Balancing the Mission Checkbook

This is not a breakthrough idea, but I am completely convinced that leadership will be the only determining factor for the survival and success of nonprofits throughout this recession. I see signs of it all the time. As the months of recession drag on, the effects of the presence and absence of real leadership at nonprofit organizations becomes more and more clear. A couple of really interesting recent blog posts got me thinking about these leadership voids and how to fill them.

In the post Nonprofits Will Never Be Respected Until We Start Respecting Ourselves, Rosetta Thurman confronts the self-induced damage of low wages, chip on the shoulders image of many nonprofit employees. She then builds up to this call to action:

With all of our own moaning and groaning about our sector, it’s no wonder other people emphasize the “non” in our nonprofit field. Believe me, I’ve been guilty of all of the above. But what’s happened is that in all of our “insider baseball” talk amongst ourselves about what’s wrong with our sector, we have somehow internalized it all to conclude that this is just how it is. This is just the nature of “nonprofit culture”. We forget that WE are nonprofit culture. The nonprofit “sector” is made up of individual organizations, which are made up of individual people, which means that this is all up to us. It is what we make it to be. So when are we going to be the change we say we wish to see?

Echoing the “take charge” message in An Open Letter to Arts Administrators, Adam Thurman (Two bloggers named Thurman, hmmm) describes the painful position of mid-level arts administrators who don’t feel supported, respected, or valued.

It doesn’t have to be like that.  I know you’ve probably convinced yourself that all the garbage you deal with is just the cost of being in the field.

It isn’t.  If the group you work for is being run poorly it is because people are ACTIVELY making choices that allow that to happen.  It isn’t just a matter of circumstance.  It’s an outcome of choice.

You deserve better then that.  You deserve to work at an organization that produces great art, treats people with respect and pays fairly.  No matter how much people may tell you otherwise those three goals are NOT mutual exclusive.

He then advises that these arts administrators give themselves a year to help bring about change - or to leave.  I love the simplicity and enormity of that advice.

Be a leader, or leave.

But how can you be a leader if you aren’t the CEO, Executive Director, CFO, Director of Development, Board Chair, etc, etc?  By leading, that’s how. I know of many cases where a new board member, mid-level program manager, or finance staffer stepped into the void, told the truth, and brought about important change. To be frank, there is risk and a lot of work involved.

Our new Recession Risk Assessment resource includes suggestions for actions to take based on the risk level. For organizations with high level of leadership risks, the advice is: “The organization urgently needs a leader to step forward to call attention to the challenges, even if it causes discomfort.”

Be a leader - why not you? Why not now?

Where do you send the condolence card after the death of a nonprofit?

Today’s Star Tribune reported that the Senior Federation to Shut Down because of financial challenges resulting from drops in both grant support and memberships. The economy is certainly a big factor since the Federation’s funders include several health care organizations that are cutting budgets everywhere. Membership declines reflect both demographic shifts and changes in the needs of their constituents. Founded in 1973, the Federation really made its mark in the 1990s with advocacy and action to make prescription drugs more affordable with bus trips to Canada and online sales.

This news about the Senior Federation is not the first or the last time that a nonprofit will close. Two weeks ago Centro Legal closed its doors after almost 30 years of providing legal services to low-income, Spanish-speaking clientele with issues related to housing, domestic violence and immigration. The loss of these services has a very real impact on the community.

The current economy has exacerbated the already fragile financial state of many nonprofits which is likely to result in more closures. Every closure is hard, painful, and sad. This sadness made me think about the sadness I’ve seen in the past month after the cancer-related deaths of three acquaintances. These losses were hard, painful, and very sad. Each of these wonderful people were remembered at memorial services billed as “A celebration of the life of … ”  The events were indeed celebrations with music, laughter, tears, stories, and food. Friends and members of the community even bring the food, passing out turkey sandwiches and brownies in church basements and park shelters.

I think that we need to organize memorial services for nonprofits. A celebration of the life of the Senior Federation, a celebration of the life of Centro Legal, a celebration of the life of _______ . Current and past board and staff members, clients, members, funders, and the community could gather to tell stories, cry a bit, remember the history and changes, take pride in the impact and significance of the organization, and say goodbye. Invite me and I’ll bring a tray of brownies.

I think that I’m losing my ability to be patient and finesse conversations about how nonprofits can deal with the recession. Instead, I’m becoming a blunt instrument with one recurring message - Act Now.

Unfortunately, quite a few nonprofits are in very fragile financial condition and don’t have much elbow room. In other circumstances, I like to work through the possibilities and understand the complexities and reasons behind a nonprofit’s structure and history. Now it’s all about speed.

For example, in the last two weeks I’ve made these very direct and difficult comments to leaders of three different nonprofits:

• Direct comment 1: “I think that your grant budget is unrealistic. I think that you need to create a scenario budget plan to reduce expenses by 30%.”

• Direct comment 2: “Based on your history of recurring operating deficits, you need more than a few expense reductions. You need to reconsider the entire structure of your programs.”

• Direct comment 3: “You don’t have time to research some new grants. You’ll be out of cash in one month.”

Not much finessing here. Because of this need for urgency, we developed a Recession Risk and Preparedness Assessment for nonprofits to quickly identify how urgently they need to act and where to start. These twenty questions cover financial condition, financial information, organizational change factors, and leadership. Use it to find your starting point.

In this week’s issue of The Chronicle of Philanthropy, consultant Pat Nichols described how frustrating it is to watch ineffective and slow reactions to urgent situations in the article A CEO Survival Guide for Touch Times. Because this requires a paid subscription to access, here’s an excerpt of some key points in this excellent piece:

Center all decision making on the mission. If, in facing tough choices, we are not explicit and rigorous about how the decisions we make serve the mission, we have fallen short of our responsibilities.

Be open and engage everyone. Everyone will find this period and the process unsettling. No one, at the outset, can guarantee an outcome. What we can do, though, is find creative means to discuss what is happening and encourage participation from all quarters.

Move quickly but systematically. When uncertainty reigns, people draw comfort from knowing that, though there is no resolution at present, there is rapid and systematic movement toward a resolution.

Be hopeful in style and rigorous in analysis. This balancing act is, perhaps, the toughest of these principles to observe. As leaders, our colleagues depend on us to set a tone, and to convey hope. However, it is also crucial that we ask the tough questions and discount our desire to believe the best.

Live with ambiguity, acknowledge uncertainty. We must act on incomplete and imperfect information; we must make assumptions and decisions that will prove to be wrong. This requires that we acknowledge what we don’t know and be prepared to adjust when we are mistaken.

The time to act is now - for all of us.

I have a New Years Resolution suggestion that has nothing to do with exercise or diet. Resolve to learn more than you already know about economics, markets, and personal finances.

It’s a matter of self interest for you and for the nonprofits that you serve, now more urgently than ever. Think in hindsight of all the financial choices that have been made about questionable mortgage terms, high home prices, risky investments schemes, and un-diversified retirement portfolios. Could some of the pain have been avoided if consumers, and nonprofit leaders, were more educated about the basics of economics and personal finance? I think so.

In his New York Times article, Contemplating the Boobs We Were, Peter Applebome recounts financial mistakes and asks:

“Are we doomed forever to be the fleeced or is there anything we can learn from this latest round of financial catastrophe? In fact, there are plenty of lessons to be learned. So here’s a revolutionary idea: Maybe it’s time we even start thinking about ways to teach them.”

Freakanomics author Stephen Dubner was even more direct last summer in his blog, asking Are We a Nation of Financial Illiterates? Included in his post, Dubner recites this list of suggested financial basics:

1. Basics of how markets work.
2. Time value of money and the working of interest compounding.
3. The concept of risk and the working of risk diversification and insurance.
4. Basic accounting (very basic).
5. Rights and responsibilities of consumers and institutions.

Read the full post for more detailed descriptions.

I’m sure that if individuals who work at, or serve on boards of, nonprofits were to gain more financial literacy that the nonprofits would also benefit. At Nonprofits Assistance Fund we see many problems that could have been avoided with better understanding of topics such as supply and demand, investment risk, and the difference between cash and income. Resolve to learn more this year, no matter whether you’re starting at Econ 101 or financial analyst level.

If you are a young professional in Minnesota, consider working on a Citizens League Action Group on this topic that is starting soon.

The reports of success for online giving are still pretty mixed.  It’s likely that a significant shift from other payment forms will take several more years.  However, there are a number of positive experiences in online giving.

Here are three examples of innovative and creative ways that nonprofits are raising money online.

1. Modest Needs

Modest Needs offers an online forum to make direct contributions to individuals or nonprofit organizations to address a very specific, and usually modest, request for help. It’s kind of like Kiva’s direct lending model - but with direct contributions instead. Through Modest Needs, donors can see the very direct impact of their gift.

If it sounds too good to be true, I have a testimonial from Susie Brown, Executive Director of Child Care Works that they were able to pay for a capacity building project very quickly with funding through Modest Needs.

2. United Way’s Give 5 Now

You may have already read about the United Way’s Give 5 Now campaign. Watch their YouTube video about the importance of supporting urgent needs now. I hope that you can’t, and don’t, resist the urge to give at least $5.

3. Social Media

Social networks have exploded in the last year. I love Facebook, and was impressed by a recent fundraising campaign that Pillsbury House Theatre launched on their Facebook page. After giving a small amount, the updates and status reports that I received made me feel like a part of the campaign.

Give List uses blogging and Twitter to spread the word that there are ways to give even if you don’t have extra cash. The list starts with 71 ways you can give and then spreads and multiplies through an online community.

Even if it takes a while for online giving to match the dollars of more traditional forms, these example show ways that online strategies are different, fast, and direct.

Don’t be a Scrooge - give online now.

It’s not a surprise that I talk to a lot of nonprofits about the current economic environment. We’re all looking for any insight, advice, and guidance. Recently, I’ve been paraphrasing one of my favorite leadership quotes because it fits the moment perfectly - the Stockdale Paradox.  To paraphrase:

You must maintain unwavering faith that you can and will prevail in the end, regardless of the difficulties, and at the same time have the discipline to confront the most brutal facts of your current reality, whatever they might be.

Vice Admiral James Stockdale was a prisoner of war in Vietnam for seven years. When asked by Jim Collins, author of Good to Great, how he survived, he described balancing hope and realism. Stockdale said that the optimists didn’t survive capture because they told themselves that release was right around the corner and they died “of a broken heart.”

What nonprofits can learn from this philosophy is to maintain the conviction that their work in the community is essential, vital, and will be valued. Carry this passion with you in advocacy, fundraising, and communications as you tell your story and share the impact. At the same time, confront the brutal facts of economic downturn and budget cuts by being disciplined about financial information, contingency budgets (with multiple scenarios) and cautious use of reserves. I’m afraid that the optimists who approach next year with an upbeat attitude that funding will arrive “because it just has to” will be the ones that fail. The survivors will commit to and believe in their mission and be realistic in their decisions.

This is also a good time to leverage the networks in which your organization operates. Nonprofits work together in many ways, and will be called upon to increase network activities for both mission and financial reasons. At the Minnesota Council of Nonprofits’ Nonprofit Fundraising and Economic Outlook forum this morning several organizations shared their experience working with peers and community to navigate the downturn. MCN also released the Nonprofit Current Conditions Report based on a survey conducted just this month. This report gives us some real time information about the immediacy of the impact of this recession on nonprofits and their clients. All of this information, research, and peer conversations will be important - and remember to be confident, hopeful, and honest.