Keeping up with the dreaded economic news? Nonprofit executive directors are evaluating organizational stamina: Are we in a recession? Will my donor base remain strong? Will it be like COVID? Anything close to the Great Recession? How do I keep the contributions coming in? How do I take care of my team? Or will it blow over before we even know it’s happened?
Questions can keep us up all hours of the night, but “keeping up” means being ready. In my long gray-headed life, I have weathered 10 recessions. Though none of them were fun (well, the first one, I was an infant, so it may have been fun), recessions are an inevitable fact of economic life. They don’t get easier. But they do become more manageable to those who are experienced in navigating their organization through the turbulence.
What are we hearing now —
- 8.6% inflation, the highest Fed rate hike in decades, and a 1Q22 GDP dip of 1.4% — definitely a tough situation.
- Fed Chair Jerome Powell on prospects of a soft landing: “There’s a path for us to get there. It’s just not getting easier. It’s getting tougher” as reported by AP June 16.
- White House economic advisor Brian Deese, asked about recession: “There are always risks” as reported by Fortune May 22.
- Bruce Kasman, chief economist for JP Morgan Chase & Co.: “I’ve been more pessimistic about the opportunity of stabilizing inflation at an acceptable level without a recession” as reported by Bloomberg June 12.
Essentially, a majority of economic leaders (and those who are not political appointees) thinks we are either IN a recession now or WILL BE in a few months/quarters. Nonprofit leaders know from experience that whether it is a formal recession or simply an economic downturn, their costs are going up, their contributions will likely take a hit, their razor-thin margins will get thinner, and their staff will be worried.
When you’re ready —
I include this out clause for any of you who may NOT be ready. It means that our industry, the nonprofit sector, has a habit of reactionary leadership in turbulent economic times. We’re great at serving those in need, making a difference in our sphere, and inspiring our teams and boards. But our front headwinds tend not to be economic but rather programmatic and institutional. We tend to notice later that revenues are down.
Recessions affect organizations in many and varied ways. Those relying on government grants may not see a negative impact for a year or two. Those with major individual gifts may see immediate declines since gifts are often tied to a donor’s stock portfolio. Those of you in community services may wonder if you will ever see a decline in demand, while those in the arts have learned to watch the economy closely. (Our team at Capacity Partners represents all these sectors, and we see the varied impacts. Plus, we do leadership coaching!)
The point here: Be Ready. There really is no out clause for a drop in contributions.
Four Strategies You Should Work Right Now
- Communicate more. All of your stakeholders should know that you are paying attention to the economic uncertainty affecting your service sector and your contributions. Your beneficiaries need to know that you are there for them. Your community should be aware of your forefront position in serving them. Your donors need to know that you appreciate them. And need them. Your board needs to know that you are proactively looking – and counting on their help – toward new and pledged resources.
- Revise your cost structure. Yes, you can! Everyone thinks their budgets are made of concrete, that their expenses are set, that there is no wiggle. You can be creative. So says Praveen Kishorepuria, Managing Director, Zero-Based Transformation, Accenture North America: “Zero-based cost transformation offers multiple options for increased flexibility….many tactical, repeatable activities can be virtualized or outsourced.” The strategy is to find partners, outsource when possible, use board member companies to provide bridge services, delay hiring….anything to reduce the expense line can dramatically (even if temporarily) improve the bottom line. And if you are worried that you are susceptible to a downturn, you should consider a dramatic 20/20 strategy, explained below.
According to Network for Good, “Ten Strategies for Recession Fundraising,” strategy #6 is “Identify Plans B, C and D: Consider subletting a section of your current office to another nonprofit. Do you have equipment that could be sold? Develop a cause-marketing partnership with a company.”
- Get closer to your donors. This is the most important strategy for protecting contributions. Donor retention during a downturn is the surest measure of whether you will survive a recession intact. If you are already close to your Top 10%, then get close to your Top 25%. Imagine being on the bubble of a donor’s portfolio. If you are not among their top philanthropic priorities, you will likely be dropped from their giving program if their income is negatively impacted. Clarifying: when the donor’s ability to contribute is constricted, you will be cut. Unless you are among their top beneficiaries.
I developed a hypothetical chart that shows how vulnerable a nonprofit is during an economic downturn. First, the economic boom period shows that a typical major donor whose giving is based on investments may both increase her number of beneficiary organizations AND retain the ones she is currently supporting. It’s an economic boom: she is doing well, and she rewards those organizations comfortably because she aligns with their mission and respects their uses of funds.
This is donor loyalty in an economic upturn. The left axis shows that retention increases over time. By Year 3, after three years of giving by this donor, the recipient has an 80% probability of continued contribution. The donor has also increased her donor portfolio.
From two in Year 1 to nine in Year 4. You are “Org #4,” added in Year 1. During an economic boom, your projected retention is good.
In a recession, the donor’s portfolio is weakened. Discretionary philanthropy means the donor is hoping to make an impact with fewer resources. She chooses to cut the number of beneficiaries to the few that are the most important to her.
This chart (hypothetical) shows what happens during a recession. The number of recipient organizations is trimmed significantly.
Donors want to maintain giving levels but are often forced to cut back during a period of economic uncertainty. If you are “Org #4” added in Year 1, by Year 2 you don’t make the cut.
Staying close to your top donors, listening to their interests, providing worthwhile recognition, and affirming impact all will result in secure donor retention. Many nonprofits are funded at 80% by their top 20% of donors. Try to ensure that you are among their top beneficiary organizations.
- Develop with your senior team a dramatic 20/20 program. It’s simple; it brings your leadership together; it works. And it is nearly impossible to do. All you have to do is reduce your expenses by 20% and increase your revenues by 20%. Done! Except that it is excruciatingly difficult.
In a normal economy, it is not unusual to experience a decline in revenue. We manage through those experiences by cutting our costs in the 3rd and 4th quarters and squeezing our board for end-of-year giving. In a recession, you could lose a large percentage of your revenue, 10% or more, maybe 20%. You should always have a plan for cutting 20% of your expenses. Unfortunately for most, it means cutting our most important resource, our people. If you start now, and for most of you entering a new fiscal year, now is the RIGHT time to start, you can figure out how to disperse duties, what operational shortcuts you can enact, what professional services you can delay…all before the contents of your anxiety hit the fan.
But that is only the start. What if you lose revenues by 20% but you ALSO have a plan for raising an additional 20% by the end of FY23. This is difficult but not impossible.
The questions that will lead to increased revenue are:
- What grants have I not applied for that will allow for administrative infrastructure?
- What companies are my major individual donors aligned with and with whom I could get a meeting?
- Which of those companies offer a matching gift program?
- What companies could provide a corporate sponsorship that I haven’t contacted, and what benefits would attract them that we could produce?
- Who among my board is well-connected and could broker three prospect meetings in the next three months?
- What additional service sectors could I explore that might attract a significant new source of revenue?
- What members of my senior team could I enlist to help raise additional money?
- Can my finance and marketing teams come together to devise a trackable and concise plan that we can all rally around?
- How should I plan for a recognition event at the end of the 3rd quarter to thank those who are helping out and to inspire those to give by the end of the year?
These and other questions will lead you to an ambitious and challenging plan to get you to 120% of your budgeted revenue. Whether you lose significant current donors becomes hedged by the new revenue development you have just created.
A 20/20 plan is very difficult. But it is achievable, and if you start now, at the beginning of a fiscal year, it is not out of the question that you can emerge through a recession in a new position of strength.
Recessions Aren’t All Bad
Imagine post-recession that your organization has emerged stronger. You may have fewer staff, but they are effective and productive. Your leadership team has experienced the come-from-behind success story that they embody to your stakeholders. You have weathered the turbulent conditions and come through them more focused and more capable than before.
You may have attracted new long-term investors in the organization. “Recessions aren’t disastrous for nonprofits. During typical recessions since the 1950s, giving has actually gone up on average, albeit by a modest 0.3 percent a year,” says Patrick Rooney, an economist at Indiana University’s Lilly Family School of Philanthropy.” (from Ben Gose, The Chronicle of Philanthropy, January 7, 2020)
A Few Final Thoughts
A diverse, cross-funded organization is the safest during periods of economic uncertainty. Nonprofits that are heavily reliant on government funding, or those with a mostly corporate donor base, are the most vulnerable. Create a comprehensive development plan that is represented by stable and varied sources.
Speed is king. The sooner you implement solid, consensus-developed and well communicated strategies, the more likely you are to weather the recession when (okay, “if”) it comes.
Finally, remember that people – your people – are the most important asset you have. Recessions come and go (and come back), but how you handle those around you will reflect your values and integrity for years into the future. Treating your team with respect will last a lifetime.
Resources from The Chronicle of Philanthropy
“Eight Steps for Managing Through Tough Times,” Bridgespan
“Tips to Navigate Financial Crisis,” Nonprofit Finance Fund
“Hard Times, Hard Decisions: 7 Things Small and Midsize Charities Should Do When a Recession Looms,” Chronicle of Philanthropy
Attending to Retention
While the worst impacts of the pandemic may be subsiding, the so-called Great Resignation seems to be going strong. Nonprofits are feeling this at least as much as any other employer. Your people are your greatest asset in delivering on the promise of your organization. How can you keep them?
For many nonprofits, retention via better compensation is not an option. One key may be to better connect the mission of your organization to the people who work there. Working for a nonprofit often is a choice partially motivated by an individual’s identification with what your organization stands for and accomplishes. If you can’t pay people more, aim to build a culture that makes it easy for them to take personal pride in the work and your value proposition because they are part of something that is making a social impact.
Building culture and connection have become even more important with many workplaces operating in hybrid on-site/remote fashion permanently, naturally heightening a sense of disconnection.
Here are some tactics to strengthen your organizational connective tissue:
COLLABORATE
The hybrid workplace for many organizations is here to stay. This brings with it a natural tension – and potential resentment – regarding being in the office setting. But this also can be leveraged as an asset. Consider being intentional in terms of expectations about when your team must be in the office, so that those times primarily are dedicated to collaboration that works best in person.
Collaboration certainly is possible via Zoom. But different dynamics are in play when people are together in person which can spark deeper interactions. Rather than requiring someone to go into the office mostly for the sake of showing up to sit at a desk, make sure that those in-person times for your team are planful and include productive collaborative time together to exchange ideas and move projects forward.
Collaboration also is stronger through inclusion. A Capacity Partners client who is in the middle of a strategic planning exercise realized the pandemic and hybrid work environment produced a morale issue: those required to come into the office felt it was an unreasonable obligation to fill in for those who are working from home. The Executive Director decided to involve all the senior staff in the strategic planning process, who then in turn involved the rest of the staff. What began as a discovery of low morale actually became a strategy for inclusive collaboration. Together, they realized there is much work to be done in order to build a positive, forward-reaching organization. The outlook brightened for a renewed, transformed organization.
COMMUNICATE
Are changes coming up in your organization? Make sure those are communicated early and well. You want to give your team the sense that changes are happening with and perhaps even because of them (see previous bullet point on inclusive collaboration), rather than happening to them.
ELEVATE
Your team can help tell your organization’s story. In addition to validating their work, you will be emphasizing their importance in delivering on your organization’s mission. Consider featuring staff members and their mission-driven successes in fundraising pieces and general communications (social media, newsletters, short video interviews shared on social platforms).
ACKNOWLEDGE
The documented reality is that different generations view work and their relationship with it very differently. Recognize that a one-approach-fits-all is unlikely to satisfy a workforce that is diverse in terms of age, and adapt. Here are some ideas from LinkedIn on tailored approaches for Millennial employees. Acknowledgment also means recognizing people are dealing with many types of stress that can affect their commitment level and productivity. Show your colleagues your humanity by checking in with empathy and grace. During the pandemic, an Executive Director of one of the organizations that CP serves became a father. He readily acknowledged how his new role in the family dramatically transformed his ability to show empathy for his staff’s personal lives and commitments.
CP Vice President Michael Feinstein led a large nonprofit organization in the Washington, DC, area for more than a decade. When COVID hit and remote work became the norm, “I changed the cadence of my one-on-one, team, and staff meetings to check in more frequently and focus on how they were feeling in addition to what they were doing.” He notes that a key to being available to others “was managing my own stress, which meant regular exercise for me.”
EMPOWER
If you’ve hired the right people, give them the freedom to do their jobs. Let them know they have your trust to get the job done even when they aren’t sitting in the same place you are.
BUILD CONNECTION
In a hybrid environment, managers must be far more intentional about creating a sense of connection and belonging. Tactics can be simple but meaningful, such as every Monday morning sending out a message to your team asking how their weekend went and sharing a bit about yours. Intrusive? Perhaps. But people can share as much or as little as they like, and it will help them connect with each other too, especially at a time when they may no longer be bumping into each other in the breakroom. Make it easier for them to feel like they belong to a team.
We welcome new VP Michael Feinstein
I am delighted to announce that Michael Feinstein has joined CP as Vice President. He will make our very strong team even stronger. I’m particularly thrilled because Michael’s expertise in both the nonprofit and commercial worlds will deepen our capabilities in serving small and large nonprofits, both locally and nationally. He brings a business mindset to mission-driven organizations. His wealth of experience in strategic planning and board governance will strengthen the services CP has to offer. I also am excited he will be introducing business planning services to meet the varied needs of our clients. On a personal level, I have known Michael for a decade and have been mightily impressed by his creativity and leadership at Bender JCC. We are very lucky he is bringing his talents to CP as we mark 20 years of providing full-service consulting to nonprofits.
You can learn more about Michael here.
How Coaching Can Make You a More Intuitive Leader and a More Creative Innovator
If someone offered you a magic elixir that would increase productivity, improve communications, deepen staff commitment, decrease stress, develop a culture of trust, prevent burnout, better manage risk, and leverage your personal power, wouldn’t you buy it?
Leadership coaching is that elixir, and contrary to what many may believe, it’s not only for those who aren’t performing as well as might be expected; it’s also for those who want to take their leadership from very good to extraordinary or for those who are experiencing significant challenges (like running a nonprofit during a pandemic and recession.)
A national nonprofit leader recently worked with one of Capacity Partners’ leadership coaches, Louise Stoner Crawford, and said, “I feel like a better person as a result of my coaching experience….the positive changes are showing up in all of my relationships in my life….work, family, and friends. This speaks to the transformative power of coaching and the dramatic effect that this can have on individuals and our communities.”
Coaching can develop those leadership qualities that have been empirically proven to be associated with success. These include: cognitive capacity, social capacities, personality style, motivation, knowledge. Focused on the future, not the past, the right leadership coach can enhance performance, build confidence, and help tackle difficult problems.
One leader Jeanine Cogan worked with for years said, "Leadership coaching is a wonderful source of support for me - smart, wise, and compassionate. I had obstacles that were getting in the way of my success. Jeanine helped me identify, understand, and address those obstacles so I could get out of my own way."
Here’s what the experts who study leadership coaching say:
- Coaching dramatically improves working relationships, resulting in a 5:1 return on investment.
- Return on training that is paired with coaching can be productivity increases of up to 88% – four times the increase without coaching.
- When a leader is unsuccessful and derails from their position, it typically costs an organization 150% of salary. This figure is in addition to productivity loss and team disruption.
How does leadership coaching work? Through one-to-one conversations – conversations that can happen remotely in this era of Covid – a leadership coach will help you or your key staff members move past an impasse, learn new skills, and work through communication challenges. Leadership coaches are not therapists; they are sounding boards, guides, and problem-solvers.
But leadership coaching isn’t for everyone. It works best when someone has a genuine desire to learn and grow. People who tend to blame others for their failures or act as victims rarely benefit from leadership coaching
Of course, a good fit is essential; the ineffable chemistry between two people must be right to build the trust required for optimal results. You don’t want just any leadership coach – you want an experienced, savvy, personable coach whose only focus is meeting your goals.
Capacity Partners has two outstanding coaches – Louise Stoner Crawford and Jeanine Cogan – who are ready to help you, your key staff, and your board members meet the unique challenges of leading a nonprofit organization in 2020. Want to learn more? Louise and Jeanine would be delighted to chat with you. Simply email them at louise@capacitypartners.com and jeanine@capacitypartners.com.
Leading a Nonprofit in a Pandemic
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When times are tough, leaders step up. And these are unprecedented times. We are each called to be a leader now, whether in our roles as nonprofit executive directors, fundraisers, business owners, parents of young children, or children of older parents.|
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Walk and Talk
The relationship between a nonprofit’s executive director and board chair sets the stage for the effectiveness and energy of the organization.
What are the most important characteristics of a good working relationship between a nonprofit’s executive director and its board chair? Communication, trust, and candor.
Executive leaders and board chairs can attain their most productive levels of management and governance by regularly and honestly assessing the current status of the organization, by deeply understanding their roles and responsibilities, by respecting the guidelines of best practices, and by working on those three qualities of communication, trust, and candor.
To develop those strengths, first understand how organizations and boards grow and change. (Watch for an upcoming CP Connector article on the stages of board development.) To determine where your organization stands in the lifecycle of boards, ask yourselves if board members:
- offer their own program ideas?
- focus on day-to-day operations of the nonprofit?
- recruit new board members?
- act as philanthropic leaders?
With an understanding of where your organization is in the board lifecycle, begin to hone the roles and responsibilities of the executive leader and the board.
The executive director/chief executive office is responsible for:
- overseeing day-to-day operation of the organization
- developing programming
- creating a budget with input from the board
- overseeing marketing and communications
The board chair guides the work of the board to:
- determine strategic direction
- hire the ED/CEO and delegate operations
- provide oversight (legal, financial, and managerial) and set policies
- partner with ED and staff to raise funds to actualize the strategic plan
- serve as passionate ambassadors for the nonprofit’s mission and vision
The board chair also takes on the responsibility for evaluating the executive and for leading the board’s self-evaluation. Far from being onerous, these are critical opportunities to reflect on the health and well-being of the organization and the relationships between executive leaders and their boards.
Clarity about the development stage of the board and about roles and responsibilities provides the groundwork for strong communication, trust, and candor. These qualities may emerge naturally if there is already a good fit. But usually they must be developed intentionally through purposeful outreach and communication:
- Some EDs report talking to board chairs several times a week, or meeting once a month at a favorite café, or local lunch spot, or scheduling regular walking meetings à la Steve Jobs (exercise the brain and body).
- Whether you are an ED or board chair, consider meeting one-on-one with other board members.
- Make sure board documents to or from the ED are accurate to avoid misunderstanding or embarrassment.
- Choose the right timing for conversations—what days or times offer the most relaxed and open interactions?
- Institute a clear orientation process for a new ED and for board members to give new people a sense of the lay of the land and to clarify expectations.
- Commit to a culture of “no surprises” to develop open and honest communication.
The ED and board chair create the best balance in their work for the organization when they can communicate openly and honestly and embrace their shared leadership. So, next time you have a chance, take a walk and talk.
If you’d like to talk to Capacity Partners about a board development, please don’t hesitate to email Margo Reid at margo@capacitypartners.com
How Leadership Coaching Can Help You
Are you wondering exactly how leadership coaching can help you be a better leader?
Leadership coaches partner with clients in a structured, challenging, and creative process, often focused on a particular issue or problem.
Some issues clients bring to leadership coaching include:
- An upcoming opportunity they’d like to leverage
- Wanting to change how they manage or show up as leaders
- Feeling stuck in a certain pattern or management style
- Exploring ways to increase effectiveness
- Navigating a difficult work challenge
Professional coaching focuses on setting goals, creating outcomes, and managing personal change. It is present and future-goal oriented. Your coach will ask powerful questions, act as a sounding board, provide objective assessment and observations, listen fully and actively, challenge your blind spots, and foster shifts in thinking that reveal fresh perspectives
Coaching starts with a clear agreement about the topics to be explored and the desired outcome. The engagement starts with a 3-to-6-month contract which can be amended as needed. It works best when the client brings a desire to change, a willingness to explore new behaviors, and openness to challenging established patterns.
As the old saying goes, leaders aren’t born, they’re made. And leadership coaching can help you become the leader you want to be.
Capacity Partners offers proven leadership coaching so nonprofit leaders can develop their potential and guide their organizations more effectively. For more information, email Louise Stoner Crawford.
Managing Transitions
The only constant in life is change, and the same proves true at nonprofit organizations. As nonprofit leaders, we’re either preparing to launch the next program, initiating a fundraising campaign, or working with our boards to map out a strategic plan for the next five years. And those are just the changes we plan for.
There is an implicit responsibility embedded in every nonprofit manager’s job description: change leader. But what does it mean to be a change leader? How do we effectively lead transitions? How do we include all of our stakeholders in the process?
While successful change management requires utilizing a host of best practices, one important tactic dictates that you enlist a core group of staff, board, and other stakeholders to drive the change you’re seeking to make. In order to do this, you need a communications plan that details your vision, give people the chance to discuss concerns, then apply the change throughout your operations. Successful change management includes a plan that first identifies your organization’s stakeholders, and then outline strategic communication plans for each individual stakeholder group. Think about how you would want to be communicated with if someone else was leading your organization.
Laying the groundwork for a successful change takes time. As Seth Godin once said, “it takes about six years of hard work to become an overnight success.” However, it’s also important to celebrate small wins and acknowledge the hard work of everyone as they strive to make change.
Capacity Partners is ready to support you your nonprofit during your transition from facilitating meetings to developing comprehensive strategic plans.
How do you know when you’re ready to do a strategic plan?
Perhaps you and your board have decided your organization needs a new strategic plan. But how do you know if you’re ready to embark on the strategic plan process? Before you hire that consultant to help you develop a bold yet achievable strategic plan, make sure your key stakeholders – board, staff, and volunteers – have answered these questions.
- Is your organization in a state of crisis? If so, you must deal with the crisis before developing your strategic plan so you have the required mental space and staff time to allow all of you to consider the deeper issues of where it is heading.
- Are key board leaders relatively stable? If your board officers are in transition, it might be wise to wait until they are comfortable in their new roles.
- Is the executive director planning to stay? Are there minimal issues with your CEO? While an organization can do strategic planning without an executive director – and sometimes does, to assess direction and determine the right CEO to hire–for a complete strategic planning process, it is best to have on board the person who will lead the execution of the plan, which is nearly always the executive director.
- Do board and staff have time to plan? While no one has enough time these days, meaningful strategic planning requires a time commitment of at least a half to full day a month for three to six months. The chair of the strategic planning committee and the executive director must dedicate even more time. Many small nonprofits hope do the impossible – complete a strategic plan in a single half-day planning session, something that’s generally neither wise nor useful.
- Do you have someone willing to make the time and energy commitment to chair the strategic planning committee? It is too much to expect board chair to lead this process while handling their other responsibilities.
- Do you want a board or staff-drive process, or some combination of the two? Very small nonprofits tend to choose a board-driven strategic planning process while large organizations with staff members who bring special expertise are often staff-driven. Either way, the board still owns the responsibility for setting the strategic direction, so the board must take the lead on the foundational elements of developing your mission/vision and values as well as setting the strategic direction and goals. Staff can help tremendously with the current situation analysis and creating strategy and implementation plans.
- What kind of consultant do you want – a partner to guide you through the entire process, or a facilitator with your team doing most of the work? It is important to interview different consultants and so that your needs match with the consultant’s style.
If you’d like to learn if your organization is ready for a strategic plan, or if you’re ready to start the planning process, call Capacity Partners at 240-462-5151 to learn if our team of experts can help you decide if you are ready to proceed and then discuss next steps with you.
A quick summary of Organizational Vitality
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