CEO Reality Check – Hard Truths and Next Steps for Nonprofits

As I sit typing this, it is March 19, 2020.  The City of Atlanta has just ordered to close all restaurants and bars.  The total number of COVID19 cases has broken 235,000 today, and I suspect the worldwide death toll will exceed 10,000 sometime before I finish the first draft of this article.  (Note: I was right.)  

While I am tempted to wax poetic about lessons learned from past crises like 9/11, such musings are simply a waste of time.  For those of us who run nonprofits, our entire world is being upended. Right now, it is easy to lose ourselves in the tactical crises of keeping operations running with remote employees, or to become paralyzed by refreshing the newsfeed on our browser.  But as nonprofit executives, we are paid to plan and execute.

This situation is not without hope, or even opportunity.  But it calls for quick, dispassionate action. For most of my career, I have earned a living as a troubleshooter.  I’ve helped organizations find strategies to face new realities. The first step of any strategic plan is a situational assessment.  Without knowing anything about your organization, I can lay out the key elements of your current situation because all of us are facing them.

A word of warning: resist the temptation to get caught up in the media’s analysis of who’s to blame or what anyone’s next steps need to be. You have a job to do and it requires your total focus. “Woulda, shoulda, coulda” games are not valuable right now, even if your board wants to engage in them.

Let’s start by listing our immediate short-term realities.

Cash is king and you need more of it

If your organization is lucky enough to have an endowment or investments, their performance can’t be trusted right now.  Sadly, despite how it appears the markets are reacting rationally. They do not see coherent, well-planned strategies to respond to the crises at the federal or national levels, which has led to wildly inconsistent responses at the local level driven by situational variables.  That has led markets to do what we need to be doing: preserving cash at all costs.

Regardless of whether you have an endowment of not, you are currently incurring more costs than revenue can justify.  While you may be able to pull down variable costs quickly through layoffs or suspension of operations, the economic fallout is moving faster.  Do not bet on a quick financial recovery. Plan for a long painful haul instead.

Your staffing problem is about to get worse

Most likely, you can no longer afford the people you have even as the demand for your services is about to go through the roof.  You need to freeze all hiring except fundraisers.  Cash is king and you need to be focused on generating it.

The rich will recover first

Do not make the mistake of thinking you can’t fundraise in this environment.  Your focus needs to shift to major gifts and individual asks now.  Do not expect growth in corporate fundraising for the foreseeable future.  

Even the best board of directors is probably not equipped to rise to this occasion

Your board is probably as shell-shocked as you are.  Even the most motivated board in the world is going to become fatigued pretty quickly with the amount of challenges we are facing. 

There are also, longer term considerations and expectations that you should be contemplating.

Your current strategic plan is meaningless

It was written for a world that no longer exists.  Coming out of this, you need to expect to revise your strategic plan heavily, if not replace it altogether.  

Your campaign is dead

Endowment, capital, corporate…no matter what you were planning to pursue, now is not the time to do so.  Sorry to be the bearer of bad news. Put that lovely, 4-color case for support away and shift your attention to major gifts.

Consolidation is coming

Institutional funders have been telling us this for years.  There are too many nonprofits and too few well-run nonprofits.  In the for-profit world, economic crises create the impetus for consolidation.  It needs to happen in our world as well.

I admit that this article is not particularly upbeat so far, but we are paid to face reality and to think strategically.  Even sitting at home there are things you can be doing right now.

Make plans to conserve cash

That means extending your vendor payment windows as far out as permissible.  It also means taking a hard look at your staff and contractors for savings opportunities. 

Obviously, salaries and headcount must come under scrutiny.  At a time like this, you will hear loud voices arguing for both headcount reductions and salary reductions.  There is a rule of thumb I find useful when trying to decide between those two options. If you believe the economic downturn is going to be short lived – say less than six months, maybe a year at tops – and you are going to need the entire staff back at the end, opt for pay cuts.  However, if you believe the downturn is going to be of longer duration, it is better to reduce headcount.

Drive revenue with a laser-like focus on major gifts

We got into nonprofit because we believe in the inherent goodness of people and their willingness to do what is right to help out.  Rely on that belief now and start telling your story fast. A restaurant in Atlanta raised $50,000 in relief funds in about two days this week by telling the story of its employees who were about to be unemployed.  Get your message out now. And, as you and your development team prepare for the future, you might want to inquire about Our Fundraising Search’s “30 Asks in 30 Weeks.”

Begin thinking about consolidation

Decide if you are a consolidator, a consolidation target, or are going to sit on the sidelines.  Assuming you are not going to sit on the sidelines, start contemplating your best, first target with whom to discuss a merger or acquisition.  Then, initiate those conversations. No one wants to be the last one asked to dance.

You are not alone in this.  Nonprofit CEOs all face similar uncertainties.  And, don’t forget that there are consultants like Our Fundraising Search who can help you think through what your first and next steps are going forward.