Navigating Times of Change: Part III – Thoughtfulness

I waited patiently for the Lord
He inclined and heard my cry
He brought me up out of the pit
Out of the mire and clay
I will sing, sing a new song
U2 (40)

In the previous blogs, we discussed the importance of showing kindness to ourselves and others and the importance of togetherness by understanding everyone’s roles. Now it’s time to ponder what might be different on the other side of the pandemic and how we can move forward.
 

Thinking for the long term

Ask a room of 25 staff about their nonprofit’s purpose, and you may get 25 matching answers: “Accomplish our mission.” That is indeed the correct answer, but that answer doesn’t necessarily mean that all resources should be spent on the program after netting out fundraising and administration costs.

This is Bob speaking: Having had multiple opportunities to facilitate strategic planning, I’ve learned to keep communications basic and to the point with nonprofit boards and leadership. Generally speaking, nonprofits can be divided into two categories for strategic planning purposes:

    1. Build and/or maintain your program (or mission).
    2. Build and/or maintain your organization.

From a true strategic planning standpoint, it would be wise to think about the longevity of your overall organization. The sustainability of a nonprofit is paramount to delivering its mission. In other words, if the nonprofit goes under, resources vanish, and the mission can’t be carried out. So, which is more important and deserves our focus: the living out of your mission right now or making plans to sustain your mission?

When nonprofits face economic hardships/downturns in times like we are in, the first thing that is usually cut to remain viable is spending; however, during these downturns, the mission needs of your organization most certainly go up.

This is Bob speaking: A few years ago, I had the opportunity to speak to a group of biologists and engineers. I asked them how they decided to focus on a specific wetland’s preservation project. They walked me through the scientific basis of the project, which was fascinating. However, when I pressed them on the one deciding factor, they gave me varying answers. My reply to them was “don’t you first ask if the project is in the budget?” They unanimously agreed.
 

How can you serve your constituency under this scenario?

We are all conditioned to live by 12-month budgets. A balanced budget means the balance sheet (or the financial strength of the organization) stays the same every year.
If you believe, as a result of the recent economic challenges, you need a more durable balance sheet, consider the following process (thinking long term):

    1. Is it time to think about reserves to weather economic or global downturns?
    2. What are our current reserves (or balance sheet strength; usually measured as unrestricted net assets)?
    3. What should our reserves be in order to balance our essential mission?
    4. Begin budgeting for surpluses; start slowly with a long-term view.
    5. Remember: budgeted surplus can lead to operational surpluses; operational surpluses build the balance sheet.

Above all, spend some time communicating with your team about what your new normal will look like. Seek input from each member of your team. By thinking about the long-term health of your organization in these and other ways, your mission can not only survive but, perhaps, thrive.

 
By Bob Mims, Sharpe Group CFO, and Tom Grimm, Sharpe Group Senior Consultant
 

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