Nonprofits need to make decisions now in response to their impending crises. Here is what to do.

Two weeks ago I posted that the Nonprofits are going to get slammed financially for three reasons:

1. their donations will decrease because of donor’s financial situation
2. Their donations will decrease because donors will have more “important” donor requests.
3. They may have losses in businesses because of fixed costs and little revenue

I suggested taking action. The first question to ask yourself or your charity that you give to, is: “Have you made any changes yet?”

Here is what I am hearing.

“Yes, we are not filling open positions.”

“We are not spending money on new projects”

"We have talked about cutting costs.”

For those of you who manage a for profit business or department of a business, you realize that this won’r cut it. You have already developed a plan and have started to execute on reductions and cuts. Why? You know that you will be out of business if you don’t and you have a good idea of where to cut.

For nonprofits, you must develop a sense of urgency. If you don’t make change soon you will not only lose some benefit of cuts (i.e. the cost reductions will be in place longer) but also you may lose the confidence of your donors.

What I have realized though is most nonprofits have no idea of what to cut. Why? Because everything that they are doing has value. Granted there are big inefficiencies but each area of focus, e.g. soup kitchen, shelter, ESL classes all bring value to people. Yet, if you don’t cut you will be out of business and helping no one.

So what to do.

I am going to give you a Reader’s Digest version of a few elements of my book, “How to Run a Nonprofit”.

1. re-evaluate your mission and your core competencies. What problems are we addressing and what skills do we have that allows us to deliver this product or service effectively?
2. Go through each department, location and/or apostolate and review the performance of each of these units to your desired outcomes for that unit.
3. Unfortunately, most nonprofits have not done that. In our move to sustainability, the buzzword of the last decade, we have measured financial metrics more than anything. Therefore, retrospectively, go through each unit and make a determination on how well you believe each unit is achieving the mission. 
4. If possible, have each unit prepare a 3 year plan with mission outcomes and resources required, primarily people and money. This must be done in days or weeks. 
5. Make decisions to close down, reduce funds or personal to those not producing towards expectations. Now, I understand not every apostolate or location is going to produce the same amount. There may be strategic reasons to do one thing over another. You also might be investing in a new community and have the costs associated with that versus a mature community. Fine. Look at the outcomes and resources for each and make decisions.
6. This is important, Use this “opportunity” to develop mission outcomes for each unit as well as the resources required and add that dialog to your quarterly review.

An example, say that you have a national religious nonprofit with 15 locations. You mission is the difficult to measure “bringing souls to Christ”. Rather than say impossible to measure, you come up with approximate metrics. How many people go to our retreats? How many of our students go to seminary? How many families are involved in spiritual direction, etc. 

From there, you look at the resources that you expend to achieve those results. Often people don’t measure the cost of their religious or volunteers. That is a huge mistake because many times those resources could be redeployed elsewhere for a higher “return”. In fact, in most religious nonprofits, the priest, minister, sister or consecrated is the most precious resource of the apostolate! I would go so far as to measure the impact per each one of these rare resources to the mission in that area. 

Let’s say that of the 15 locations, three are in rough shape. You committed to close one. Which one would you chose and why?

Location 1 is a new location, 2 years old. It has several active apostolates but needs $50,000 a year to pay for itself. It has met its mission objectives the last 2 years and projects being self sustaining in 3 years.

Location 2 is a long term site. It is a key city yet they had a major challenge in the 2008 recession and lost a lot of members. As a strategic city there continues to be a big presence of priests. This is our lowest return city.

Location 3 is a great producing city. The cornerstone is its retreat center, that has been closed down for 2 months. It has been breakeven for the last couple of years but will lose $200,000 because of fixed costs.

I realize that this is an unfair question with not enough history and perspective. But for sake of discussion, I would close the long term strategic city. It’s not producing results and there is no reason why repeating the same things there will make a difference. Location 1 is an investment.  It is growing and is projected to be successful. The retreat center most likely will return to its former self after this pandemic is over.

The point in all of this is, as a nonprofit, you need to be proactive and make decisions as if your organization depends on it. It just might!