Welcome to O.D. Fridays at DonorDreams blog. Every Friday for the foreseeable future we will be looking at posts from John Greco’s blog called “johnponders ~ about life at work, mostly” and applying his organizational development messages to the non-profit community.
In a post titled “Survival Is Not Mandatory,” John talks about how change is occurring all around us all of the time. Organizations need to make the decision to adapt to those changes or risk going out of business.
On Wednesday afternoon, I received the following email in my inbox from a local non-profit organization with whom I’ve worked with and supported over the last 13 years.
A Farewell Thank You to Larkin Center Supporters
The Larkin Center has been a valuable part of the Elgin area for over 117 years. Unfortunately, the Center has experienced financial challenges at a time when demand for its services has increased. We have been in discussions with several strategic partners over the last 18 months to secure the long-term future of the Center.
As of last Friday, the effort collapsed and we are working with appropriate state agencies to transfer contracts and transition our clients as a result, it saddens us to announce that the Center will no longer be able to sustain itself after Friday, October 18, 2013.
The Larkin Center clients and staff would like to thank the many individuals and organizations that have supported our mission throughout the years and have truly made a difference in the lives of our clients.
Larkin Center has adapted to all of the changes throughout the years. They were founded more than 100 years ago as an orphanage. Over the course of time, orphanages disappeared from our communities, and Larkin Center evolved into an agency offering residential services to children who had trouble surviving in a state-run foster care system.
As the years passed, Larkin Center added more services including a school for children struggling with behavior disorders and counseling services for adults.
It is obvious to me that Larkin Center’s staff and board understood that “survival is not mandatory,” which is why they kept evolving and changing with the times. I think it is this realization that makes this closure so difficult to swallow.
Is it possible that there comes a time when adapting to change and evolving is not possible? Do organizations have a life span much like human beings?
The sadness of this moment makes it impossible for me to go down this road and contemplate the answers to these questions.
Instead, I want to celebrate. That’s right. You heard me correctly.
There will be lots of news coverage about the “failure“. Many people will weigh-in with what they think went wrong and what could’ve and should’ve been done differently. There might even be a victory lap taken by a few Elgin city council members who openly fought with Larkin Center because they didn’t think “those kids” belonged in our community.
I won’t touch any of these topics with a ten foot pole. At least not today.
Instead, I urge all of you to take a moment to think about the heroes who fought to the very end to save Larkin Center.
When I think about the countless number of volunteer hours invested in strategic planning and exploring merger possibilities over the last 18 months, I want to honor those efforts.
When I think about the Larkin Center staff who persevered through furloughs and late paychecks because they believed in saving this agency’s mission, I want to honor those efforts.
When I think about the donors who invested in efforts to save this organization in the final months and years of its life, I want to honor those efforts.
When I think about the tens of thousands of children and adults (if not more), whose lives were touched and changed by Larkin Center, I want to honor those efforts.
There will be plenty of time to dissect what happened and learn lessons from Larkin Center, but please join me in honoring the accomplishments and hard work of so many people.
Sigh! As always, John is right . . . “Survival is not mandatory.” But it doesn’t mean we shouldn’t celebrate 117 years of evolution and the will to survive.
You can join me in remembering Larkin Center and honoring the organization, its accomplishments and its volunteers and staff members by recalling a memory and sharing it in the comment box below.
Here’s to your health (and continued evolution)!
Founder & President, The Healthy Non-Profit LLC
Welcome to O.D. Fridays at DonorDreams blog. Every Friday for the foreseeable future we will be looking more closely at a recent post from John Greco’s blog called “johnponders ~ about life at work, mostly” and applying his organizational development messages to the non-profit community.
In a recent post, John appealed to his creative muse to write about a 14th century French philosopher named Buridan by writing a story about Buridan’s ass (if you want to know, then you need to go read the post). In a nutshell, this philosopher believed “in the face of equally good alternatives, he believed a rational choice could not be made“.
This got my nonprofit wheels spinning, and I wondered if the opposite is also true. In other words, in the face of equally BAD alternatives is it impossible to make a rational choice.
I don’t know about you, but since the economic downturn began almost five years ago I’ve seen a lot of non-profits prove this point.
- Apply for more government contracts in spite of slow payment and what seems to likely to be future cuts and claw-backs due to a poor tax revenue situation all in the name of keeping the agency’s doors open; OR
- Cancel some government contracts because they don’t come close to covering costs, which means a loss of some (albeit small) revenue that helped cover administrative overhead resulting in downsizing and re-organization. Of course, there is usually a plan to shift resource development efforts and invest more in private sector fundraising, but the re-org and downsizing destroys public confidence in your agency and these plans likely fall short.
Ugh! Which equally bad option should we choose? Of course, board volunteers drag their feet and don’t make a decision because who wants to be known in the community for slashing services or downsizing a “do-gooder” non-profit organization?
Besides, the board members sitting around the table weren’t recruited for their fundraising skills because when they were recruited the government funding situation was good and there was no need to focus recruitment efforts on finding “lean-mean-fundraising-machines”. So, they are probably very reluctant fundraising solicitors and very resistant to this idea.
Staff members aren’t much better as they reach for their rosary and convince themselves that “hope” is a strategy.
Do you think that I am talking about your agency or some other organization in your town? Let me assure you that the agency I have in mind is none other than Jane Addams Hull House. The Chronicle of Philanthropy wrote a great story about this tragedy back in February, and I think they help me prove that the opposite of Buridan’s philosophy is also true.
The scary thing about this example is that I can name a number of other non-profits who appear to be going down this same road.
Regardless, if you wait too long to make a decision, then everything caves in and you’re out of business.
Interestingly, I came across an old New York Times article that examined the emerging trend of non-profit organizations using bankruptcy laws to shield themselves from this phenomenon. The newspaper did a nice job of explaining an agency’s two options:
“Under Chapter 11 of the federal bankruptcy code, charities can get relief from creditors, obtain emergency financing, renegotiate leases and draw up a reorganization plan to let them emerge as financially viable. Some charities, however, have resorted to Chapter 7 of the code, under which organizations liquidate. The American Musical Theater of San Jose, Calif., for instance, took that route.”
My gut feeling tells me this will become a bigger and bigger trend as more and more non-profit boards experience difficulty in making a choice between two very bad decisions (whatever those decisions may be). Hopefully, they don’t end up like Buridan’s ass in John’s blog post . . . DEAD.
Has your non-profit organization ever been faced with the choice of two bad decisions? How did you work through it and avoid indecision? Have you ever seen a non-profit organization in your community file for bankruptcy? If so, how did that turn out for them? Did they survive? How did they restore donor confidence? Please use the comment box below to share your thoughts.
Here’s to your health!
Founder & President, The Healthy Non-Profit LLC
This week I’m looking back upon 2011 for major trends, and then looking forward to 2012 with an eye towards making a few predictions. Today, we are looking at non-profit failures, mergers, acquisitions, and strategic alliances.
I have heard rumblings for years that the non-profit sector is about to experience a wave of mergers. This conversation always involves facts like:
- There are approximately 1.5 million non-profit corporations in existence of which three-quarters are classified as “charitable”
- Every year brings another 20,000 to 60,000 new non-profit agencies in existence (depending on what source you read)
- Almost 25-percent of non-profits allegedly report $25,000 in annual revenue and are obviously very small (and the vast majority operate with annual budgets of less than $3 million . . . in fact most are smaller than $1 million)
- Every year 30,000 to 60,000 non-profit organizations go out of business
In 2008, Paul Light predicted that the new economic challenges would result in more than 100,000 non-profit organizations failing over a two year period. Two years later Caroline Preston wrote a follow-up article in the Chronicle of Philanthropy and investigated whether or not this prediction actually came true. As you can imagine, the answer was difficult to ascertain, but in the end the conclusion seemed to be a resounding — “YES“.
With so many friends working in the non-profit sector, I’ve tried to stay on top of where they perceive their agencies to be with regard to financial solvency, and I must admit that I see too many indicators pointing to:
2012 continuing (and likely escalating) the trend
of non-profit failures, mergers, acquisitions and strategic alliances.
Guidestar recently published a great document titled: “Late Fall 2011: Nonprofit Fundraising Study“. If you have some time, you need to read this report! While I am usually very skeptical about the validity of survey research, I indulge in it every once in a while. After looking at this report, I am even more convinced now that the non-profit sector is still only at the beginning of a long-term trend involving bankruptcy, mergers, and alliances because:
- small non-profits are experiencing more financial stress than before (and I suspect many are finally at their breaking point)
- small agencies are experiencing more donor turnover (most likely resulting from poor stewardship efforts)
- small organizations have less money in the bank and their reserves are marginal (a bad position to be in if there is another economic shock)
- small non-profits report are preparing to downsize staff in 2012 (not a great situation to be in when donors want to see more impact for less money)
Combine some of these generalizations with the government funding contraction trends we’re seeing, and it becomes obvious to me that more failures and mergers awaits us as we travel down the 2012 road. If you want some good reading materials on this subject, you may want to check out the following resources:
- Measured Outcomes blog: “Top 7 Reasons Why Nonprofits Fail – And How To Avoid Them”
- Joint research project of MAP for Nonprofits and Wilder Research: “What do we know about nonprofit mergers?”
- Thomas McLaughlin, author of the book: “Nonprofit Mergers & Alliances”
Is your non-profit organization living on the edge? Have you ever looked at merger, acquisition, or strategic alliances? If so, what were your considerations in moving forward or not moving forward? If the best time to look at mergers and strategic alliances is BEFORE a crisis, are you starting to look more seriously at these opportunities?
Here’s to your health!
Founder & President, The Healthy Non-Profit LLC