Wednesday, January 28, 2009

When Times Get Tough, the Tough Start Sharing

Slipped in under the large headlines in today's Times-Argus about IBM's layoffs, was a shaded box informing the world that Frog Hollow was closing down its Middlebury operations and selling its building. A few months ago the Chaffee Arts Center in Rutland announced it would close for the winter, citing high fuel costs and limited operating income as the reason for suspending its operations until this coming spring.

The stresses and strains of the economy have a very different kind of impact on the not-for-profit sector. In the private sector, when times get bad, operations are cut, staff is cut, business go out of business or get sold or taken over by other businesses. The competition is fierce, the rules are pretty straightforward (eat or be eaten comes to mind) and the strong survive .

But in the n-f-p world, the organization's mission tends to overrule fiscal realities and the behaviors of boards often contradict their knowledge and experience as business people. The real question is, is this a good thing?

The answer is maybe yes, maybe no. Here's the problem. For a mission-driven organization, profitability often runs a distant second to emotional content as the driving force behind what sustains an organization. Huge accumulated debt, low salaries and the accompanying staff "churn" (high turnover rate), undercapitalization, and characteristically low investment in marketing and promotion are all symptoms of a not-for-profit ripe for disaster.

When times are good, these issues can usually be dealt with in a variety of ways that keeps the organization functional. But when times are like they are now, n-f-ps that tend to operate on the proverbial shoestring are at serious risk. How can boards overcome their own tendencies to ignore financial realities?

The fact is, some can't. And so those organizations end up flaming out and raising disproportionately large amounts of anxiety among their peers across the sector. Onion River Arts Council gone? Crossroads Arts Council gone? Gasp! Chaffee closing for the winter? Frog Hollow no longer in their Middlebury location? Horrors! It can't be!

Well there are things we can do as a sector and as individual organizations. Here are a few I've been preaching lately:

Explore with another agency sharing some of your basic administrative costs, like a shared administrative office space. Develop relationships with local senior centers and social service providers how your work might benefit their constituents, and vice versa.

Increase your marketing/p.r. budget
This sounds counter-intuitive in hard economic times, but if you don't value your own programs and services enough to make them known to people in your community, then you can't expect anyone else to either. Look at it this way...your programs may be even MORE valuable to your local constituency than ever before and you are the only one capable of forcefully driving home that point. You may have to do fewer programs, but if people value them more as a result--this could be a good thing.

Invest in staff
Since the economy is forcing you to consider how to do business differently you may need to spend some time and money helping your staff become more expert in managing new ideas, new relationships, and new technologies. Technical support/professional development grants are still quite available if you spend a little time looking for them (hint: the Arts Council, the Community Foundation, and the dept. of labor are good places to start).

Learn to say No
It always feels bad to say no to a great idea. But if you don't have the money or the personnel, you have to learn to say "hold on to that idea. We can't do it now, but we should revisit it when we have more resources."

Focus on Impacts (especially those that matter to your supporters)
To do this, you have to really know what matters to your supporters. Ask them. Pick up the phone right now. All it will take is maybe 5 conversations before you have some really good ideas and some direction. This will lead to healthy changes and new behaviors.

Make a "profit" and put half of it away into a 12-month CD
Don't settle for breaking even. Earn a little money for your organization every year. Take half of your net income and put it in a 12 month CD. Do this every year, and within five years you'll start to notice that you actually are starting to have a nice little operating reserve.

And if you REALLY don't know how to position yourself for the coming economic storm, please join us at one of our listening tour stops in the next six weeks. I guarantee you there will be a lot of great ideas to be shared among your peers.


Deborah said...

Thiose of us who are artists with The Chaffee have been told they are closing for good. Selling the building.

Anonymous said...

This is a helpful set of comments for nfps. However, the "Focus impacts" section is not well written. I found it opaque in stating what is being focused on. Is there a word missing in the caption? This could be clearer. Thanks.

Clair said...

Chaffee, Frog Hollow . . .
And here I am, "counter-intuitively", dreaming of a center in St. Albans. My timing clearly sucks. But, still, I'm going to call on the Franklin County Chamber of Commerce. Can't hurt.

Clair said...

I'm hijacking your blog comment space to get a msg. to you:

Check out my AOA Image Database About page for the Kent Corners images we talked about.

(I sent you a msg. via the VAC site, but don't know how long that will take to get to you.)