How to Adapt When Your Nonprofit Organization Faces Hard Times

It’s likely that you’ll come across problems in the course of managing your nonprofit organization. Everyone does. But sometimes those problems are so severe that you must change the way you do your work to address them.

You may face a catastrophe — a natural disaster, the destruction of a venue, or the serious illness or death of a staff or board member. Or shifts in legislation or foundation policies may cause you to lose needed grants or contracts. While some crises are sudden and fierce, others may build gradually. Several modest deficits may add up to significant debt. Needs of your constituents may change. A competitor may win away your clients or staff members.

The choices you make in challenging circumstances depend, in part, on how much time you have to plan. Is the change you’re facing sudden or has it been gradual? Is it long-term or temporary? Thinking about a crisis or dry spell when you’re currently successful isn’t fun, but it’s necessary in order to survive.

Transforming or even closing a nonprofit in hard times draws on the same courage, leadership, and resourcefulness you used to create it. You need to be clear and decisive, include others in making and executing your plans, ask for help when needed, and base your decisions on clear, accurate information.

Recognize the need for change before it’s too late

Recognizing a sudden crisis is easy, but often the most difficult aspect of managing a nonprofit is seeing a gradual decline and the need to change. Likely, you work so hard and feel such dedication that you can’t believe your organization is floundering.

Financial problems have clear consequences (so be on the lookout for them): When deficits exceed 10 percent of an operating budget, the organization will have trouble paying bills within 30 or 60 days. When the deficit exceeds 20 percent of the budget, the pressure intensifies. The inability to make payroll or timely tax payments signals severe problems.

A loan or an emergency fundraising drive may solve a short-term problem, but an organization must consider whether its programs cost more than its earning and fundraising capacity can provide. It can’t keep borrowing funds or crying out for help without alienating its friends and supporters.

Communicate when making hard decisions

If you’re facing an unpopular decision — laying off staff, for example — it’s better to communicate clearly and move forward decisively. The longer you delay, the greater harm you may do to your organization and to those employees.

Take a break

Sometimes an appropriate first action when you recognize that your organization faces a crisis is to step back and take a breath. You may even consider suspending your programs to give yourself time to plan your next move. Not every nonprofit can do so without harming constituents, but many can. Taking a hiatus can reduce operating costs and allow you to focus full attention on your options.

If you do take a break, communicate your reasons to your members, clients, and funders and keep everyone informed of your progress. Even if you suspend programs, don’t stop publishing your online newsletter or quarterly status reports. It’s critical to your long-term health as a nonprofit that your supporters know you care about them and — even more important — that you still exist.

Revisit fiscal sponsorship

If you’re facing the need to downsize, a fiscal sponsor may be helpful to you. For a percentage of contributed revenues (often 10–20 percent), some sponsors provide check writing and payroll services, access to human resources expertise and insurance, regular financial reports, grants management, and other back-office services — freeing you of those key administrative burdens.

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