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A Different Way to Think about NPO Staffing

At a time when nonprofit organizations are entering a new financial environment for fund raising – as difficult as any I have seen – it makes sense to think about solutions in a completely new way.  I do believe that nonprofit organizational structure will be very different once we have emerged on the other side of this recession, influenced as much by technology and entrepreneurship as by the economics of the times. 

 Let’s look at what has been happening already in each of these areas.

  • Technology.  Workplace capacity has expanded through:
    • remote servers (e.g. Basecamp);
    • cell phone networks (and other increased access to the internet);
    • powerful yet inexpensive laptops; and  
    • the workstyle of the younger generation.

All of these advances and more have enabled nonprofit staff to operate in virtual offices rather than being tied to an office with phones, equipment, and a desk.  This change in thinking about the place where nonprofit work occurs has even begun to alter the location of services. 

One of my clients has begun to operate their program for seniors out of another organization’s space.  This has the benefit of making more efficient use of existing space – space appropriate for the programming, but not being used during these service hours.  In addition, my client does not need to put more money into expanding or improving space on a permanent basis.

Nonprofits now are not confined to accessing needed expertise only from their geographic community.  They can connect with needed knowledge, skills, tools, and processes wherever they are in the world.  This past month I participated in a meeting that took place in three states with local leaders in the “room” with me.  I could see and talk with them all, simultaneously, through the internet and some large screen monitors. 

In addition, advances in the social media enable people who have similar interests to interact as a community very inexpensively (Facebook, blogs, Ning, Twitter, etc.).  This provides everyone with quick access to knowledge and information from the smartest people that can be found.

  • Entrepreneurship.   It has been years since people in the workforce zeroed in on one company and one job and built their career there.  Data show that the average person in the workforce is likely to change jobs 9 times by the time they are 34.  This means that people are looking at creating their own career paths rather than relying on the corporate HR department to do it for them.  More and more individuals in the workforce are comfortable serving as consultants, taking on part-time project work, signing time-limited contracts to provide services, and not holding allegiances or loyalty to an organization but rather to a field of work in which they are developing skills. 

This changing way of thinking about the world of work is being accepted by younger members of the workforce as their reality, while older workers have had to operate this way because they have lost their jobs.  This past month I worked with eight people on different projects all of whom consider themselves consultants.  They are working with many organizations and bringing their skills to the table at “just the right time” from the perspective of the organizations with whom they work.  They operate independently or in small groups and are not part of any large firm.  They view their service area as anywhere in the country and in some instances the world.

  • Economics.  For the nonprofit world 2010 and 2011 are projected to be difficult fundraising times for all the reasons I have discussed in earlier blog entries.  So it will make sense to focus on the expenditure side of the budget for nonprofit leaders.  One way to keep costs down – both in the present as well as on the other side of the recession – is to avoid making long term commitments on equipment, space, furniture, and staff with specialized skills.

The simple solution to this is to contract out for some of the work that needs to be done on a project basis.  This will place the costs for these items on the contractor.  Even if you are paying more for these items through the contract on a monthly basis (and it is likely that you may not be), when the project is completed these costs go away.  I say that you may not be paying more because when you figure the real cost of keeping staff it is frequently two to three times the cost of their salary and benefits.  Consider rent, computer, printer, phone (land and cell), supplies, insurance (liability, space, and equipment), internet access, vacation, sick leave, and infrastructure staff (HR, IT, finance, etc.). 

I am working with one client who has grown his organization dramatically yet has kept his staff relatively small by having contract agreements with 7 consultants for project work including marketing and communication, finance, IT, planning, board meeting arrangements, community engagement, fundraising, policy and advocacy work, and some direct service work.  Were he to have hired staff to fill these organization needs, he would be paying significantly more for the work and is only paying for actual work performed, not down time.

So how should you think about nonprofit staffing for the future?  Given what I have outlined above, one way to think about it is to build a core of multi-skilled staff who are flexible, able to change functions easily, and are good project managers.  This group is augmented with temporary staff and consultants who bring skills to the table when they are needed.  This will keep costs down and keep the organization nimble and able to more easily and quickly shift direction in response to community needs and funding. 

This kind of vision about staffing nonprofits in the future will require leaders to think differently about staff, growth, and signs of organizational success.

What do you think nonprofit staffing will look like in the future?

Posted in Management, Planning. Tagged with .

“Never Waste a Good Crisis”

This quote has been attributed to everyone from FDR to Rahm Emanuel and lots of others in between.  So why is it so quotable during these times? 

Well, it means that if you are in a crisis, this is the best time to make changes – especially those things that have been most difficult to change in the past.  For this reason President Obama is moving quickly on many fronts:

  • Financial regulation
  • Health care
  • Early education & child care
  • Negotiations with countries in the Middle East

…and the list goes on….

For nonprofit leaders, it does seem counter-intuitive to tackle big changes at a time when your organization is facing financial problems; yet, that is the best time to do it.  To understand why, we need to understand the variables in this change formula:

Change = D x V x 1st < cost

Michael Beer at Harvard developed this formula, which states that for change to happen, one needs to have D (high dissatisfaction with the current situation or condition) as well as V (a vision of how things might be better in the future) and 1st (the first steps to move one from dissatisfaction to that vision of the future).  And, the cost (emotional, energy, financial, etc.) of doing this must be perceived as being less than the cost of staying as is.

What makes today a great time for change are the first and last variables of the formula.  Most people are dissatisfied with the current economic situation and the dissatisfaction is high enough to make staff, board and volunteers more accepting of a potentially high cost of making the change.

Now is a good time for making major change in a nonprofit because board and staff leadership do not need to convince people it is time to make a change – they understand why the times demand that organizations cannot operate as they always have. 

This heightened awareness also increases the perceived cost that people are willing to take on to make the change happen.  They will expend more time, money and energy in order to get to a better place – that is, the vision provided by the leaders.  In other words, staff and volunteers will cooperate more readily with leadership to make change happen.

So this dynamic is what people mean when they say “never waste a good crisis.”  It is all about willingness to make change if you believe that there is a big problem.  This is a great time to make those changes that leadership has been unable to make during good times.

What other factors make this a great time to make change?

Posted in Board leadership. Tagged with .

Thinking Through the Next 12-18 Months

Once a non-profit’s leadership has a vision for the future, the Board and ED can develop plans for getting through the next year or so.  One technique several EDs use for serious discussions about the short-term is financial scenario planning.  This approach is good for several reasons:

  • It enables leadership to consider several real, possible 12-18 month financial  futures simultaneously without having to lock in on one budget (important given the uncertain times)
  • By discussing several detailed possibilities before having to make decisions, leaders can create a framework within which the staff can act quickly once the financial picture clears, facilitating a nimble response to the financial environment
  • By talking about more than one possible future, leadership can discuss what to do if the bottom falls out of their funding streams.  That scenario is psychologically very difficult to talk about if it is the only option on the table

Here’s my suggested approach to financial scenario planning, using  a few basic steps:

  1. Select a revenue projection for each revenue stream for the 12-18 month future that you believe is likely (make it real, not overly optimistic) – this is the basis for your first scenario
  2. Next, reduce your revenue projection by 20-25% (the reduction need not occur evenly across all revenue sources) – this is your second scenario
  3. Finally, try to imagine complete disaster and reduce your revenue projection by at least 40% – this becomes your third scenario
  4. Next, for each scenario make program and staffing plans for what you will do in each case – and make sure you consider the impact of any restrictions on funding streams)
  5. After making your implementation plans for each scenario, consider the impact on your projected long-term vision and your future core programs – and make adjustments if you need to position yourself differently

Even though you will probably not be directly on target with each of your projections, by using this approach you will have prepared yourself for a range of real possibilities before anything happens.

The Nonprofits Assistance Fund also has an excellent scenario planning worksheet for nonprofits.

What planning techniques or tools are you using to prepare for the next 12-18 months?

Posted in Finance, Planning. Tagged with .

Don’t sacrifice the future while solving today’s challenges

For some Executive Directors and Board leadership, the biggest test faced as they solve the financial crisis of 2009/10/11 is not sacrificing the long term future of the organization in order to get through the next 12-24 months.  In order to stay mindful of the longer term nonprofit leaders should ask themselves:  “Are we positioning the organization well to best accomplish our mission once we get through the current financial crisis?”

In other words, an eye needs to be on the long term even as leadership deals with any decline in resources in the short term.  The financial crisis will pass and each organization needs to have its core programs in place and ready to go as resources become available.  Organizations will address this challenge in different ways; however, they will all speak to the following three questions:

  • Are today’s community needs going to be the same needs in the future? How leadership projects these needs will determine the organization’s response in both the short and long term.
  • How should our organization respond to the community’s future needs? The answer to this question will determine the organization’s core programs for the long term.
  • Are today’s core program service models the models that we will be using in the future? The program service models that organizations choose can be as important as the selection of programs in determining how resources will be spent in the future.

As one of my long-term clients has said, “If the board and staff leadership is not thinking about the future of the organization, then nobody is thinking about it – because the staff are too busy dealing with the alligators in the swamp.”

How are YOU addressing the long-term future while responding to today’s challenges?

Posted in Board leadership, Planning. Tagged with .

Creative Conversations Re: Challenges Facing Nonprofits

Many people have called the current economic environment for nonprofits the perfect storm.  With government budgets stretched to the limits and foundation, corporate, and individual giving down, 2010, in the minds of many, could be the most difficult fund raising year in a long time for nonprofit leaders.  An ED I’m working with remarked, “If we can just make it through the next two years without having to close the doors, I will be very happy!”  So, what is happening?

Foundation endowments are not worth what they were a few years ago and are not generating the same level of returns.  Many foundations determine the amount they will give away each year on a rolling three-year average of the value of their endowment.  So even as investments (stocks, bonds, real estate) start to rise, the amount foundations can give away lags behind the market recovery.

Foundations are also changing the ways they typically grant funds in response to a smaller pot of money.  Three typical responses are:

  • Cut funding to all grantees across the board by the same amount
  • Focus the funding on a few targeted areas where the foundation wants to make a difference and stop funding the rest
  • Do a combination of the above strategies

As for individual giving, it has remained somewhat flat (an overall 3% decline) during this past year.  What makes this statistic somewhat misleading is where the decline has occurred.  Giving has continued to be flat or, in some instances, growing with religious institutions. Translation: the decline has been deeper in the rest of the nonprofit sector.

One problem area is with large donors who have reduced their giving because it has typically come from their investments (which are down) rather than from their current income.  This decline in investment gifts (I would guess that there is a similar trend with planned giving gifts) has hit nonprofits hard.

Finally, government budgets are being stretched to the limit and annual contracts with nonprofits are necessarily less.  One ED complained, “They want me to do more with less money, as if I have a bunch of reserves somewhere!”   This last comment speaks to the perfect storm.  At the same time funding is down, the need for services is on the rise.

Given the current funding environment for nonprofits, the million dollar question facing those in the leadership hot seat is: “What should we do with resources down and demand for our services as great as it has ever been?”

The answer, as I often find, may be counter-intuitive.  While many are hunkering down, sticking to their knitting, and hoping that the perfect storm will pass and they can come out the other side, I think that an organization may be able to actually attract resources at this time by being bold, standing up and calling attention to themselves.

How to be bold?  Here are three things I think the successful nonprofit needs to do to distinguish itself to funders and investors:

  1. Show that your organization’s work is making an important difference in the world. This means you need to have the capacity to document what outcomes are being achieved through your efforts, not just what you hope to achieve or what activities are performed.  If you have been doing some outcome evaluation all along, you are well positioned to make a strong case for getting more resources.  If you do not have this information related to your programs, start compiling and analyzing data as soon as possible.  Don’t forget that sometimes you have the information available; you just have not pulled it together.  So you may not be starting from scratch.  One nonprofit I work with does an outcome study once a quarter and extrapolates from that study to identify outcome numbers.  This saves them from having to count outcomes all the time.
  2. Demonstrate that your organization is relevant today. This means that you are not living on past relevance, but that you are a good fit with the issues that people are facing today.  To demonstrate this you will need to show a considerable demand for what you do among a constituency in need.  The need that your organization is addressing should be widely recognized, understood, and significant.  This will make your case for being relevant powerful.  To illustrate your relevance you can show that you are filling a gap that others are not meeting or that you are addressing an issue in a unique way compared to others.  One ED told me that in order to prove relevance, he pulled together an advisory group of clients/customers to make certain that he was always addressing their most important needs.
  3. Prove that you are flexible enough to change in response to your environment. This means that you are willing to constantly look at what you do and how you do it, and consider doing things differently.  An organization that is willing to refine its program model(s) on a regular basis in order to provide services as efficiently and effectively as possible, demonstrates that board and staff leadership is focusing on accomplishing its mission and takes very seriously its stewardship responsibilities. 

If an organization shows that it pays attention to the above, it will distinguish itself in the eyes of investors who have to make difficult decisions about where to put their precious money.

Does this fit with your view of what investors are thinking?

Posted in Economy, Finance. Tagged with .