Are You Over Capacity Already?
(Note: This post comes directly from my new book Smart Stewardship for Nonprofits: Making the Right Decision in Good Times and Bad, to be released in February 2012 by John Wiley and Sons. You can pre-order at Amazon by clicking on the link above.)

In Smart Stewardship, I look at the issues of core competence and capacity in light of making decisions to grow your nonprofit, take on a new service, accept a foundation grant etc: In that context, here are some ways to assess if you’re already over capacity.

Before you even think about growing more, as a Smart Steward you should assess where you are. Is you nonprofit already at the edge of its flight envelope. Many nonprofits are already under-resourced, under-funded, under administered. In addition, most don’t have the cash to expand either. What you don’t want to do is to pile more work (even though it will result in more mission) on to an organization that is already overburdened. The proverbial straw that broke the camel’s back is a cautionary tale you need to keep in mind.

Current capacity is hard to objectively measure, but not impossible. While the specific metrics will vary organization by organization, here are some things to look at:

Look at Your Management Staff Load
As I said above, most organizations are under-administered. I often tell audiences that their personal Full Time Equivalent (FTE) count has risen: five years ago, they probably only had two FTE living in their bodies, now they may have 3, 4 or 5. While sort of funny, it’s also true. Just because funding goes down, it doesn’t mean that management responsibilities do. To take a look at this, start by looking at your organizational chart 5 years back and comparing it to now. Are there less managers per line staff person? Have some functions (like accounting or IT) had a reduction in staff while the organization has grown? Slow and steady staff burdening often goes unnoticed until it is a crisis, like the frog in the slowly heating pot. You need to be looking out for this, starting now. There is of course, no clear cut measure, but it will get you started.

Some other tell-tales of staff being over capacity include:

Staff Satisfaction
I hope you’re already measuring staff satisfaction regularly. This kind of surveying is crucial to making sure you don’t miss what’s going on at the level of service provision. Of course, comparative data over time is also key--are you doing better or worse than prior years? What about the comments? Do they show an issue you need to drill down into? This survey can be an early window into staff that are overworked

Staff Turnover
Turnover is a tricky thing to use as a metric. Some turnover rates that seem high are really pretty good in context of national numbers, while too low a turnover can hold an organization’s growth back. What you want to look for is spikes over time, as well as spikes in certain programs, or administrative areas.

Use of Sick Days
Sick days can go both ways. If people think they can’t take the time to be sick, they’ll come in sick--and get everyone else sick. On the other hand, if people are miserable at work since they feel overwhelmed, this number may rise steeply. Monitor this closely.

Use of Vacation Days
In most overburdened organizations, the management staff don’t take much if any vacation. This is a bad thing--we all need a break. If this number is low and getting worse, you’re near or at capacity.

Look at Your Quality Indicators
I assume you have a quality assurance program or monitoring system. Take a look at that on a regular basis (perhaps every six months) and compare the results over time. Are you having more problems? Is your accreditation or licensing review turning up more negative findings than in the past? Again, these are issues that need to concern you and get fixed before you consider growing any more.
You don’t want to crash your organization while trying to grow. While these indicators will help, you have to get out of your office and talk to your staff, listen to their input to make sure that growing (for all the right reasons) doesn’t result in serious unintended consequences.

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.

The cost of higher educution and nonprofits

One of the concerns I have about nonprofits recruiting and retaining the best and brightest is the cost of higher education which, as a percentage of average family income, is an enormous barrier. Not only does it stress out current nonprofit staff who have kids and are trying to figure out how to pay for college, but for someone coming out of undergraduate or grad school with a $20k, $30k, even $90k debt, the ability to work in a low-paying nonprofit is severely limited.

The recent federal bill to "fix" this problem is a start, but a poor one. Basically, a 22-year-old has to go to work for a nonprofit, work ten years, and then she sees some minimal help. Ten years? Ten YEARS? Ten years for a 22 year old is half their life so far, at least the part they can recall. Not much of an incentive, particularly for the average 22 or 23 year old who is still figuring out their place in the world, where they want to live and work, and what their real passion is.

We've always used financial incentives to push people toward desired outcomes. Whether its the ability to deduct interest costs on your mortgage to encourage home ownership, had rapid depreciation allowances to encourage businesses to build, or drill for oil. Let's put together a real program that helps both students and parents.

More and more families are taking out loans, rates for loans are rising: student loans now cost 6.8% and parent loans 8.2%. Rates went up last year to help cut the deficit. And, private lenders have stepped back from lending given the mortgage crisis....

Here's my suggestion:

A student with a federal debt (in his/her own name or that of his or her family) goes to work for a nonprofit. During the year, the debtor pays only interest on the loan. After one year, if he or she does the job, 5% is cut off the principle. This continues moving forward for as long as the individual works for a (any) nonprofit. The second year, the forgiveness is 10%, where it stays for each of years 3-5 and then it moves up again to 15% per year until the loan is retired with one last 10% forgiveness in year 9.

Thus, the student receives immediate help (interest only) and a reduction in one year, not 10.
Will congress change the law? Unlikely.

So, what can communities do? Set up the same program locally with some variation. I'd love to see community foundations put money aside for debt reduction for employees at nonprofits, corporations and service organizations like Rotary and Lions set up scholarships for graduated students who work for nonprofits. Local governments could offer property tax relief to nonprofit workers buy homes in the community they work for, and state governments could target the areas where the most workers are needed and offer incentives as well.

We want well educated employees. We know we can't pay our employees salaries that are competitive with the for-profit sector, and we know that our mission-satisfaction makes up for that to a point. But mission-satisfaction can't help here: we have to come up with a better way if we want the best people.

More on boomer retirement....

A great story on boomer retirement and its effects on nonprofits from the Philadelphia Enquirer. No surprises, but an effective part of the story is on the inability of younger staff to work for nonprofits given their college debts. So sad, so true.

Speaking of sad but true, I'm in Ann Arbor for the next to last time while my son is a student here. Graduation next month!

Why "Who Really Cares" matters

In a post two weeks ago, I told you my preliminary thoughts about Who Really Cares, by Arthur C Brooks. I finished the book shortly afterwards, but wanted to take a couple of weeks to let it sink in before sounding off about it again. Here are my thoughts, about why it is a terribly important book for our sector, one that needs to make it to the top of your reading list, and quickly.

First, Brooks is an economist. He focuses on the data, and I don't believe he has a political agenda. (Whoever designed his cover seems to, but, as an author myself, I can assure you that's not Brooks' fault.)

I spent some considerable time with the date (that makes up perhaps the last 15-20% of the book) and felt comfortable that Brooks was telling it like it is, not the spun version. I might have chosen a different term here or there, but in the main, the tale he tells is told fairly.

Second, the tale he tells is really, really interesting, and a bit counterintuitive to our pre-conceived notions about people's generosity or lack thereof.

Not to steal the thunder from the book, Brooks data shows that people are more likely to give (time, money, blood, etc.) if they are from a strong family, go to religious services regularly at some point in their life, earn their own money, and don't think that government has all the answers. Now, combine least two of those characteristics (religious attendance and scepticism about government) and you get a rough description of a conservative. At least a trend to the right. Huh. Aren't liberals more generous? Wouldn't that be your first thought?

Brooks shows (and I did go into the data for a long, long time) that the opposite is true. He does not say that liberals are selfish or the modern incarnation of Scrooge, but that in the main, conservatives give significantly more; more time, more treasure, more of everything, to charities than liberals do.

As a social liberal, this bothers me no end. And I've been thinking about the implications to our sector. The fund raising outcomes are obvious: go where the people are who are committed to your cause, but then beyond that trend in targeting to people who fit into Brooks' major catagories. Same for volunteers.

But what about our employees? We need charitable employees. Brooks argues that parenting is a charitable act (and is in itself a predicator of later generosity). I would say the same about choosing to work in a nonprofit. You are sacrificing income (without question) to do something that needs doing, something you are hopefully passionate about.

We're in the middle of a huge turnover in employees in our sector. Perhaps Brooks is on to a way to target our HR staffs as they look for better odds in the hiring game. You gotta go where the data show you, and here the data is pretty impressive.

Anyway, read the book, and then post a comment.

Recruitment woes

Very interesting article on a survey of nonprofit recruitment efforts. It shows that while new positions will increase, recruitment budgets are not for nonprofits.

This again speaks to my concern about not just new positions, but filling the slots left by the exodus of boomers over the next 10 years.

Hmmm.

Doing the Right Thing...

I have told my clients and my kids for years and years and years what my grandfather and father always told me.
"Do the right thing. First, it's the right thing. Second, it's the smart thing, too."

I've tried my best to follow their good advice, and knowing the right thing is a whole lot easier sometimes than actually doing it. Like everyone else, I've had vexing choices and have fallen back on their words more times than I can remember.

Well, today in my in box from the New York Times comes a case study from Colorado Springs of a guy who not only did the right thing (after a severe, in-your-face wake up call) but has done it for years, and discovered that the right thing is also the smart thing.
http://www.nytimes.com/2007/02/04/business/yourmoney/04bigari.html?_r=1&th&emc=th&oref=slogin
is the article, and if you are not a registered NYTimes user, you have to (at NO cost) create an account. It's worth it, trust me.

A shout out to Steven T. Bigari. Good for you, good for your employees, and good for your community.

Pre-book buzz...

With my new book on generation change coming out next month, I've been speaking on the subject and have been asked about best practices in the area. Interestingly, there really aren't a lot.

My consulting on this issue has led me to develop some metrics of my own about retirement plans, benefits, board and staff age diversity, websites, marketing materials, technology use, planning, etc., etc., etc.

Really, everything on the manager's plate now needs to be viewed generationally, and my problem as a consultant has been to view it ONLY that way, and not get into the my other 25 years of experience....and add things on and on and on to my recommendations that have to do with general good management and stewardship practices rather than just limit myself to just the generation specific stuff. Yet, if I see a problem and don't bring it up, I feel like I'm committing malpractice....hmmm.

I'm also pretty excited about the reaction to the book so far. A TON of pre-publication orders are in...more than with my other books by far. And everyone seems to get this issue.

Funny, too. I've been perseverating over the cover. Fieldstone has been nice enough to let me have significant input into the decision making process, as they did for the paper marketing piece. Today a friend pointed out that in the book I say this....

"What about that expensive brochure you just wasted your money on-because the teens you need to reach are too busy with MySpace and text-messaging to read your glossy money pit?"

My response was that the paper marketing piece is for boomer execs who still control all the money!

And, two different people told me today that they are giving speeches on generational issues.

Seems this is on everyone's mind.

As it should be. It's a huge, huge issue for the sector.

Below the radar....

I was reminded yet again this week in Denver about the difficulty nonprofits have in hiring and retaining good employees in today's economy. Two key contributors:

1. Health care costs. While rates/contracts/grants for nonprofits go up at or below the rate of inflation, health care premiums do not--they go up way, way faster. And, the result is that nonprofits are passing the increased health insurance costs on to employees, who already are underpaid.

2. Educational debt. Today's college and grad school students bear an unprecedented amount of educational debt. I have students at Kellogg who tell me that they want to work for a nonprofit (and often did before grad school) but how do they pay off a $60,000 educational loan on a $40,000 a year salary?

Idea: Federal legislation that forgives one year of debt for each year worked in a 501(c)(3) with an annual budget under $20,000,000.

If we can't hire and retain good staff....we'll give crappy service. Not a good thing.

More nonprofit jobs...

Here's a really interesting article from the John's Hopkins Gazette entitled "Employment in US Nonprofits Outpaces overall job Growth." Worth a read....I think it speaks to the need that nonprofits have overall, and note that the average nonprofit wage is below the average national wage---no surprise there.