Tuesday, February 03, 2009

What to do now, Part II

This is Part II of a series on what to do now. We'll get to that in a minute, but I have to mention the irony of my current big project, the one that kept me from posting for two weeks.

I'm working on a third edition of Mission-Based Management, which was my first book in 1993 and had a second edition in late 2000. My preface (and lots of the contents) talk about being a nonprofit in a booming economy with no federal deficits in sight, etc., etc., hahahaha, sob.

Of course there are a lot more changes than just that, particularly in technology, marketing and best practices (think SOX). But the big change is economic.

As an aside, I'm nearly done with the full rewrite, then I have to read it all again word for word, edit one last time and then I ship it to Wiley, and you get to see it in nine months to a year, after THEY edit it, I see it again, they set it, I see it again, and then they actually print the thing. As you can imagine, after all this back and forth, I'm so sick of my own words I never actually look at any of my books after they come out for at least a year.

But, most importantly, the writing and review has shocked/ saddened/appalled/terrified me as I see how far down we've come since 2000.

So let's get to it, and talk more about what you can do in the economic downturn. In Part I, I showed you signs of trouble that could be lurking in your nonprofit. In this post, we'll talk about initial strategic actions that should be taken, and then in Part III we'll look at some more strategic responses before we get to tactics.

Strategy first, though. Yeah, yeah, yeah, you say. Strategy, Schmategy. I want to DO something, not just ponder.

I understand. As managers, and particularly as CEO's we are action oriented. We want to fix what's broken, get our hands on the problem and wring its neck, not sit back and think. But just as our management level jobs usually don't let us provide direct services, (and some of us miss doing just that), our responsibility in a financial crisis is to think first, then act.

Hence the strategic thought process outlined here.

1. How bad is our projected (or immediate) shortfall And, how bad it is really? The italics are there to underscore a key problem--people tend to believe what they hear and rumor abounds when things get tough. You hear from a peer CEO that the state is cutting everyone 25% and before you check it out with the state (and find it's "only "15%", you go to your board and staff in a panic.

Don't. Think like a journalist--it's not true until you have confirmation from two sources.

2. Is this shortfall short term or long term, systemic or incidental. Many arts charities in New York got a lot of their funds from Lehman Brothers, both the firm and the partners. The firm is gone and most partners are unemployed. That's a systemic long term hit. Was your charity golf tournament sponsored by the now defunct Circuit City? That's a long term problem. A large donor moved to warmer climes and you can't find her? More a short term, solveable problem.

Having said this, do not, repeat do not fall into the trap of believing that our current economic mess is short term. It's not. This recession (let's hope we don't get to depression) will last years, not months. SO you've got to think long term for most things.

3. Is your organization's viability at risk? Most organizations can cut back (if painfully) 10%, 15%, perhaps even 20%, and still provide some services. But at some point, and only you know where that is, it becomes impossible to for you to provide even minimum services and pay the bills. You lose too many staff, or cut too many services and you go into a domino decline. So, ask this question now. If the answer is truly yes, then the motivation to act now is even higher for everyone. Paul Light has said that at least 100,000 nonprofits in the US could fail this year and next--don't let yours be road-kill.

4. Are services at risk? This is a subset of #3. Will a 10% cutback cause you to eliminate any services completely? If so, you need to look at your strategic and marketing plans and see what they say about priority markets and established high priority mission.

5. Are there legal and contractual responsibilities in play? In some cases, eliminating service X means that you are no longer meeting the requirements of the contract for service Y or Z. Some contracts and grants link capabilities, accreditions, etc. Some disabilities groups have CARF accreditation, an expensive and time consuming process (and one that I fully support, by the way).But in a downturn, it's easy for someone to say--"Let's cut CARF!" and save some bucks. Except that having and maintaining CARF is a requirement of many government funds. Check the contracts you currently have now. Refresh your memory about what's in those contracts, leases, and other obligations.

Think these things through carefully and with your key staff and board. In Part III, we'll look at some strategic responses, then we'll move in Part IV to tactics.

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