Winter 2009
Nonprofit Survival:
Four Steps to Take Now
By Judith E. Alnes and Kate Barr
Economic uncertainty and the threat of impending doom are not unfamiliar territory for nonprofit organizations. We've lived through multiple downturns and have "right-sized" ourselves time and time again. Philanthropic organizations have done likewise.
But something feels uncharted about this downturn. Perhaps it's the fact that it has fallen on the heels of a downturn from which we never really recovered. Perhaps the global nature of the economic stress makes us see ourselves in a broader context. In any event, this fire is real and hot.
Step 1: Focus
In the hullabaloo surrounding the economic troubles of the world, it is easy to forget that the nonprofit sector's role is to preserve and advance the most effective work that we are accomplishing toward our missions. And the philanthropic sector helps us do just that.
The other activities in which we engage — wringing of hands, hunkering down and insomnia — won't help. What will help are actionable strategies that reflect the reality of the situation in which each organization finds itself.
Step 2: Identify Your Most Important Work
For a nonprofit leader — executive or board member — preserving your most important work starts with identifying the most vital and viable parts of your organization — those that are at the heart of your mission. Protect those as your primary focus.
Step 3: Seek and Speak Financial Truth
You need to tell yourself the truth about your organization's financial situation before you can select the right strategies for the future.
Pay close attention to cash. Cash is always king, but in this financial evaluation it's more important than ever to plan cash flow for at least a year. Review your revenue and expense budget in detail. Push yourself to be as specific as possible. For example, "I believe these 42 people are likely to contribute at the same amount as they did last year." Or "I believe 20 percent of our revenue may be at risk."
Consider, and then become specific about, what you will do on the expense side, if projected revenue doesn't occur. Select indicators to which you will hold yourself accountable. For example, "If XYZ foundation turns down our grant application, we will need to eliminate ($____) in expenses and I plan to do that by (insert strategy here)."
Note that some executives and boards will be tempted to use funds from reserves. If so, be sure you make that decision intentionally. Be very cautious about using up reserve funds to pay for unfunded programs. It only delays the pain.
Step 4: Review Size, Scope and Structure
As you consider what strategies will best address the financial challenges, consider the size, scope and structure of your organization.
Let's start with size. Your nonprofit can only produce in relationship to the investment made in it. The right size for your organization is primarily set by the amount of support you can garner. Does your organization need to be "right-sized"? What size is needed to support your core work? Consider eliminating or spinning off the other parts. The choices that you make about what to stop doing are at least as important as those you make about what you maintain.
Next, examine the scope of your work. Have you wandered away from the efforts that most boldly advance your organization's mission and vision? If you have, this could be the time to realign your programs with the mission of your organization.
Finally, take a look at your delivery structure and organizational structure. Now's not the time to hold this sacred. Start playing with changes that could propel your organization's mission forward. Imagine new partners or a merger, or a new way to deliver services.
As you review structure, consider smarter ways to get things done, but beware of under-investing in your management or infrastructure. During challenging times, organizations may be tempted to put all possible dollars toward programs, rather than management or infrastructure, leaving organizations weaker and less likely to survive long term.
Foundations Play Important Role
The loyalty of Minnesota foundations in previous economic downturns has helped stabilize nonprofits and their ability to serve communities. Because of the severity of this decline, Minnesota foundations will want to review guidelines and restrictions to make sure that available funding is stabilizing for this cycle. In many cases this means that new programs and expansions will not be helpful unless they truly replace old ones and show promise of better results.
Foundations can help grantees with funding needed to do the tough work of changing delivery structures and organizational structures that will maintain or build effective program results. Foundations can serve as accelerants to increase the attention each organization is placing on the economic changes.
Engage Emerging Leaders
The kind of fast, flexible adaptability needed now is not the typical nonprofit operating style. Look around the organization for those who demonstrate this ability — you may well find them among the emerging leaders. Be sure to tap into their ideas, energy and capacity to integrate multiple priorities. It will be a win-win to get their involvement in this downturn, while helping to train them to handle the inevitable downturns in the future.
Those of us in leadership roles should remember that this time will be judged by the actions we take or the actions we fail to take. Not every organization will make it through this economic fire intact. But those who do will have a great deal in common — a willingness, in the face of tough situations, to make tough choices that preserve the best of what we do.
© Copyright 2009 Minnesota Council on Foundations
Reproduction in any form without the written permission of the publisher
is prohibited.
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Healthy Finances from Nonprofits Assistance Fund
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At Nonprofits Assistance Fund, nonprofit managers can access a Cash Flow Template, a ready-to-use worksheet that can help them project their organization's cash position.
Barr notes that, after assessing programs, organization structure and income mix, some nonprofits may decide to pursue new strategies that require flexible financing to move toward a sustainable future. Nonprofits Assistance Fund provides financing for a variety of purposes, including working capital during times of transition.
Contact Nonprofits Assistance Fund to learn more about loan programs, as well as other financial management training and resources that help nonprofit organizations implement healthier financial practices.
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MAP for Nonprofits: Umbrella for the Storm
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MAP for Nonprofits offers a wide range of resources to assist nonprofit organizations in weathering the economic storm. Alnes says her organization helps nonprofits by:
- Strengthening and facilitating board and management strategic decision-making
- Identifying merger partners and guiding nonprofits through mergers
- Analyzing a nonprofit's financials
- "Right-sizing" organizations to reflect their revenue streams
- Reviewing and recommending streamlined staffing structures or job duties
- Answering legal questions about downsizing
- Supporting leaders through Leaders Circles
For more information, call 651.647.1216 or visit
www.mapfornonprofits.org.
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