July 11, 2012

Better Ways to Survive Hard Times

Nonprofits expect their consultants to work miracles by helping them do more with less. However, with the most recent “Giving USA” report that fundraising grew just 1.1 percent last year after inflation—and predictions of very little growth in 2012—it could be a long time before charities are raising funds at the rate they did prior to the recession. What's a consultant to do?

Logic and experience lead us to traditional responses in hard times: Grow revenue or cut expenses. But restricting our response to these strategies is flawed.

The first response to a tough economy is often to work harder on raising revenue. "Development Director" seems to top the wish list of every nonprofit that doesn’t already have one. A quick look at these job descriptions reveals a demand for people who have previously brought in large gifts, have managed aggressive campaigns, and are connected to major philanthropists. But more people pushing harder on limited or declining funding sources is like a financial cage match. It may be of interest to the spectators, but almost every participant comes out worse off.

The second response is to reduce expenses. Nonprofits everywhere have cut staff, services, or both during the past few years. Many are offering no salary increases in the coming year, and staffs are being asked to take on additional responsibilities. Reducing the scope of programs and working employees harder may be desirable financially but not programmatically.

This is not to say that effective fundraising and a sharp pencil are not useful. They are. But we would benefit from taking a step back to consider a third alternative.

Most nonprofits have expansive missions, always with more to do than their capability to achieve it. More than ever, charities need to take a hard look at the scope of their mission as well as within each program to make sure the work is targeted and the funds are spent effectively. That could mean:

▪    Coordinating services with other organizations instead of doing everything alone.

▪    Instilling of culture of discipline by using quantifiable performance metrics that are usable in real time. That can ensure that the charity is spending its resources in an efficient way on worthwhile programs.

Other changes can help, too. Innovation is important. Social-impact bonds and tighter corporate partnerships are other possible keys to survival—or even substantial expansion in program services. The big caveat is that these "investors" want to see your client coordinating services with others, if appropriate, and instilling a culture of discipline.

It is never too soon to start discussions with your clients about these ideas to help them meet the realities of their capabilities.

How are you helping your clients innovate instead of just tying harder at traditional approaches?