mother of invention – we could also say it is the mother of innovation. Many disability services organisations are doing it tough and are seeking to innovate at a time when their financial certainty is being washed away. The challenge for managers is to use this feeling of crisis to help their whole organisation innovate. This might involve new systems, new cultures and new approaches.
Nous Group has extensive experience working with disability services providers as they adapt to the NDIS. From our work we have identified three insights about the next wave of challenges faced by disability services providers.
The NDIS puts consumers at the centre of disability services. Direction over care sits with the person with disability, providers need to act to attract them and payment depends on time spent on services. Many Western Australia providers have been thinking in person-centred ways for decades, but for most this represents a further and significant shift.
To survive and grow in this new environment, organisations seeking to serve consumers are increasingly adopting a commercial approach, investing in strategies, processes and systems. But they need to ensure the culture of the organisation keeps pace.
For many organisations, this is not easy. Disability services providers are typically driven by a strong sense of their mission. Their staff and volunteers are aligned to the purpose of the organisation, so they identify with the caring work they undertake and gain personal satisfaction from doing good for others. These organisations develop strong internal cultures built around the mission.
So organisational strategies that appear to alter the purpose of the organisation (even slightly) can result in significant resistance from staff, who become concerned that the purpose to which they are committed is no longer the focus. Staff that have been with an organisation a long time may be particularly resistant to change.
Because of this, an organisational narrative that resonates intellectually and emotionally is essential. An effective narrative tells people who you are as an organisation and where you have come from, where you are heading in the future, how you will get there and what people need to do to offer support. For disability services providers, it needs to link the proposed strategy to the history of the organisation and demonstrate the continuation of ‘doing good’ for clients.
However, too many organisations present their transformation strategy as a necessary evil to survive the NDIS and achieve scale, rather than providing a positive case for change aligned to their mission.
Building this narrative requires an iterative process in which stakeholders shape the story. Done right, this can bring stakeholders from understand the strategy to believing in it, accepting it, and ultimately supporting it.
Organisations that have successfully made this transition found that communicating openly with staff about what the organisation is doing, and why, achieves greater buy-in. They also found benefit in explaining to staff why they are repositioning the organisation in the public’s mind.
An organisation equipped to attract and retain customers is fundamentally different to one that relies on referrals from government agencies. It needs to design its service with the customer at the centre.
Many organisations are rightly expanding their marketing efforts, using marketing agencies to refresh their brand, do market research and build their profile. They have taken on sales staff to generate leads and make sales, often by making big promises that the organisation is not yet ready to deliver.
As well as focusing on customer acquisition, service providers need to think about how to retain customers. For this purpose it is worth investing in human-centred design to deliver an experience that customers value – and will return to. HCD is the combination of design and psychology to create processes and services that are oriented around the user rather the service provider. It requires listening deeply to the needs of your customers. For example, giving frontline staff the tools to explain services and prices in a way that is most relevant to the consumer.
A typical HCD project, depicted below, will involve four stages that move between divergent and convergent thinking to develop a solution to a problem.
The use of HCD forms part of the innovation necessary to thrive under the NDIS. Many disability services organisations are already reporting higher rates of innovation than under the previous model, and this is likely to continue.
The NDIS has put cost pressures on disability service providers. The margins offered by NDIS are slim in part due to a pricing model that assumes overheads of no more than 15 per cent.[2] The inevitable result is that disability service providers are looking to reduce their overheads as a proportion of their revenue.
In response some organisations are seeking to grow in scale, either by aggressively acquiring new customers or by branching out into aged care and other adjacent fields. These are understandable responses, but the benefits are often illusory; often the cost of overheads grows in proportion to the customer base, so the intended saving is not realised.
Instead, organisations need to confront the cost challenge head on. They need to consider whether their head office is fit for purpose, whether there are processes that could be automated and whether there are synergies with like-minded organisations that make mergers or acquisitions viable.
In information technology, for example, the potential for automation and online functions to replace outdated process is great but making the most of them requires an upfront investment to achieve ongoing savings.
On mergers and acquisitions, we know local collaboration can result in integrated services that respond to local needs. Consumer-centric funding provides opportunities for commercially viable integration. Organisations can build connections between services (including through shared data, care coordinators and physical co-location) to facilitate system navigation and to drive efficiencies.
The reality is the slim margins mean some disability service providers can no longer sustainably provide some services they used to. Organisations would be wise to take a dispassionate look at the portfolio of services they offer or are considering offering to establish if they can be delivered within the NDIS cost envelope. The new commercial model means that some services are not viable.
When identifying suitable opportunities for growth, it is useful to think about both their ease of implementation and their revenue potential. While it might be tempting to chase ideas that can be rolled out quickly, the benefit will be limited if they generate only marginal revenue. Similarly, high revenue proposals may be appealing, but bring with them high risk if they are far from the existing capabilities of the organisation. The sweet spot will be those growth propositions that score highly on both.
There are also some difficult conversations that need to be had regarding human resources. Many providers typically pay their staff above the award, but the newly competitive environment may make this unsustainable. Consequently, some allied health professionals will look closely at the employee value proposition offered by the organisation, and some of these staff may find it makes sense to operate as sole traders.
Whatever strategy an organisation pursues, it needs to think about why it wants to grow, what are the sources of that growth, what it can sustain and how it explains its approach to its stakeholders.
At Nous Group we are here to help. We have extensive experience working with clients across Australia to make the most of the opportunities brought about by the NDIS. We understand the industry dynamics, the internal tensions and the financial pressures they face.
Disability services providers need to act now to prepare for the changes coming to the sector.
Get in touch to discuss how we can help your organisation take your NDIS preparations to the next level.
[1] State of the Disability Sector Report, 2017
[2] Independent Pricing Review for the National Disability Insurance Authority, McKinsey & Company, 2018
