Difficult Decisions

The first 90 days for a new leader in a role is critical. ?I started as the CEO in April1, 2017, and during Memorial Day Weekend (end of May) I knew what had to be done in order to begin right sizing the organization.

I remember that weekend vividly as our family went to the beach for the weekend. While walking on the beach with my wife, I told her that I needed to make reductions, and I needed to do it upon my return to work.? Although I knew it was the right thing to do for the sustainability of the organization, I needed to see if my Board would support this and support my leadership.? If not, I could have returned to my old position and company, but the window was closing.

I remember the meeting where I presented the need to execute a 10-20% Reduction In Force (RIF) in an effort to begin our journey to financial health.? I was asked if I could wait another 3-6 months.? My response was, “if we wait, there may need to be a 30-40% reduction”.? I knew what most didn’t want to admit to.? We had more employees and budgeted positions than we needed.?

Our annual revenue per employee was approximately $45,000 and our cost per employee was approximately $70,000 at that time.? It was a math problem that could be solved but would require resolve and the ability to make difficult, yet smart, decisions. ?We needed to prune in an effort to salvage the mission and prepare for future growth.? That being stated, as a leader, you need to cut where there is dying on the vine and be careful not to go too deep in the wrong area.? We did not want to make reductions that would impact current or future service delivery and impact to children and families. That being stated, on my 61st day on the job, we did complete a 15% RIF (27 positions) by:

1. Eliminating vacant positions (50% of RIF was vacancies)
2. Reducing &/or consolidating administrative positions.
3. Reducing &/or consolidating leadership positions.

In addition to the RIF, the following was also done to better position us for the future:

• Renegotiation of all purchasing contracts (over $200K in annual savings)
• Revision of PTO Policy (accrual, sell back, and pay out)
• Development of Pay Grades & Compensation Guidelines
• Elimination of a $250K early childhood education contract that cost $500K to deliver ($250K annual saving)
• Renegotiation of service contracts to increase price of services.

As you can imagine, I was really popular in some areas of the organization.? It’s true, but for all the wrong reasons.? What was good for the mission, was viewed as bad by so many working within the mission.? Our Controller at the time actually cried when she was informed of the decision that had to be made to ensure we improved our financial health.? (yes, the person responsible for ensuring financial health cried when a difficult decision was made to ensure financial health for the organization).? For many, it was completely ok for the mission to lose money as long as people had jobs.? For me, our mission is not to keep people in the organization employed, but to provide needed services to youth and families in need. ??(That’s a nonprofit mindset).? Ideally, we want to do both but those we serve must always come first.

What do you think happened as a result?? My 3rd month on the job (June 2017) was the first month in perhaps 48 months where the mission actually made more money than it spent.? Hope!? We could be financially healthy, we could do more, we could do better, we could do different.

Do you need to right size your business? Is it a math problem that can be solved? What are you waiting for?