Friday, January 16, 2009

What we lose in a downturn......

When things get bad financially in our nonprofit what is our tendency? What do we do when money gets tight?

Actually, we do predictable things. I've been called in to help dozens of nonprofits in financial crises over the years, and when I get there the process of cutting is usually well under way.

Here's what normally goes first:

1. Travel and training. Easy to cut. No services get hurt, and nothing is lost--at least that's the theory. As I said in my last post, when you cut training, you hurt services, staff morale and staff retention all in one nice bundle. Cut travel? It depends on the organization, but training? There are so many inexpensive options. Look for choices before you cut this line.

2. Innovation. We certainly don't want to try anything new, since it might fail and we don't have the cushion we did when finances were better. Again, bad idea. Lack of regular innovation (some of which can be very cheap) is a sure way to lose the people you serve, donors, funders, volunteers and staff, and certainly the best volunteers and staff, who thrive on new challenges.

And, while we're on the subject of cutback mistakes, I always seem have this conversation with the boards and ED first when we start working together during a fiscal crisis:

Them: "We want to do everything we can to avoid cutting staff." (note: this sentence nealry always comes before anything else, including mission.)

Me: "Really? Why?"

Them: (looking at me like they've made a big mistake in securing a consultant) "Why? Because they're great people, doing great work. We're loyal to our staff. Cutting staff has to be the last thing we consider."

Me: "Well, it seems to me that the first thing and last thing you should be concerned about is the people you serve, not the people you employ. If you're like most nonprofits 80-90% of your expenses are related to staff. If you have to cut back more than 10% of your expenses, some of that HAS to be personnel. I have no doubt your employees are great, and dedicated, and hard working. But unless you're a jobs program....well, you're not a jobs program."

Them: (unhappily) "Oh."

Understand, I've been an exec, had financial crises, and avoided cutting staff until far, far too late. I wanted to save everyone, too. But in a service organization we usually can't.

We'll talk more about this in the "Tactics" post in a few days. But suffice it to say here that you are in the business of providing mission first, last and foremost. Keep that front and center as you confront your financial challenges.

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robin george said...

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