NEWSLETTER NO. 3

A Crisis is a Terrible Thing to Waste

We couldn't agree more with Stanford economist, Paul Romer's, statement, so we used it for this issue's theme. Although counter-intuitive, a crisis can provide opportunities, if you are attuned to them. We devote our December newsletter to the tough, counter-intuitive, but ultimately successful "mantras" for nonprofits to live by in these challenging times.

 

It's a New World

This is not a typical recession. We can't just hunker down to wait out the storm after we cut back on expenses, and then return to business as usual. This is more like the 2004 tsunami or Hurricane Katrina: its stronger winds and rain will affect us in more ways than we can imagine and will leave a permanently changed landscape. What can nonprofit leaders do?

Make the tough choices now; don't wait.

Time is not on your side; the water is already rising. The earlier you make critical decisions - about key programs and how to adapt to a sizable revenue drop next year and in 2010 - the more flexibility you will have and the greater the likelihood that your programs and services will continue.

Dragging your feet, not deciding, now or at all, are choices. But you may pay a significant price. There is a real opportunity cost, and now more than ever staff and board want a clear course of direction. Without it, they will be distracted, demoralized, and program quality may actually suffer. We have seen too many organizations fail because leaders and boards didn't face reality soon enough or decide how to deal with it.

Recognize the need to make decisions without perfect information.

Remember that old "80/20 rule", which applies in most situations, whether it pertains to donor funding or potential budget cuts. Focus on the big items; don't waste precious resources on the exceptions. Trying to obtain perfect information delays decision-making; after a certain point, more information won't change the ultimate outcome.

To make the best choices in times of uncertainty:

  • Be clear about your mission, your values, and who you serve;
  • Determine your criteria for decision-making; 
  • Identify the key information you really need - that 20% - then gather and assess it in light of those criteria; and 
  • Finally, trust your instincts.

Let the economy be the scapegoat.

Take advantage of this economic downturn to do the things you know you should be doing but haven't yet done. That could mean shedding an extraneous program, reorganizing your staff, moving out poor performer(s), or shrinking your space. It's OK to say, "the economy made me do it", and it's true.

Focus on what you do best.

This is a good time to make sure you focus your efforts and your resources on your core programs, so you deliver the best service possible. For those programs that you do less well or aren't really mission-critical, find an agency that excels in providing them and find them a new home. You, your partner and, most of all, the community all will benefit.

 

There will Always Be Demand For Your Services

Nonprofit leaders worry that funding cuts will mean fewer people will be served. Unfortunately, that is true, but demand for services has always outstripped supply, even in the best of times. We can't continue to provide quality service to as many clients with even fewer resources. Yet this is what nonprofits routinely try to do. It doesn't make sense.

Now may be the time for nonprofit leaders to stand up, just like Florida public defenders did recently when asked to absorb huge caseloads. Executives can renegotiate contracts, press to raise reimbursement rates and, if necessary, refuse contracts rather than provide poor quality services because of inadequate funding. Nonprofits' staff and the people they serve deserve better.

 

Take Care of Your Agency, Too

We don't know how the nonprofit sector can be strong if individual organizations ignore their own needs to build capacity. You cannot starve your way to sustainability.

Quality programs without a solid organization is an oxymoron, and they won't be sustained for the long haul without investing in both. Without adequate systems, program staff will squander valuable time on simple administrative tasks and not focus on direct service. You probably won't have the information necessary to track program outcomes, improve performance, and demonstrate impact. Not filling that position in development or human resources may seem necessary to preserve a program position, but it means fewer dollars coming in, hiring delays, or higher turnover, all of which affect your ability to deliver good programs.

 

Focus on What You Can Control, Not What You Can't

There are lots of things you can't control right now: how long or deep the recession will be, how far the stock market will fall, how much funders will cut their support, or whether there will be a bailout somewhere. Yes, these are real, legitimate concerns, but spending time worrying about them takes precious energy away from what you can control. Be thoughtful and creative; you may find you have more available resources than you thought:

  • What happens if you redeploy dollars from direct program staff to add program assistants? They can absorb several staff members' administrative tasks, freeing up program staff to concentrate on service delivery, and you may even save some money; 
  • Do you have the right staff in the right jobs? What other capabilities do they have that you might tap? For example, do you have a computer data whiz on staff, working in human resources?
  • Which board members can provide needed expertise or get it (especially pro bono)? 
  • How can you delegate tasks, reorder your days, or make other changes to spend your time and energy more efficiently?
  • How can you maintain and deepen key funder/donor relationships?
 

We Want Your Suggestions!

Let us know whether or not you find our newsletters helpful and why, so we can improve, too! And we'd love to hear from you about suggestions for future issues.

 

Quick and Dirty Scenario-Building

Create various high-level budget scenarios for the next three years to help you understand your options. You can prepare for the worst-case situation and give yourself more flexibility to adjust in better times. The results will give you directional insights. Here's how:

• Develop budget scenarios that plan for (1) a 25% revenue drop in 2009, an additional 25% decline in 2010, and flat revenue in 2011, and (2) a more conservative 30% drop in 2009, 30% in 2010, and flat in 2011; and/or

• Develop a budget where you measure the effect of eliminating whole programs – both revenue and expenses. Or, start with the revenue and expenses for just your core program and needed infrastructure - how much can you reasonably add back?