In May my son finished his full time education and started a great job at a great company with an excellent starting salary, profit sharing bonus structure and health benefits. As any parent of someone in their twenties will tell you, I felt like I personally had caught the brass ring. So far he has experienced business travel, formal training, the summer picnic, fall barbecue, free stuff with corporate logo and a tuition aid plan. Feel jealous yet? Yesterday they had a whole facility meeting where he learned about the austerity measures they are taking to deal with the loss of sales. He asked me if I could guess what they were. After working for a Fortune 100 company for 30 years I had no trouble naming all of them. He was surprised. I was glad to hear that layoffs were not on the list...yet. I know about the yet part pretty well too.
The list included no more catering, high level approval needed for business travel, limited attendance at conferences, freeze on hiring, overtime and training and a small, if any, bonus. Forget any more freebies. Seems like small stuff, right? Yes it is but it all adds up. There is no silver bullet.
Nonprofits can’t wait to see how badly their year end fundraising will be. It will be bad. You need to look at expenses now and begin to take action before the actions you have to take are more painful. This list from my son’s employer is a very basic standard starting point.
Many nonprofit leaders are much better at dealing with program services than business management. However, paying attention to business may be a critical component of survival in the year ahead.
If you have reserves, now it the time to figure out how much you are willing to go into your reserves for next year’s budget and how much you may have to cut back on expenses. This will need to be revisited regularly.
If you don’t have reserves, you will almost definitely have to reduce expenses. Here are some tough choices to consider.
•Take a look at your services and figure out which ones you can’t afford to still offer no matter how wonderful they are. Plan a smooth phase out at the end of a program phase – such as the end of the school year. Planning will make it have less of an impact than if the decisions are made hastily.
•If you have multiple locations and can consolidate space to reduce expenses or move to a less expensive location begin planning now before a lease expires. Or perhaps a lease renewal at a lower first year rate is feasible. That may be negotiable if finding another tenant will be difficult.
•Keep tabs on your level of service and staff levels and make adjustments in a timely manner. Rather than layoffs you may be able to handle adjustments with reduced hours or eliminating overtime.
Plan your expense cutting in priority order. Do the simple things like my son’s employer did immediately. Analyze your income after the year end campaign and see if there are bigger steps that you have to take.
Seeking new revenues is not out of the question. Remember foundations have just taken a huge hit in their portfolios and are not the best source at this time. The experts say reving up your individual giving is probably the best bet.
It’s a good time to look at how the big guys have dealt with the downturn – consolidation, merger, acquisition. If you are one of those fortunate organizations with reserve funds you may be an excellent suitor for a complementary organization. The time may be right for a great strategic move. For those of you on the other side of the coin, merger, consolidation, acquisition may be what will keep you in business. Now may be a good time for some bigger, stronger, more robust nonprofits to emerge.
Marion Conway Consulting