Responding to the Economic Meltdown

By:  Terrie Temkin, Ph.D.

October 2008

Q:   You are probably hearing from a lot of people right now about the economic meltdown.  This couldn’t have happened at a worse time, right before the holidays when most of us expect to receive a significant portion of our donations for the year.  Can you offer any thoughts on how to approach this potentially disastrous situation?  I’m the chairman of our board and I want to be as proactive about this as possible.   

A:  If ever there was a time when it was not business as usual, this is probably it.  I applaud you as a board chair for recognizing your critical role in guiding your organization through this economic crisis.

Call a special meeting to discuss this issue, and this issue alone.  Most bylaws require a waiting period – typically five days – between sending notification of such a meeting and actually holding it.  Use the time to have staff pull together key numbers.  These might include cash on hand in your checking and any money market accounts, your cash flow projections from now until the end of the fiscal year with a list of major expenditures coming due, the amount in your reserve and any restrictions on its use, the historical use of services from now until the end of the fiscal year, the current and projected relationships between revenue and expenses, the percentage of revenues coming from each source, critical unmet needs that currently are not reflected in the budget, commitments to funders and so on. 

The above information will give the board a sharper picture of the organization’s situation.  The board is likely to want to spend the meeting determining how to cut operational expenses.  Turn that responsibility over to your CEO or executive director.  You must keep the session focused on strategic issues.  How well are you meeting your key commitments to the community?  Are some of your programs and services more closely aligned with your vision and values than others?  Which, if any, of your programs and services pay for themselves?  What is the relationship between the financially viable programs and the programs most closely aligned with your vision and values?  If you were starting the organization over from scratch tomorrow, what would the organization look like?  Where have you been focusing the majority of your resources?  Why?  Where should you be focusing your resources given the financial picture and its impact not only on your organization but on your clients?  If your revenue streams are not as diversified as they should be, what can you do today to change that? Should you consider merging with another organization or sharing backroom services?  If so, with what organizations should you be talking and what might you propose?  

As you are asking yourselves why you are doing things the way you are, consider:  Are those things necessary?  Effective?  Efficient?  Or, are they merely habitual?   How do they look to the community?  What do you need to be doing differently?

You will start to see directions emerging.  Don’t be quick to hail any of them as the answer.  Determine what success would look like in today’s environment.  This is a time of great opportunity.  But, opportunity often carries some risk.  So, consider your tolerance for risk. Generate multiple options from which to choose.  Be creative.  Judge the options against your success measures and their potential benefits against their potential costs.  Whatever you do, this is not the time to let your fund raising and PR professionals go, reduce their budgets or cut off funding for campaigns.  You need those resources now more than ever. 

As you move forward, keep the conversation positive and focused on solutions.  Believe that you are capable of determining work-arounds for the obstacles you are facing now or could be facing in the near future.  Believe that even if a good percentage of your money has come directly or indirectly from our financial institutions you can come up with ways to replace those funds.  It’s interesting how our minds work.  If you think you can keep your organization healthy during these trying times, you are far more likely to accomplish that desired result than if you allow yourselves to wallow in how tough it is for all nonprofits out there. 

It won’t be easy, but following these steps should help get your organization through this immediate crisis.  Assuming you escape this bullet, do not breathe a sigh of relief and go back to life as you have known it.  Other situations are likely to crop up in the future that have the potential to be even more damaging to your organization.  Build strategic conversations into all your board meetings and strive to stay ahead of any flack. 

Terrie Temkin, Ph.D. is an internationally-recognized governance and planning expert.  She is a founding principal of CoreStrategies for Nonprofits, Inc., which interweaves governance, board development, fund development, PR/marketing and public policy to strengthen organizational capacity.  She invites your questions.  Contact her at 888-458-4351 Ext. 3 or TerrieTemkin@CoreStrategies4Nonprofits.com.