Uncertainty is one of the most difficult emotions for a leader to process and then turn around to lead successfully. Today the economic, social and geopolitical clouds around us are hard to ignore. The question is: what can you best do as a leader in uncertain times? In our experience, it is important for leaders to acknowledge this feeling and then proactively chart a path forward. With the impact of inflation and the looming economic downturn, we wanted to share our thoughts for steps to carry you through not only these uncertain times, but also any crisis event.
Step 1: Identify and Outline Key Risks
- Cash flow
- Rising costs
- Rising demand from clients at or below poverty line
- Lower endowment returns
- Staffing issues related to hiring and retention
- Donor interest
- Internal anxiety
Step 2: Face the Future Head-On
Step 3: Reframe as New Opportunities
Analyze Your Cost Structure – While the headlines share price increases, there are also areas where certain items are getting cheaper, so it might be time to analyze your major expenses and upcoming expenditures to economize where possible. John Gillespie, CFO at Charles River, recommends asking yourself: “What expense or investment is not critical for the next six months? Can a new project, staff development program or new hire be pushed out six months?”
Increase Staff Salaries and/or Total Compensation – To prevent staff shortages and ensure they can meet demand for services, many nonprofits are proactively thinking about staff compensation to counteract inflation. If you cannot raise wages, think about other non-financial rewards for staff, including flexible hours or remote work options (to reduce commute time and expenses).
Expand Volunteer Base – Many individuals want to give back. Although they may not be able to give donations currently, they may be open to skills-based volunteering. Then, when their personal finances improve, they will be highly motivated to become a donor.
Exit Programs, Services or Events – During the pandemic, we advised nonprofits to consider shedding less relevant programs, services or events. Now, you can do the same – based on their impact on your mission as well as their ability to cover costs. We encourage the use of Mission-Money Matrix as a helpful tool for this exercise. Take a hard look at your offerings, prioritize essential services and sunset or downsize anything that isn’t having a sizable impact.
Proactively Manage Cash Flow – Most businesses close not because of profitability but because of their cash flow. Managing it is especially important during periods of economic strain. Give yourself a cushion by getting a line of credit at your bank, if you haven’t already. Make sure you are getting accurate monthly financial statements on time so you can make decisions based on real-time data. Get ahead of the curve by updating a monthly cash flow forecast, projecting out at least three months.
Lean in on Free & Reduced Services or Products – Given that prices are increasing, consider shifting some of your corporate asks to in-kind needs, especially in areas of high impact to cash flow. And consider free resources available through Google Ads, Tech Soup or the YouTube Nonprofit Program.
Talk Directly to Donors About Economic Strain – Many nonprofits want to project confidence to donors, but it is also important to build and maintain trust with them. It is alright to talk frankly about the financial strain that inflation and/or an economic downturn is having on your nonprofit, your clients and the community. Then, share your plans. For example, ask recurring donors to increase their gift slightly – if they can – to account for the depreciating amount of their donation. Or ask those who give annually to switch to monthly giving to make it more affordable.
Ramp up Fundraising and Marketing in New, Innovative Ways – In times of economic uncertainty, many nonprofits want to cut back, but now is the time to diversify your income streams and focus your marketing messages on your impact on the community with stories of lives changed.
Monitor Your Endowment – With the economic shifts, many nonprofits need to re-engage their finance committees to monitor their endowments and savings regularly and ensure they are safeguarded for the future. As leading financial advisor, Stephen Tosha of Merrill Lynch often quips, “’It is time in the market, not timing the market.” This is where having proactive conversations about your organizational risk tolerance and investment policy go a long way.
Shift from an Annual Report to an Impact Report – Most nonprofits publish an annual report with their financial picture, but lately more are adding their impact statistics. Demonstrating impact attracts donors who will donate to charities they believe give the biggest bang for their buck.