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.

Thursday, January 15, 2009

What to do now? Part 1

On my last post, I promised I would start a series on What To Do Now?, based on the chapter in my book Nonprofit Stewardship entitled "Stewardship in Good Times and Bad".

Times are tough, or worse, for many nonprofits. I just finished the current issue of the Chronicle of Philanthropy and was depressed all over again. Then I read through the economic news on Google News and felt worse. As I've said before here, we're in for a loooonnnngggg haul. My longstanding view is that, at best, things will only get worse through 2009 and that we may see a leveling in 2010, with a beginning of a recovery late that year or early 2011. At best, could be worse.

So, if you aren't already cutting, strategizing and re-thinking, you need to be. The economy is NOT a short term problem.

Today, we'll start with organizational signs of trouble for nonprofits. Next post, we'll look at strategic things you can do.

Signs of trouble are things that I see in my consulting role that are indicators of less than optimal performance or warning signs of impending crises for any nonprofit. We start here because you want to make sure that your basics are in shape for the downturn for your nonprofit.

Look for these issues and fix any you can now:

No (or insufficient) financial reporting. Sounds dumb--of COURSE you're going to report, right. You'd be amazed. Anyway, keep the financial reports coming, and definitely develop a six month cash flow projection and update it every week. Every WEEK, not every month. More about this when we get to tactics.

Excessive staff turnover. This is less of a problem in a steep recession/depression, but look at organizations like FedEx. Everyone took a pay cut rather than lay people off. Hmmm.

Excessive board turnover. You need to keep your board on board now. So, keep them informed, use them as resources. Don't scare them off by lack of information or involvement.

No new programs or methods of provision. Keep trying new stuff. Really. I know your dollars are tight, but keep innovating in program provision, fund raising etc. You may not be able to do BIG innovations, but you can still do lots of small ones. These keep staff energized and show the community you are moving forward.

No regular and repeated Asking. You gotta ask. Keep your staff, board, funders and the people you served involved. Ask them what they want, ask them for ideas on how to weather the storm (notice I did NOT say "cut back"), ask what's critical to them about your organization. Ask, ask, ask. It's cheap and essential.

No Staff continuing education. Ooooh, easy to cut right? Non-essential, right? Wrong. When you cut staff training you cut the quality of service, reduce staff morale, hurt services. I know you can't send everyone off to a conference, and perhaps not anyone can go out of the area to a meeting this year or next. But there are still book clubs, local training, online options, etc. Get creative, and DON'T stop pouring new ideas into your people's brains.

Out-of-date internal policies. I know, I know you're in a crisis. But life (and good management) goes on. Make sure you regularly update your HR, financial and QA policies. These are essential and help prevent distractions and problems down the line. You're keeping your insurance, yes? Keep your policies up-to-date, too.

No Strategic Plan. Again, I know you're in a crisis. But the most important time to have a strategy is now, not when thing. More on this in the next post when we talk about strategies.

Little or no sharing of information internally. Regular readers know I'm a zealot about this. Use all your staff's minds, not just some of them. Same with your board and volunteers. To do that you HAVE to share information, like budgets, plans, contingencies. You need people's ideas more than ever. You need them to have a sense of contribution to the problem. No matter how smart you are, you don't have all the ideas or all the solutions. As John Chambers, CEO of CISCO says: "No one of us is as smart as all of us". I could not agree more. We'll come back to this in our tactics post.

Inadequate marketing materials/website. Focus focus focus in your materials and website. Too big an issue to cover here, but suffice it to say that this is a great time to look over your marketing materials and website and to make sure they focus on your current priorities, and that they reflect the current economic times.

Poor use of technology. See the last two issues above? They beg for better use of technology, as does more asking and more sharing of financial situations. USE your tech to help you through this. Whether with staff wikis to hone ideas, or special online editions of your newsletter to keep people informed, push your tech. Ask your young staff how to best do this--they know!

And, don't panic. Ever.

Nervous? Fine.

Scared? Me, too.

Panic? Not a useful leadership response.

You need to go home and scream into a pillow? Good. Do that. At home. Not at your nonprofit.

As my Dad (an engineer and attorney) used to say, "Don't angst, work the problem." I agree. The people we serve need us to FOCUS on still getting the most high quality mission out the door as possible.

Think about these, and next post we'll look at some strategic responses you can start with.

Tuesday, January 13, 2009

Employee Shortage?

I just read an article by an exec search firm referring to the society wide need for more nonprofit "talent". Of course there has been much said (including by yours truly) about generation change in the nonprofit sector as well as in society as a whole.

But, in general, the early prognosticators have been wrong, primarily regarding their assumptions that Boomers would retire on schedule at 60 or 62 or 65. We want to work forever...and then there's the economy.

Over the weekend, a couple of friends and I had in interesting g-chat about this. We all agreed: in terms of a need for more talent than there is a supply: That's SO 2008. This is primarily the case because of the economic meltdown. We spun the issue for a bit and came up with these conclusions:

First, most Boomers who were thinking of retiring in one, two or three years have put that on hold since their 401k's have shrunk 30-50%. The few exceptions are people who have a working spouse, a spouse with an actual pension, or are independently wealthy. Thus, many of the nonprofit management teams that were heading for the door are (to mix metaphors) hanging in for another lap or two around the racetrack.

Second: The economy is ruthless on new and recent grads. Lesson? We in the nonprofit sector may be able to get great young talent that would have gone to the for-profit world if the economy were healthy.

Third: Those of us who do have job openings (and some nonprofits do) should remember: It's an employers market--you can get better people (of all ages) for the same price. Lesson? Take your time when hiring. I talked to four HR people at medium to large nonprofits this week said they were averaging 75-100 resumes per week. Normal? 5-10 tops.

I know many readers are not in the position to hire: you're just hanging on. More about that in tomorrow's post, when I start a series of posts on Mission-Based Management in Tough Financial Times.

Sunday, January 04, 2009

Is transparency just for outsiders?

The January Edition of the Mission-Based Management Newsletter is up, and in it I ponder a bit about transparency and how we tend to focus on just the "outsiders" and forget that transparency is for the people inside the organization as well. Here's a brief part of what I say:

Transparency should not simply be for "outsiders". It should not stop outside the organization's door. It should also thrive inside your organization. Each staff member and volunteer, each committee and work group, every manager and senior manager should be open, available and accountable to others. Why? Because when organizations are internally transparent there is more engagement, more employee satisfaction, more good ideas thrown at problems, and less gossip and paranoia about what's going to happen.

You may think your organization is transparent now. If so, good, but answer the five questions below before you pat yourself on the back. You make be surprised.

1. In your last strategic plan update, did you share the draft plan with everyone in the organization (all staff and volunteers) for comment? (Same question for your marketing and tech plans, of course.)
2. Are all staff invited to every board meeting? (They should only be invited as observers, not participants.)
3. Are the minutes of every board and board committee meeting as well as every staff meeting available online in the staff section of your website?
4. Do you share your draft budget with every staff member to get input?
5. Do you encourage ideas from staff on how to improve service or solve problems?

If the answer to any of these questions is no, my question to you is why not? What do you gain by not sharing information? How does your organization, your mission, benefit by keeping information close to the vest?

Here's the truth: it doesn't......

For the rest of the newsletter and some tech and marketing tips, go to the full newsletter.