Over the last year the federal government froze nearly $3.2 trillion in nonprofit funding, a blow to thousands of nonprofit organizations which relied on federal grants to provide services. Adding to the uncertainty is the recent government shutdown, which reduced federal funding even further and forced many organizations to rapidly reassess their short-term viability, to say nothing of their long-term funding goals. Uncertain finances, inconsistent support from the state, and difficult decisions are not new in the nonprofit space. These recent changes have forced many organizations like yours to create contingencies so as to not be caught flat-footed the next time something changes.
It’s a very difficult conversation, particularly at mission-driven organizations which already deal with a good amount of uncertainty and shifting funding sources. However, thinking through all of the various scenarios you might face could make them much less daunting, and can prepare you and your organization to be more nimble and thus more capable of riding out challenging periods. How you use this information, disseminate it to your team, and formulate plans around it can also be important to consider, as you will need to find an effective balance between transparency and leadership.
Here are some steps you can take to prepare for even the most unlikely scenarios:
Get a clear picture of where you stand
The first step is to establish a baseline which shows the extent of your current fundraising levels, projections of what might increase or decrease, and where this funding goes in terms of staff, overhead, and programs. This should be straightforward, as you likely have this information available to you in some form, such as an annual report, quarterly review or some other aggregation of organizational health and statistics. Once you have this, you can break up the organization’s costs and projects and begin mapping out how they might change.
Start with the worst-case scenario
It can be helpful to start with the ‘worst’ and work your way up from there. This could be any number of things, such as a total revocation of state and federal grants, a recession that causes public donations to fall dramatically, or some other existentially significant reduction in the resources available to you.
Once you have a clear idea of what the financials might look like, you can do the difficult work of choosing which programs, teams, and contributors are absolutely necessary for your organization to survive and continue its mission. Note that this doesn’t necessarily have to mean large-scale layoffs, as it may make sense to simply re-orient or retrain existing staff to do a new role. For example, a huge reduction in federal grant work could be somewhat alleviated if you train staff to help fundraise from donors instead.
In either case, the key is to determine if and how, in the worst-case scenario, your organization can fulfill some aspect of their mission and retain enough core services and staff to weather this change. You might be surprised at how much can be retained or how many programs can be paused or sunsetted without moving drastically away from your organization’s core mission. Another thing to keep in mind is that some of these changes could be seen as temporary reductions in capacity rather than permanent steps.
Take a look at less dramatic scenarios and work out a plan
As you work your way back up through less drastic situations and fundraising reductions, you can choose which programs seem most critical and assess the bare minimum they need to keep going. Many organizations break these possibilities into “tiers”, with the bottom being the worst case, ascending all the way up to where they stand currently.
Once you’ve gotten a rough idea of the impacts, you can make an assessment of which teams might need to be reduced, which provides an estimate of the unemployment claims you might incur, the experience and capacity reductions of different layoffs, and other key aspects of the potential risk. You can also try to find workarounds to keep people on staff on a limited basis, for example, reducing some to a part-time schedule in order to save money as you work to identify new funding sources.
Work out a communications strategy to go with each plan
As you model out each situation, you should think about how to explain your choices internally and externally. Having a clear and honest explanation for both your donors and your team can help you clarify that your choices are necessary for the continuation of your organization’s good work.
There might not be a ‘positive’ way to discuss these kinds of changes, and you will need to accept that they might be extremely difficult for many people internally and externally. Ensuring that you provide support to anyone impacted, including those still in the organization, can help you at the very least soften the blow of any layoffs, salary reductions, or other challenges.
Keep these plans on a need-to-know basis
Even if your organization strives for transparency, you should take great care when discussing these plans with your team. Even if the worst never happens and there is no reduction in funding, if people on your team find out you’ve mapped out scenarios for layoffs or other changes, this could create a downturn in organizational morale, cause team members to look for other work, or assume the worst about the future of their employment. While transparency can help your team plan and adjust to change, it can also lead to unintended consequences and fear. Being thoughtful and reserved about the details of these plans could help you avoid this kind of fallout.
Survive funding and other uncertainties with expert advisors
In our decades of experience in the nonprofit world, we’ve seen the challenges that come with changes in federal and state funding, drop-offs in private donations, and the difficult scenarios that mission-driven organizations face. We can help you plan for the worst and help you find the resources you need to survive these turbulent times. If you’d like to know more about our work, please get in touch with us today.
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The information contained in this article is not a substitute for legal advice or counsel and has been pulled from multiple sources.
