Local Government Innovation & Redesign

To support local government redesign efforts and recognize the innovative work already underway, the Public and Nonprofit Leadership Center has partnered with state associations to create the Local Government Innovation & Redesign Guide and host a yearly Local Government Innovations Awards ceremony.

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The New Normal is Process, Not an Event

Following is a guest post by Carol Berde, Nonprofit and Philanthropic Consultant.

Recent articles about which financial records to keep and which to toss out inspired a little file purging in my office, or, as I thought of it, clearing the clots out of the office arteries. One item I found (and kept) got me thinking that non-profit organizations also have to keep their arteries clear--not just once a year, but continually.

I found notes from a philanthropy conference I attended in 2002, in which the speaker urged his audience to "get comfortable with the new reality" following the post-9/11 economic downturn. Sounds a lot like the "new normal" we hear about today, doesn't it?

In July 2009, the Pohlad Family Foundation in Minneapolis made grants totaling almost $5 million to more than 70 nonprofits that provide housing for the homeless, human services, and community health care in the metro area. I had the privilege of being part of the team that assisted the Foundation and MAP for Nonprofits in making these funding decisions. As Scott Russell reported in an August 13, 2009 MinnPost piece about the Pohlad initiative, "waiting lists and overstretched services are commonplace" at these organizations. Are tight funding, waiting lists, and overstretched services the "new reality" for nonprofits working to meet essential human needs? If it is, how can nonprofits keep their arteries healthy even as they serve more people with fewer resources?

Insight into the first question comes from our review of reports six months later from organizations that received these Pohlad funds. Among other things, grantees were asked to assess whether their financial condition had changed in the last six months of 2009. Of the 68 organizations reporting, 43% said their financial condition was better, 37% said it was unchanged, and 21% said it was worse. Operational efficiencies, expense controls--often including staff layoffs and elimination of retirement contributions--and Federal stimulus funds contributed to "better" financial positions. On the other hand, changed priorities on the part of public and private funders were the chief reason for "worse" financial positions. Huge increases in uncompensated care for people without health insurance or resources to pay deductibles and co-pays were another major stress on community-based providers of health and mental health care. "While we are effectively managing the downturn, we have been less successful stemming the tide of declining revenues and changing [funder] priorities," wrote one grantee.

This anecdotal evidence suggests to me that settling into the "new reality" or "new normal" is not a one-time event for nonprofits. Cutting budgets, the work of 2009 for many, was necessary but insufficient. Rather, keeping a nonprofit's arteries clear is a continual process of assessment and adjustment, just as watching our diets, exercising, monitoring cholesterol, and, if necessary, taking medication is for people who want to keep their arteries healthy. Here's a six-part prescription for nonprofits' heart health.

1. Scan the environment--both inside and outside the organization--continually. Planning for change is preferable to being surprised. Staying ahead and in touch is an added responsibility for executive directors who are already more than busy, but it is essential in the "new normal."

2. Monitor priorities and strategies and make course corrections. Change is happening too fast for the old-style strategic plan that was adopted and treated like a fossil to still be useful. But that doesn't mean that the whole idea of strategic planning has become irrelevant. To the contrary, having a clear strategic direction, overarching priorities, and well thought-out goals and strategies to achieve them is more important than ever. Organizations that remain effective and use scarce resources efficiently do so, in large part, because they have a plan. What's different in the "new normal" world is that a strategic plan must be dynamic, re-calibrated every 6 to 12 months in response to progress (or lack of it) and changes in the environment in which the nonprofit operates.

3. Confront the gnarly issues. Programs rarely operate in isolation; organizational problems tend to be intertwined; and changes in funding streams often affect multiple aspects of a nonprofit. If most discussions in an organization end by circling back to the same complex issues, it's time to unravel them. What are the strategic questions that cause stress in your organization? For example, what results does your organization seek to achieve? What's the role of each program or service in achieving one or more of those results?

4. Align costs and results. Understanding each program's true costs and financial and mission contributions can be empowering. Data, no matter how discouraging the story they tell, often pinpoint decisions that can no longer be postponed. High costs and tenuous relationship to results are the equivalent of high cholesterol numbers, calling for strategic thinking and, perhaps, program changes.

5. Consider sharing. Mergers are at the extreme end of a continuum of ways in which nonprofits can collaborate. Programmatic partnerships and administrative alliances are options in the middle of the continuum that preserve organizational identity but allow both organizations to expand capacity or, sometimes, save money. Think about your organization's excess administrative capacity (i.e., office space, vans used only at specific times of day, time of a bookkeeper) and those functions where you need more capacity (i.e., front desk coverage, proposal writing, technology). Perhaps there are nearby nonprofits--even working in different fields--with whom you can trade or share, not unlike neighborhood-based car sharing that is part of the new "environmental normal." More sophisticated management service organizations (such as the MACC Commonwealth in the Twin Cities) share accounting, human resources, facilities management, and purchasing.

6. Call on the board to deepen its engagement. The new normal demands that board members use their talents and connections on behalf of the organization in ways that may not have been necessary before. Yes, it's still important to honor the boundary between governance and management. But it's also important for board members to volunteer as individuals to advance the mission and achieve the goals. Beyond traditional volunteer roles, board members can help relieve nonprofit stress by, for example, offering to think through gnarly problems with the executive director in an informal work session or using their financial expertise to figure out true program costs.

We know from our personal behavior that maintaining a healthy heart takes effort and discipline; so too with nonprofits that want to be healthy. But just as there are websites, workout partners, and coaches for personal fitness, there are great resources on the internet to help nonprofits stay healthy. Two of my favorites are the Nonprofits Assistance Fund, and the Bridgespan Group. One article by Bridgespan staff, Delivering on the Promise of Nonprofits, includes a useful matrix for analyzing mission relevance and financial contribution or cost of each program.
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Carol Berde has worked with nonprofits for 30 years from both sides of the desk: a long career at The McKnight Foundation in Minneapolis and, more recently, as a consultant to nonprofits and foundations. She can be reached at carolberde@comcast.net.

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