Learning The Triple P

August 17, 2009       Patrick Rooney      

It can be challenging for nonprofit professionals to rise above grim news reports, struggles their organizations might be facing, and for many, concerns about the growing needs of their clients. Often it seems that there are more questions than answers.

Yet in these difficult times, many nonprofit professionals are looking and working for the positive. They are seeking messages of hope and constructive steps they can take right now. Nonprofits, fundamentally, are about hope, fresh starts, new beginnings and finding new ways to meet the needs of society.

This is a time to be positive, pragmatic and proactive. And although it might feel like a luxury, it is a critical time for reflection. It’s a time for stepping back, rethinking what your organization is and what it wants to be going forward, and figuring out how to get there. Ingenuity and being open to taking risks that could result in big rewards down the road.

The financial crisis is an opportunity for nonprofits to look at things with a fresh perspective and identify long-term opportunities. Tough economic times might force organizations to do what they should be doing regularly anyway. Many families today are re-evaluating what is most important and meaningful to them and so should nonprofits. This is the time to search our hearts, missions and strategic plans, not just budgets and financial statements.

Times of adversity create opportunities to make tough decisions about whether and how a charity might need to revisit or re-focus its mission or how it approaches fulfilling its mission. Are you doing things just because you’ve always done them, or done them in a certain way, or are you doing them in the way that best and most efficiently meets your mission? Are there things that should be done differently, regardless of the times? Has your organization’s mission evolved logically, or has mission creep allowed the addition of tangential programs, projects or services that may be pulling you away from your core purpose and programs and draining resources? Are you focusing on your core strengths?

These are complex, difficult issues that are hard to grapple with in the best of times, but addressing them now will help your organization not only weather the storm but emerge stronger, more focused, and more effective in fulfilling its mission. While it might seem impossible to do much more than keep one’s head above water, in fact this might be the best time to take the long view, and for prudent, reasoned investment in infrastructure, operations and planning.

As budgets become tighter, the tendency for many organizations can be to clamp down and pare away everything possible in a bid for survival. As they attempt to stay afloat, nonprofits might be tempted to heave the ballast — the very things that fundamentally contribute to their stability — overboard in the rush to “streamline” operations and cut costs.

It is important, instead, to evaluate costs strategically. Are you spending smart, not just being as frugal as possible? Achieving maximum return on investment is not about doing it on the cheap, it’s about how to do things best and most effectively for the money.

Examine each of your organization’s activities and their marginal costs and relative value. Conduct a cost-benefit analysis of each of your main programmatic areas. How many programs would you sustain if you applied a zero-based budgeting model? That is, what would you keep (or drop) if you were starting over? Are there places where careful pruning will help the remaining programs to grow, flourish, and serve more constituents better?

What tools does your organization have to help it survive and thrive? How can you play to your strengths? Remember all of your capital. It’s not just what’s on the budget sheet that’s important. Your resources might be deeper than you know. Strong, intentional relationships with clients and donors must be a top priority. Don’t let belt-tightening affect your ability to cultivate and maintain these current and prospective relationships.

Look carefully at how you manage and evaluate your fundraising program. In more prosperous times, nonprofits might not pay close attention to these issues, so this is a good time to reassess. Are you fully employing and leveraging a variety of fundraising techniques? Where have you realized your best return on your fundraising investment? How can you redirect resources to do more of that type of fundraising?

Although it could seem counterintuitive, and might not be possible for all organizations, it might actually be wiser to spend more on certain aspects of your operation and infrastructure during tough times. For example, it is critical to continue to invest in fundraising as a long-term support issue. This might also be an opportune time to plan for developing or expanding a major gifts program so that your organization can hit the ground running when the inevitable recovery begins.

Adding or maintaining a business development specialist might be even more important in challenging times to help grow existing sources of revenue and identify and develop new revenue opportunities. Focus on how to improve, build on and innovate with your existing services to increase revenue streams. Encourage staff to propose new ideas and initiatives for expanding revenue and that could in turn help preserve or create jobs.

Similarly, it might be wise to invest in a good outside facilitator to help you create a new strategic plan that both addresses current realities and provides a visionary path for the future. Consider whether you have the right metrics in place to be able to assess maximum impact and return on investment. Explore ways that you may be able to continue or expand professional development and training to help develop more effective management practices and give employees the skills and strengths they need to be successful in a changing environment.

If budget cuts are necessary, it is important to evaluate strategically what should be cut and what effect cuts will have on the long-term mission, goals and performance of the organization. There is an inherent tension at all times, but especially in more difficult times, in balancing staffing and expenses of infrastructure with those for programs or direct mission-related work. If the nonprofit cuts back too deeply on programs, then one must ask, what is this charity really achieving? However, if the organization cuts back too far on infrastructure in order to preserve program funding, then there may be short-term and long-term weaknesses in management, accounting, budgeting, planning and technology. That can also cause an organization to implode.

Some nonprofits may look to reduce their compensation costs by cutting back on fundraising staff and related expenses. While it is true that development costs are current and certain and that the benefits are often longer-term and uncertain, it is such investments today that are likely to be critical to the long-term success (if not survival) of the charity.

If reductions in force become clearly necessary as a last resort, explain to staff, the board and other key constituents why they are necessary, but also explain what’s being done to ensure that the jobs for those who remain are “safe,” unless things change dramatically for the worse. Some experts recommend that it is best to “cut once and cut deep” to avoid the organization’s death by a thousand cuts and to allow the organization and its remaining staff to move forward with purpose and confidence.

Openness, honesty, transparency, accountability and communication are more vital than ever. As you examine budgets, processes and programs, make sure that key stakeholders, especially staff at all levels and board members, are invited into and engaged in an ongoing dialogue about difficult decisions. This will generate good ideas and good will, and will help create buy-in when tough decisions are made. When you tackle problems head on, openly and honestly, that in itself gives staff hope and confidence and contributes to trust, loyalty and perseverance.

Finally, for those organizations that have benefited from the foresight and discipline in the past to build a rainy-day fund, they must strive to re-build the cash reserves that have been depleted during the recession. For nonprofit organizations that did not have a cash reserve (or had an inadequate reserve), this economy creates a teachable moment about why it is so important to create and preserve cash reserves in good times to ensure organizational survival and programmatic success in periods of fiscal duress.

It is self-evident that smaller budgets are easier to sustain than larger ones, but budget cutting should not be an end unto itself. Rather, critical reflection on where and how the organization is moving is necessary. Beyond merely cutting budgets, charities must consider opportunities for new revenues — whether that’s from expanding existing programs or creating new ones.

Properly managed, evidence that organizations are thinking strategically about these issues and are nimble when there is a sea change is likely to appeal to donors and funders, and to inspire their confidence and that of other key constituents. Thoughtful, foresighted decisions in this difficult environment will increase the chances of survival now and build toward the organization’s long-term health and success.

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Patrick M. Rooney is executive director of the Center on Philanthropy at Indiana University. His email is rooney@iupui.edu

 

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This article is from NPT Weekly, a publication of The NonProfit Times.

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