So, your non-profit cannot make its payroll obligation?
Let me start with an apology to DonorDreams readers for my recent absence. My workload has increased exponentially lately, and the last few mornings when I’ve sat down to write the floodgates opened unexpectedly. I will try harder, but if things don’t get better, then I will have to seek out more guest bloggers and re-publish popular posts from the past. Please accept my apologies and my promise to work this problem. ~Erik
This morning’s post is top of mind because I’ve recently had the privilege of working with a non-profit organization that is encountering a cash flow situation. First, let me say that this is something many non-profit leaders have had to deal with. Second, I’ve recently come to realize that many people freeze when confronted with these situations and very little is written about how to survive such a crisis. So, I’m going to provide a few tips from my experiences of working with clients facing a cash flow and payroll crisis.
Ask board members to contribute
The people closest to your mission are board and staff members. So, when the organization is short on cash and cannot meet its payroll obligations, it is only natural to ask board members to dig a little deeper.
While this will bring in some money and help bridge the gap (at least partially), the bigger reason you need to start with the board is that no other donor will jump into the gap if they don’t see the board doing their fair share. Additionally, you won’t likely be able to get board members to jump in and help you engage other donors if it doesn’t feel like they have skin in the game.
Ask key donors to contribute
Don’t pass the basket and ask smaller, low capacity donors. Identify your larger, more capable donors and schedule an in-person meeting to explain what has occurred and ask for their support.
Don’t make your “case for support” sound like your organization is the S.S. Titantic. You might get a contribution from someone by telling them you’ll go out of business without their support, but making the ask that way makes getting future gifts significantly more difficult.
Because no one likes to through good money after bad money. Remember . . . only the captain goes down with the ship.
So, when talking to those key donors, make sure to explain what happened and why you’re in this situation. Clearly explain to them what the plan is for getting out of the hole. Make sure to keep your message mission-focused because donors are emotionally attached to your clients and programs. They are not inspired by your overhead and business challenges.
Contact your accounts receivable list
Accounts receivable can be any number of the following individuals/entities:
- individual donors with pledges that are due at a later date
- foundations or government agencies who have given you a grant and your reimbursement paperwork is still pending
- individuals or companies you invoiced for a service you provided and are still waiting for payment
Call these people and explain your situation. Ask them if they could work with you on paying their pledge early, speeding up the reimbursement paperwork, or paying their outstanding invoice sooner-rather-than-later.
Always keep in mind that you catch more flies with honey than you do vinegar. Being polite is a necessity because your crisis isn’t their problem. More importantly, you are in the relationship building business, and your words today can impact your relationships tomorrow.
Pay your bills carefully
If your organization finds itself in this mess, then the bank is probably not extending you additional credit. While managing your cash flow on the backs of your vendors is a bad thing to do, sometimes life presents you with a bunch of bad options.
Make sure to prioritize what little cash you have in the bank towards making payroll. The phone company can wait a few weeks. However, be transparent and ethical about this strategy. Pick-up the phone and call the vendors who will be impacted by this decision. Explain your situation and ask them for patience and assistance. You might be surprised at their response.
Don’t rest once the crisis passes
This crisis came to your door for a reason, and you owe it to your clients, donors, volunteers and community to make sure it doesn’t happen again. The following is an incomplete checklist of things you should consider:
- Revisit the budget and make necessary changes
- Create a cash flow project tool and keep it updated
- Invest in evaluating board composition, structure and governance practices and fill those gaps ASAP
- Evaluate executive leadership and make changes if necessary
- Conduct a resource development audit and use it as a springboard to create a written resource development plan
Has your organization ever experienced a cash flow crisis that resulted in a payroll panic? I know this can feel embarrassing, but please share your thoughts and experiences in the comment box below. We can all learn from each other, and our clients and communities can benefit from that collective wisdom.
Here’s to your health!
Founder & President, The Healthy Non-Profit LLC
What can your non-profit learn from Southwest Airlines?
A few weeks ago, I signed a contract to do a little work with an organization on the Mississippi Gulf Coast. I must admit that it was nice to get out of the Chicago winter, even if it was only for a few days. On my way home, I found myself waiting for a delayed airplane at a Southwest Airlines gate at the Louis Armstrong New Orleans International Airport. As time elapsed and the plane became increasingly more late, people understandably became more agitated and upset. It was in this moment I saw a Southwest Airlines gate agent (I think his name was Aaron) demonstrate the type of leadership that every non-profit executive director and fundraising professional could learn from.
Let me attempt to tell this story pictorially.
In the picture above, you see that no one was particularly happy. No one is smiling. There are some arms crossed. In fact, every time the gate agent used the PA system to announce a new piece of information, there were audible groans and grousing from weary travelers. It wasn’t a pretty scene.
Then something happened as you can see in the pictures below . . .
Uh-huh . . . your eyes aren’t deceiving you. You see people in the picture above line dancing.
Yep . . . this last picture is the gate agent dancing with one of those delayed travelers. What you can’t hear is a fellow passenger playing music on his accordion.
So, what happened?
Simply put, the gate agent realized that people were unhappy, and he stepped into the leadership void and filled it. However, what was most impressive was that he didn’t have many resources at his disposal. Over the course of more than an hour, the gate agent facilitated the following activities with people in the gate:
- charades contest
- trivia game
- line dancing
- talent show (e.g. an accordion player, magician, and a 7-year-old girl performing her dance competition routine)
When the delayed aircraft pulled up the gate, no one noticed because they were too busy having fun. There wasn’t a frown to be found anywhere.
Mission accomplished! 🙂
So, what happened here that your non-profit organization can learn from?
Well, scroll back up to the first picture of angry people being told that their flight was delayed. Now pretend that those aren’t angry travelers, and they are instead angry donors and key community stakeholders.
The reality is this can happen to the best of us. Our organizations make decisions that make people upset. Sometimes management decisions simply don’t work out. Other times external circumstances lead us down roads fraught with crisis.
When this happens, people get angry. More oftentimes than not, you aren’t in a position to wave a magic wand and fix the situation, but you better do something to keep things from getting worse. (Very similar to the Southwest Airlines gate agent’s situation, right?)
Here are a few tips when your organization finds itself in similar circumstances:
- Take responsibility
- Don’t make excuses (even though you want to explain what is happening and why it is occurring)
- Empathize with those who aren’t happy (we’ve all been there)
- Do whatever you can to make people happy even if you can’t fix the problem (ask those who are upset if there is anything you can do to make the situation better)
- Coordinate your response (especially when dealing with a crisis, only have one spokesperson dealing with restless people)
- Know your resources and use them!
This last bullet point sounds simple, but it is hard to do when you’re in the middle of a challenging situation. However, the reality is that most non-profit organizations have many more resources than the Southwest Airlines gate agent I’ve highlighted in this post.
The following are just a few examples of resources at most non-profit’s fingertips:
- talented staff
- board volunteers
- community supporters (e.g. program volunteers)
- collaborative partners (e.g. other non-profit partners)
- budgets (albeit probably stretched thin)
- facilities (albeit not every non-profit is endowed with physical space)
This short list of resources is like a list of food ingredients for a chef. Surely, some spontaneous recipe can be cooked up?
The reality is that whatever mess you find yourself in, you don’t have to be in it alone.
Please scroll down and use the comment box below to share your thoughts and experiences. No one is in this alone. We can all learn from each other.
Here’s to your health!
Founder & President, The Healthy Non-Profit LLC
Cookies, honor and Rush Limbaugh
I trust that most of you are up-to-speed on the controversy swirling around Rush Limbaugh and his recent comments about feminism, contraception, and prostitution. If not, I encourage you to Google it because I won’t waste another inch of space talking about it here on this blog. However, I will spend a little time this morning talking about what every non-profit organization in America needs to walk away from this news story learning.
Last night I was watching some “opinion-based programming” on one of those alleged cable news stations. When the Rush Limbaugh story aired, I started looking for the remote control to change the channel, but I changed my mind when I saw a graphic showing all of the sponsors who recently pulled their support over this controversy and one of those sponsors was the Girl Scouts.
I must admit that my first reaction was “WTF” . . . why were the Girl Scouts paying Rush Limbaugh to air cookie commercials? My second reaction was “I need to re-think my support of this organization”.
Your brand is important, and it represents something. In the case of the Girl Scouts, this is what their brand represents to me:
- empowering young girls to believe they can do anything they put their minds to doing,
- positive self-image and self-esteem,
In my community, the Girls Scouts were one of the first youth development agencies to develop a nondiscrimination policy banning discrimination against kids and adult leaders based on their sexual orientation. Nationally, the Girls Scouts took the word “God” out of their pledge and made it optional for kids to say because they didn’t want to discriminate against girls who didn’t believe in God.
It was these issues that helped me form the aforementioned conclusions about the Girl Scout brand.
In a matter of just a few minutes last night, one news story called everything I believed about them into question.
The lessons that every non-profit organization needs to take away from this example is:
- Your brand is important and it defines you.
- Each of your donors holds a mental image of what you stand for in their mind.
- When a donor sees something that doesn’t match up with their image of you, it can have devastating effects.
- Everything you do provides an opportunity for the community and your donors to see your brand at work.
In the case fo the Girl Scouts, they made a mistake. They purchased radio ads and didn’t realize that some of their ads would air during “opinion-based programming” like The Rush Limbaugh Show. Ooooops!
However, your brand is also at risk every time you take your clients out in public. I once talked to a donor who saw his favorite charity at a Chicago Cubs game. As you can imagine, some of that non-profit’s clients were misbehaving and the donor openly questioned whether or not his contribution was having any impact.
Your brand is also at risk if your facilities or vehicles are poorly maintained. Both of these things are a direct reflection on who you are and what you stand for. Driving clients around town in a van or bus that doesn’t look safe tells donors that you either don’t value safety or don’t allocate their contributions wisely.
We all make mistakes, and the Girl Scout council in Portland, Oregon made a mistake that landed their national brand in a national news story. It can happen to you, and it can happen even if you are very careful. The best suggestion I have to offer is to make sure your agency operates with a written crisis management plan. If you are looking for a good resource to guide your efforts, the Colorado Nonprofit Association offers a nice white paper and template that you can access by clicking here.
Has your agency ever found itself in a similar situation as the Girl Scouts? If so, how did you handle it? Do you have a crisis management plan in place? If so, what does it look like and how often does the board of directors review it? Please use the comment box below to share your experiences and thoughts.
Here’s to your health!
Founder & President, The Healthy Non-Profit LLC
All non-profits are Penn State?
It has been a week since the Penn State child rape scandal broke, and I’ve been stewing in my emotions like most of you. There are so many aspects to this story, and it never dawned on me that any of these many storylines fit within the context of this non-profit blog until I read this quote from Moody’s in Forbes on Friday:
“Over the next several months, Moody’s will evaluate the potential scope of reputational and financial risk arising from these events. While the full impact of these increased risks will only unfold over a period of years, we will also assess the degree of near and medium term risks to determine whether to downgrade the current Aa1 rating. We will monitor possible emerging risks emanating from potential lawsuits/settlements, weaker student demand, declines in philanthropic support, changes in state relationship and significant management or governance changes.”
OMG . . . this story is so big that it blinded me to the fact that Penn State is a non-profit organization belonging to the higher education portion of the sector. Once this realization hit me, I saw the story from a whole different perspective. Here are some of the thoughts that ran through my head:
- I wonder what it must be like for a board volunteer to sit on that board right now with all that liability hang over the university’s head?
- I wonder what the fundraising professionals must be doing to prepare for and mitigate the impact this scandal will likely have on its resource development program?
- I wonder what university staff must be doing to minimize the impact this scandal will likely have on volunteer, booster and alumni program recruiting?
- How does a scandal like this affect the university’s strategic plan, and what are they doing to adjust their plans and factor in this new head wind?
- How much money will this scandal cost the university in lawsuits, increased insurance premiums, philanthropic losses and an adjusted bond rating?
After processing all of these questions, it dawned on me that ALL NON-PROFIT ORGANIZATIONS ARE PENN STATE and this is a “clarion call” for all non-profit agencies to take action immediate!
Take action? Huh? What are you talking about Erik?
Regardless of how big or small your agency is, this scandal should strongly motivate you and your board to immediately take action on development of a crisis management plan. No one ever thinks that tragedy will strike. It is always something that happens to other non-profit organizations. And when it happens your world changes in a blink of an eye.
Penn State administration didn’t see this coming. One day they were on top of the non-profit world, and in a flash they are looking at a financial catastrophe (not to mention the human collateral damage done by the action and inaction of just a few men).
The non-profit organizations in Joplin, Missouri couldn’t have predicted a devastating tornado. One day their agency was there, and the next day they were gone.
The non-profit sector is naturally chaotic because most agencies are under-resourced. One person is typically asked to do multiple jobs. There never seems to be enough time to do those necessary capacity building things like preparing for future crisis. In a word, most non-profits are “reactive” and not “proactive,” which is typically our undoing when disaster strikes. So, take a moment to ask yourself these questions:
- Is my agency’s Director & Officer insurance up-to-date? When is the last time we looked at whether or not we have enough coverage?
- Who is our organization’s spokesperson in the event of a crisis?
- Do we have a “crisis team” that can be activated in the event of tragedy? Are there a diversity of people on that team (e.g. lawyer, psychologist, PR professional, board members, staff, etc)? Do they know they’re on that team? When is the last time this group went through an orientation looking at the “what if” types of questions?
- When is the last time staff reviewed your agency’s disaster contingency plans? Do you even have those plans in writing?
I encourage you to read this great blog post by Joanne Fritz at about.com titled “Top 5 Tips for Effective Nonprofit Crisis Planning“. It is a good to place to start as you use this national news story to motivate your board of directors to take action around developing a plan and putting systems in place to deal with whatever lurks ahead for you on the path of life.
Look at it this way . . . developing a crisis management plan could be a great cultivation or stewardship opportunity for certain fundraising prospects or existing donors to your organization.
If you look at this project as “one more thing that you don’t have time to do,” then it will be a burden and likely something that sinks to the bottom of your task list. If you look at it as an opportunity, then I suspect good things will happen for you and your agency.
Does your agency have a written plan? What is in that plan? How often do you review that plan? Is your plan posted online? If so, would you share that hyperlink with other readers of this blog so they can see a sample?
Please take a moment to answer one or more of these questions using the comment box below. It will only take a minute or two out of your very busy schedule and it could make a difference for another agency. If you don’t have time to comment, then click the forward button on your email and send this post to another non-profit professional who you care about and tell them that it isn’t too late to prepare for the apocalypse. After all, we can all all learn from each other.
Here is to your health!
Founder & President, The Healthy Non-Profit LLC