Sunday, March 01, 2009

What to do now, Part IV

In the last post of this series, (Part III) we looked at strategic responses to difficult financial times. In this posting, I'll go over some tactical actions you can take.

Most readers will say "FINALLY!" since we all want to start with tactics in a crisis. As managers, CEOs, Executive Directors or board members, we want to fix stuff and fix it now. But, as we noted in the first three parts of this series, you have to stop, breath, think through your strategy first.

That was then...and this is now, so let's talk tactics. Here are my things to consider doing once your strategy is in place.

1. Form a task force of board, staff, and even an outsider or two that is charged with thinking through the crisis. This group is formed now (not earlier) since the strategy evaluation should be done by the entire board.

2. Run cash flow projections every week. I'm assuming you're taking a (perhaps big) financial hit. Cash=Oxygen. Run a six month cash flow projection (Receipts versus disbursements) on a two week basis revised every week. So, if you do this on a spreadsheet, you'd have two columns for each month (May 15, May 31, June 15, June 30) and lines for every kind of receipt and every kind of disbursement. At the bottom, you'd have a running "cash on hand" total. I understand that the further out you get in time the less accurate the cash on hand will be, but what you're looking for here is trends and early warnings. In terms of tactics, this is the single most important tool you'll have. Do this.

3. Inform the staff, board and service recipients early and often. Communications is key in a crisis. Tell people as much as you can as early as you can, but only what you KNOW, not what you THINK, fear, or have heard through the grapevine. Facts, not conjecture. If you say "Well, we don't want to, but there's a small possibility that we may have to cut salaries or staff down the road" in an effort to be upfront with your employees, what staff will hear is "WE'RE ALL GOING TO BE FIRED TOMORROW!!!!"

The rumor curve is your worst enemy. Just the facts. ma'am.

4. Read your contracts. Actually, have the task force ALL read ALL your contracts. Find out what your lease says, your funding obligations are, etc. Know where you are flexible and where you aren't. Can you cut your lease or if you do is there a big penalty? What if you end one program that is city funded....does that impact funding for a second program?

5. Develop best-case, worst-case, middle-case scenarios. And be conservative.

If the best case shows you need to cut staff or programs now, do it. Now.

In bad situations you have to have deadlines (commonly called "drop-dead date"--a terrible term, but there it is) that are something like "If we don't have a check from funder x by this date, then ____ happens." As you develop these, you have to stick to them---and that's hard. We all want just a bit more time, a little more information. But waiting will only make things worse.

Trust me-I've been in this situation and waited far, far too long.

6. If layoffs are contemplated, check state labor laws. If you are like most nonprofits, with more than 80% of your costs related to staff, some cutbacks, either in FTE's or salaries, are probably inevitable. Thus, you want to know what your limitations are, and what's the best practice in the areas of layoffs, or salary cutbacks. Remember: while "white-collar" workers may be able to take a % cut, you can't cut a minimum wage (or living wage) worker's pay.

7. Communicate your plans with vendors and creditors. Once you have a plan, let the people you owe, and the people who sell you things (landlords, office supply firms, banks) know your plans. If you have to stretch payments, let them know, but....let them know. ANY creditor would rather hear that you are going to pay something every month (even if its much less) than not hear anything at all. Communicate. Let them know you have a plan.

8. Lead optimistically. I know you're concerned, scared, terrified, exhausted and probably all of those emotions at least ten times per hour. But you have to lead now. And, leading optimistically does not mean being a Pollyanna. Telling staff:

"I know this is scary. I'm scared too. But I believe in our team, I believe in our mission, I believe in all of you and we're going to get through this the best way possible." ,

is not Pollyanna. And, be around to talk to staff, out where they are. Don't hide behind your open door policy. Let them see you, talk to you. You're the icon now, so lead from the front.

Speaking of leaders, in our final post on this topic, I'll give you a leadership checklist.

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