The National Disability Insurance Scheme (NDIS) will give individual participants the ability to direct their own care, choose a service provider and decide how funding is spent. For established disability service providers this could mean a complete about-face in how their organisation is managed.

The transition from receiving government funding in advance of service delivery, to competing in a contestable market is no easy shift. Combine that with the additional, and in some cases new, need for organisations to manage their working capital, brand, engagement and finances in a more sophisticated way, and it’s not surprising the task can seem daunting.

To better understand the sector’s “readiness” for NDIS transformation, BDO conducted an in-depth study of Queensland not-for-profit (NFP) disability service providers. The survey findings, as presented in our 2016 NDIS Readiness Review Report, challenge much of what we know about the sector.

Survey insights

Many disability service providers have identified that the change ahead brings opportunities for growth, community impact and greater fulfilment of their mission.

Despite this, for those organisations that currently exist under grant or block-funded arrangements, the NDIS will shift the foundations upon which they operate. Survey findings identified a number of organisations that are well equipped for the changes that will occur during the roll-out period; and many others that are heavily engaged in their own transformation journeys – connecting with government and other service providers nationally to understand everything they can about the sector’s future state.

Of particular note was a clear feeling among respondents that the NFP disability services sector will remain a vibrant, mission-driven segment, focused on the needs of NDIS participants, regardless of how government funding is administered. In fact, 91 per cent of respondents maintained complete confidence in their ability to deliver core services for participants, and would ensure that service standards would not slip in times of change.

However, the nature of the NDIS transition is such that even the best prepared organisation will still face pressure on its systems, service operations and finances. Startlingly, survey findings identified that many NFP disability service providers would not exist beyond 1 July 2016 in the same way they did prior to the NDIS roll-out.

Six areas of focus

The survey findings highlighted six prominent challenges for the sector to resolve in order to survive and thrive in the new environment.

  1. Strategy

For many NFPs, strategy has always centred on how to do more with limited funds in generating positive clinical and recovery outcomes for their participants. However, the funding landscape shift means service providers must now think in terms of short-term stability followed by long-term growth goals, and identifying the business models to achieve these objectives. The survey found:

  • Forty-three per cent of respondents had insufficient strategic planning or no strategic plan in place.
  • Leadership’s ability to plan and act centrally was being undermined by the lack of a specific NDIS strategic plan.
  • Some organisations lacked internal resources to successfully analyse market and NDIS-related data and define their future state.
  1. Cashflow and capital

The traditional disability services funding model sees an organisation allocated participants and funded by government in advance of service delivery.

The “new normal” will see organisations build and maintain their own participant relationships and deliver services prior to receiving funding. The survey found:

  • The funding transition will create payment timing and cashflow challenges – only 60 per cent of respondents were confident they will be able to deal with these challenges.
  • Effectively managing the transition will require a “cash war chest” to meet short-term brand, engagement, service delivery and operational requirements – only 39 per cent of respondents believed they have sufficient cash reserves to achieve this.
  1. Transactions for growth

The financial and service delivery landscapes that many organisations have built their foundations upon are changing. Service providers must seek out alternative operating and growth methods to ensure long-term survival.

According to the survey results, the scale of the NDIS changes could see an unprecedented level of merger, acquisition and collaboration activity in the sector, as organisations seek the best path forward. The survey found:

  • Immediate geographic or service offering growth may be required for some organisations to continue operating.
  • Only 50 per cent of respondents believed they have the necessary capability or understanding to use transactions or partnerships for growth.
  • A number of smaller respondents were actively positioning for merger or acquisition to ensure the best delivery of services is maintained for their participants. In some cases this could include involvement with private sector players entering the market.
  1. Marketing and engagement

The new open and contestable marketplace will bring the opportunity to explore more traditional “for profit” behaviours in relation to marketing, branding and communications – essential if organisations are going to win new participants and engage with them over the long term. The survey found:

  • Respondents strongly believed they can respond to their participants’ needs, but 35 per cent had no system in place to hear about their own performance post the NDIS.
  • While almost 70 per cent of respondents said they understand their market and who their potential competitors may be, only 46 per cent have a marketing strategy.
  1. Technology

The new environment brings a need for rapid uptake of technology and knowledge in all aspects of IT and communications. While many service providers use tools and systems that strengthen their service offerings and ability to deliver for participants, many others have demonstrated a lower than ideal level of digital literacy and technological maturity, which may put pressure on their ability to compete in a contestable market.The survey found:

  • Ongoing doubt remained as to the final state of the NDIS portal and government-owned technology platforms – this is causing doubt and hesitancy amongst some respondents.
  • Billing and invoicing (as a staple component in supporting working capital) was listed as a prominent challenge – only 29 per cent of respondents indicated their current systems can manage 48 hour service delivery confirmation and invoice release.
  • Thirty per cent of respondents identified a need to focus on links with frontline employees and regional locations, which may require investment in new communications systems.
  1. Human capital

As the structure of the disability services market changes, so too will the leaders, managers and employees of organisations and the approaches they use to identify, secure, engage and retain talent. Organisations must manage this transition or be left behind, as competition for the sector’s best and brightest increases in line with an expected surge in workforce demand. The survey found:

  • Developing a full “human capital lifecycle” was a priority for many organisations, particularly those that appreciate the value of retaining and getting the best from their current workforce.
  • Thirty-four per cent of respondents had substantial work to do to embed their culture and values in their hiring, engagement and development practices.
  • Forty-three per cent of respondents identified a need to invest in equipping staff for “sales and referral” conversations.

The NDIS is a ground-breaking policy and market shift that demands a challenging mix of long-term thinking and short-term action from Australia’s service providers. Queensland appears well positioned to continue a high standard of service delivery, with organisations on a shared journey of growth and change in an environment where “readiness” is a truly relative term.