NDIS Providers: Unleash Your Organisation’s Potential
What a great time to be an established Disability or Aged Care services provider in Australia with immense organic revenue growth opportunities in existence across NDIS and Aged Home Care services. Yet why are organisations playing defence, struggling to be sustainable, let alone scale?
By David Cuda
The opportunity
We are all aware of the headline growth numbers in the NDIS and Aged Care Home Care markets. The tailwinds of year-on-year growth in both NDIS and Aged Home Care markets are set to continue for many years to come creating a wonderful operating environment to establish strategic plans. What an exciting time to be leading a Community Services provider, leading in business environment where you have plentiful waiting lists of customers wanting your organisations support and care services, what a privileged position to be in.
But are providers appropriately structured and match-fit to drive organic revenue growth in their organisations?
Many providers across Australia are not onboarding new customers due to a wide range of limiting organisational challenges, whilst those who are taking on new customers are doing so at tapered levels.
Established service providers need to address their legacy operating processes and models to capitalise on increasing their impact by serving the many new customers who want to engage their organisations support and care services.
The challenges
The reasons why providers are struggling to increase revenues and ride in the sector tailwinds are wide ranging, but some of the more common narratives include:
· Frontline support workforce shortages.
· Excessive corporate overhead structures which need to be unbundled.
· Inefficient operating practices burdened by layers of bureaucracy.
· Problematic funding models with organisations struggling to make the numbers work within pricing models.
The movement towards hourly rate fee for service, customer choice revenue models has forced providers to adapt, innovate and service customers in new ways, or risk going out of business. It’s not easy for an history-rich service provider who entrenched their business operating foundations, processes and structures based on block funded revenues models, to then re-engineer the business to transform to an agile fee for service, customer choice operating model. The bigger the organisation, the bigger the inherent challenges are to transform.
Dealing with the circumstances at hand though, no level of procrastination hoping for Government to magically waive their wand and change the course they have now established for funding Disability and Aged Care services is useful for any management team or board to hold-out on, the only thing we all can control is how we transform our pocket of accountability to be great and sustainable within hourly fee for service models.
Gross margins are favourable, so should be profit margins
Based on the “correct” application of the SCHADS Award, gross margins on frontline workforces are attractive for providers of Disability and Aged Home Care services. For payroll tax exempt providers average gross margins (incorporating statutory on costs and applying a workers compensation value of 3%) should be as high as 44% for work classified as “Home Care” per SCHADS and 30% for work classified as ‘Social and Community”.
Gross margins ranging from 30% to 44% in any high-volume service-related business are strong margins and a nice starting point to operate an appropriate overhead structure so that decent bottom-line profit margins are generated. Service delivery management and corporate overhead costs either create deficits or generate surpluses as they are purely an output of how the providers structure their end-to-end operations to service customers. If end-to-end operating practices are not transformed and re-engineered, then adding more customers is only going to increase overhead costs and, in a lot of cases for established providers, increase the size of bottom-line deficits.
The challenge for long-term established providers is how they pivot and adjust their service management and corporate services overhead structure in a manner which will enable them to be nimble and generate bottom line surpluses, or at least break-even.
The thousands of start-up NDIS and Aged Home Care providers which have entered the market over the last few years have a huge competitive advantage in that they started as a cleanskin not weighed down by service delivery management and corporate overhead cost structures formed in the old world of block funded revenue business models.
Importantly though, what the start-up providers lack is an established and respected brand which creates a rich funnel of new customers. The large waiting lists of new customers that established providers have is a nicety that start-up providers could only dream about and provides established provides with a significant competitive edge.
The inherent challenge for established service providers with long term histories in delivering for purpose Community Services is to transform successfully and quickly so that they can be sustainable and increase their social impact by supporting more customers.
Seeing new potential
Transformation programs by providers focussed on putting customers at the centre of the enterprise, embracing innovation, rethinking priorities and overhauling outdated operating models to more agile models will improve overall business performance and organisational sustainability. Breaking down organisational silos and bureaucracy to improve collaboration and speed up decision-making and activity will assist providers in their pursuit to become more customer centric and nimble to capitalise on the wonderful growth opportunities at hand. Transformations are more likely to succeed when leaders are active to drive change across the organisation creating a cultural norm to expediently improve the way an organisation operates.
Executing transformation programs is challenging as organisations need to be ambidextrous and play both defence and offence in developing initiatives to improve the organisations performance and make it more resilient. Leading change in the dynamic world of human services takes unrelating commitment and strategic courage to push through for the betterment of the cause, something which is not for the faint hearted.
Are challenges with workforce-related levers restricting your organisation’s capability to scale?
No growth can be achieved without the provision of Support Workers to deliver supports to your customers. The most common organic growth inhibitor outlined by providers is their lack of frontline Support Workers to deliver supports if they were to onboard new customers. Positions such as “there is no use us bringing on more customers if we can’t deliver the services to them” are common across the sector.
Support Worker outputs are determined by a range of workforce-related key levers that need to operate in perfect unison covering sourcing, recruitment processes, onboarding, deployment, empowerment and optimisation. It’s not one of these levers working in isolation that will produce the results needed to generate increased outputs, it’s the effective union between all the key carriages on the workforce train to enable it to travel at a higher speed.
Significant opportunities exist for leaders of Community Service providers to look at workforce strategy differently to traditional models and consider alternative workforce models which will enable organisations to deliver increased outputs. If nothing changes in workforce strategies then we will see the continuation of service providers struggle financially, offload their services and just giving up and close their doors. No doubt achieving growth is something that is discussed around the board table once a month, particularly about how important it is for your organisation to increase revenues, yet often, and as time passes, organisations continue to be hamstrung by inefficient workforce-related operating structures and practices which impair the organisations capability to generate increased revenues.
Transformation to create a better future to bring your organisations vision and mission to life requires strategic rethinking and restructuring in nearly every aspect of the organisation. Improving workforce-related levers is a great place to start since your workforce-related cost of sale and corporate overhead costs are your organisations largest expense.
- There’s no learning and progress without doing, so you might as well get moving.
Author - David Cuda, Managing Partner – Support Worker Co – david@supportworker.co
Would you like to gain some further insights?
Support Worker Co. is a pioneering Workforce Solutions and Consulting Services firm. We leverage a combined 100 years of expertise and insight our leadership team has in designing and successfully executing tailored Support Workforce-related services and solutions that drive results and solve complex and important Support Workforce-related challenges of Community Services providers.
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