Navigating Difficult Financial Times

by Michele Martin on April 2, 2012

As federal, state and local governments continue to cut budgets wherever they can, CILs face new and uncertain financial terrain. During April we will be exploring various strategies for navigating this difficult landscape and, hopefully, sparking conversations that can help us find the best ways to move forward.

In December, the Stanford Social Innovation Review (SSIR) published an informative article, Five Ways to Navigate the Fiscal Crisis, that lays out a roadmap for CILs to follow as we look at how to function in a leaner economy. In this post, we’ll identify the key points, but the full article is definitely worth a read.

1. Get to Strategic Clarity

The first step in gaining strategic clarity is to set priorities for whom we want to serve, articulating the impact we want to have with those stakeholders and specifying how we will go about having that impact. It’s easy to get into “mission drift” or “vendorism, where grant-mandated activities cause us to get away from our core mission. To move forward strategically, we must return to that core.

We also need to understand the true costs–both direct and indirect–of our programs and services. This is a fiscal issue that requires each department to maintain its own profit and loss statements, units of service, etc. so that costs are clear and programs can be properly managed from a fiscal perspective.

Finally, to achieve strategic clarity, we must make good decisions about whether or how to pursue funding opportunities. We need to be vigilant about not pursuing funding opportunities that “consume more cash than they bring in and that do not have much mission impact.”

2. Diversify Funding Streams

It is a risky game to rely on a single source of income. Not only do we need to make certain that we find alternatives to grants (the subject of some later posts), we also have to diversify our funding streams across different government agencies, programs and contracts. In the SSIR article, Denise Cross, president of Cornerstones of Care describes how her organization looks at diversification:

“Always be thinking about the services you can provide that can be provided in a different way or in a different geographic area. . . We developed an approach to support children with behavioral disorders in school settings. It’s an evidence-based curriculum, and we bega thinking about who else could benefit from this. So we then took this same approach to children in foster care.”

3. Improve Productivity

Human services organizations have typically lagged behind the private sector in looking at how to provide services more efficiently and effectively. Everything we do needs to be examined to determine if there is a way that we could do it better, a way to make it more cost-effective or less staff-intensive. For example, one organization realized they were spending hours having staff type up case notes. Now they use electronic medical records and voice recognition software to streamline, reducing the time spent on this task by 40-50%.

4. Measure Outcomes

From the SSIR article:

All too often, outcomes measurement is something nonprofits feel obliged to do for reporting to external parties. But the real power of measuring outcomes is to drive internal learning about how the work is going and planning how it can be improved. Viewed in this way, rather than being a burdensome quarterly or annual fire drill to comply with funder reporting requirements, outcomes measurement can become a powerful way for leaders and staff to connect with and advance their organization’s mission.

This may mean developing additional measures not specified by funders. It also means nurturing our curiosity, seeing outcomes as sources of learning, not as “judgements” of our programs or services to be finessed in order to maintain funding. The NCIL Outcome Measures Task Force headed by Bob Michaels has done excellent work in this area and you’ll want to check out training and materials on the CIL Outcomes wiki.

5. Move Beyond Vendorism

The organizations that are most successful in working with government contractors are those that take the time to see their government contacts as customers. They cultivate relationships with key people and seek to better understand their needs and issues.

Says one nonprofit leader, “We find out where the leadership’s biggest needs and challenges are, and then we look at what services we have that can help them solve the problem. ” Another says, “We want to position ourselves as a source of solutions for funders. We will provide a proposal that violates the terms of the RFP but that lays out what is really needed. More than once that has led to the RFP being re-opened, and we have secured the rebid.” That’s an approach that takes a lot of courage!

So what do you think of these five strategies? Has your CIL used one or more of them? How have they impacted your CIL’s financial situation?

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