Managing Non-Profits in Tough Economic Times

Cass WheelerThe following is a guest post from Cass Wheeler, longtime CEO of the American Heart Association and author of You’ve Gotta Have Heart: Achieving Purpose Beyond Profit in the Social Sector (AMACOM 2009). He explains what non-profits can do to remain relevant, effective, and stable in today’s recession.

What do you do when times are tight? Managing in an economic downturn can be challenging, but it also provides an opportunity to make an organization more effective and efficient. The strategies and changes implemented now can be rewarding for your organization in the long term.

The first step is to reframe the issue from a broad perspective. In order to survive a tough economy, we need to get out of our comfort zones and possibly come up with some breakthrough strategies in advancing our mission. Put what you’re doing in a positive context in terms of your mission and strategic goal. You have two avenues to follow:

(1) How do you keep your revenue stream flowing?
(2) How can you reduce expenses to operate more effectively?

You will need to take both routes. Be careful not to make it an “either/or” decision. You must balance the two—revenue and expenses—or carefully spend down some of your reserves. Be sure to increase your internal communications throughout the process. Your employees and volunteers are feeling the uncertainty and if you leave voids, they will speculate and fill in the blanks and the rumor mill will run wild.

Let’s focus first on revenue since more often than not the first reaction is to just look at cutting costs.

Look strategically at your business model and focus on five to seven things where you think you can be world class. Phase out those initiatives with high costs and low rates of return. By working strategically, you can maintain a sustainable and diverse income stream.

Revise your case statement to point out how the economic downturn is affecting your mission, why you need even more financial support, and what you will accomplish with your resources. People want to see that you understand the situation and are revising what you do accordingly.

Look at your tactical plan and see what you have to do differently in order to meet your revenue goals. For example, you may need to put more emphasis on major gifts or you may need to recruit 30% more volunteers in order to get more gifts if your donors are still giving, but just giving less than last year. Set out a plan to expand the number of potential donors that are asked.

Look at new strategies that possibly involve technology that offers a good return at minimal cost. In order to monitor closely and adjust your plans quickly, you can increase the frequency of your on-going analysis and assessments.

Now let’s turn to the expense side.

Reassess your strategic alignment of financial and human resources to accomplish your goals. Establish some sort of rating criteria so that you can easily identify the projects that have the greatest impact. You will have to look at the situation through the available data and take emotions out of the equation.

Know your return on investment (ROI) on meeting your programmatic goals. Then you can take steps to purge the lower impact initiatives.

Engage all of your employees in coming up with ideas of what the organization can stop doing or do more effectively. When any of these suggestions are implemented, report back to the staff. Feedback and knowing that their work is appreciated is essential to maintaining a healthy work environment during rough times.

Standardize administrative functions in human resources, finance, and IT and consider joining a purchasing consortium. Standardization can save precious time and resources.

Leaders need to walk the talk. Make sure executives and managers are role models for their employees and are actively demonstrating that they are cutting back as well. Employees are acutely aware of mixed messages.

Are there any organizations with whom you can form strategic partnerships?
If you have some overlap with your missions, then you can leverage your resources more effectively together. You may even consider merging with another non-profit in some instances.

Lastly, tend to the people. Use open and candid communications. Transparency from all sides will benefit people at every level. Nuture your star performers. You want to make sure they know they are highly thought of and have a bright future with your organization so they are with you when the economy stabilizes.

Whatever you do, make good long term as well as short term decisions. This economic downturn will end and you want to make sure you are a strong organization when we get to the other side.

Cass Wheeler was Chief Executive Officer of the American Heart Association from 1997 – 2008 and is author of You’ve Gotta Have Heart: Achieving Purpose Beyond Profit in the Social Sector (AMACOM 2009). He began his career with the association in 1973, after working for the American Cancer Society and as a stockbroker. The first nonprofit CEO to be honored with the Award Excellence in National Executive Leadership, he has been a guest lecturer at the Harvard Graduate Schools of Business, among other distinguished venues. A past chairman of the Board of Directors for the National Health Council, he currently serves on the boards of Partnership for Prevention, National Center for Tobacco-Free Kids, and Research! America. Mr. Wheeler lives in Austin, Texas.

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