By David LaPiana and John MacIntosh
Weeks into the coronavirus pandemic, the carnage in the nonprofit world continues to pile up. For many groups, the goal has shifted from preserving programs and staffing to just surviving, according to a recent survey of more than 400 nonprofit leaders.
Some fear the crisis will put them out of business, while at least one organization is effectively already there, having cut all staff and programs.
Specifically, almost all of the 433 nonprofit executives surveyed by La Piana Consulting have been forced to modify or outright cut services. They have laid off, on average, 19 percent of their staff, moved 83 percent of their operations to work from home (requiring unbudgeted IT investments), and shifted 79 percent of their programs and services online. Seventy percent have lost revenue, often more than 50 percent and a few up to 100 percent.
Most believe the worst is yet to come. Fifty-six percent expect additional reductions in staff, while 66 percent expect more cuts in services.
Complicating matters further, many nonprofits’ reliance on self-funded unemployment insurance — seen as a good bet when only limited layoffs might be necessary from time to time — has become a dead weight for those facing massive employee layoffs. Many nonprofits can afford neither to pay their staff nor to lay them off.
8 Keys to Survival
What can nonprofits do in response? SeaChange, a nonprofit lender, grantmaker, and consultancy that has worked with many nonprofits in crisis, has compiled advice into a new report, Tough Times Call for Tough Action. It recommends the following:
Refocus on the mission. All decisions should aim to advance the long-term mission of the organization, even at the short-term expense of vendors, partners, grantmakers, and staff.
Understand your type of organization. Are you a hibernator (for instance, a shuttered arts organization), a responder (such as a shelter or food bank, where demand is skyrocketing), or a hybrid (a group that can continue operating to some degree but does not deal directly with the pandemic’s effects, though it might adapt to do so)?
Conserve cash. Reduce expenses, delay payments, accelerate efforts to obtain cash and other revenue, and explore new fundraising opportunities. Negotiate with the landlord or take advantage of local bans on evictions; pay only the most essential vendors; ask for the next tranche of a multipart grant or for extra help from longtime donors and board members; explore new COVID-19 related grant and loan opportunities.
Shorten time horizons. Magical thinking leads to fatal delays. The executive director and board chair should speak daily, boards should meet at least monthly, and they should set up a committee to deal with COVID-19 related issues and get ready to make hard decisions.
Explore strategic restructuring: Explore mergers and other forms of collaboration, divestments, or even thoughtful dissolutions now; options will narrow as time passes.
Understand the nexus of mission, cash, and control. “Tough-minded,” “hard-nosed,” and “ruthless” are not adjectives that most nonprofit leaders usually embrace, but many will need to, and fast.
Get help. Get outside advice from people with relevant experience. Some boards might even consider an interim chief restructuring officer to support, or temporarily replace, an overwhelmed leader.
Plan for the longer-term. Don’t weather the crisis only to ignore what will happen afterward. Stay in regular discussions with donors, and be realistic about the significant cuts in philanthropy and government support that are likely in the COVID-19 aftermath.
The Way Forward
We won’t know what will be left standing until the pandemic runs its awful course. Will our previously strong economy bounce back once the health crisis has passed? Will we fall into a recession and, if so, how deeply and for how long? Will government intervention continue, or even accelerate, when it becomes clear that many nonprofits may not survive a monthslong shutdown? Will philanthropy stay the course — or even increase giving beyond the immediate crisis? This uncertainty is one of the hardest things to manage. “I’d rather take the current bad news than the ongoing uncertainty,” one nonprofit leader told La Piana.
We believe the strategies offered here will help position nonprofits as strongly as possible. La Piana will regularly update its survey, looking for trends to help nonprofits know where they collectively are, and where they are collectively going. SeaChange will continue to refine its recommendations based on experiences during the pandemic. We join hands with the many organizations committed to arming nonprofits with the information they need and critical questions to consider as they plan for the difficult future in a post-COVID-19 world.
John MacIntosh is managing partner of SeaChange, which uses various tools to help nonprofits facing complex challenges. David La Piana is managing partner at La Piana Consulting, which advises nonprofits and foundations.