Things to Do When the Budget Squeezes

Click here to see our list of 185 cutback strategies

From Vince Hyman, Publishing Director, Fieldstone Alliance:

Bad Dream picture I'M SURE MOST of us would like to say that we thought nonprofit budgeting was fun, but for the most part, it's painful. The fun part is the business planning--figuring out all the things we want to do next year. Attaching the numbers is at best work. And hardest of all is realizing that there may not be enough to go around to cover existing plans, let alone future plans. That's when the nightmares start--you know the ones--the type that leave you sitting bolt upright in bed at 3 in the morning, scared awake by a procession of menacing dollar signs, zeroes, ones, decimal points, and, worst of all, the dreaded parentheses of negative budget variances. Been there?

Most nonprofits have had to deal with tight resources at some point, and many have been living with them for the past five years. In the mid-nineties, the federal government began a long process of "devolving" (and sometimes, unfortunately, "deceasing") programs from the federal to the state and local level. It was clear then (and it is even clearer now) that there would be less money to go around to serve the most vulnerable in our society. So, Emil Angelica and I began researching various strategies for coping with the long-term problem. We wrote the book, Coping with Cutbacks: The Nonprofit Guide to Success When Times Are Tight.

In preparing the book, we interviewed nonprofit directors; we surveyed a number of nonprofits, and we searched older literature from a previous round of cuts in the early-mid 1980s. As we analyzed the cutback strategies, we began to see that most people focus on only one way out of their budget problems, missing important strategies that might result in more mission getting accomplished.

In budget crunches, our instincts lead us to form a tight defensive circle, like a herd of Yak protecting its young. You fight like mad to save what you can. And then you start to look at one of two strategies: you've either got to raise or earn more money, or you've got to cut some expenses. So programs get cut, staff are let go, your mission is diminished, and the community suffers. So much for the Yak circle.

The trouble is, that's really only ONE strategy--the financial approach to budget problems. There really are other (and sometimes better) ways to approach the problem. However, they run counter to our instincts, because they push us to look at deeper change, and they push us to invite the community "in" to the protective circle to help us change and solve our problems.

Through our interviews and research, we came up with a three-part taxonomy of strategies to accomplish mission within a budget. Besides financial strategies for solving budget problems, there are structural strategies and engagement strategies. These strategies are often overlooked when a nonprofit is struggling or expanding. Yet they can be the keys to long lasting mission success.

The entire taxonomy of cutback strategies can be downloaded at no cost. But I'd like to provide an overview of it here. For those of you involved in some sort of financial crunch, use it as a start to brainstorming. In all, we listed more than 185 specific strategies--but we're sure those are just the tip of the iceberg. The important thing is the taxonomy: Once you "get it," you can imagine many new ways to cope with tight resources.

1. Financial strategies. These are strategies that immediately and directly affect the bottom line. Basically, they involve reducing costs or increasing revenues. They are the strategies most organizations turn to first when they feel a financial pinch.

1.1 Cut or control costs

1.1.1 Analyze purchasing (11 tactics listed)
1.1.2 Adjust payables (4 tactics listed)
1.1.3 Evaluate facilities and infrastructure (12 tactics listed)
1.1.4 Modify staffing (26 tactics listed)
1.1.5 Reduce services (8 tactics listed)

1.2 Increase revenues

1.2.1 Manage money differently (7 tactics listed)
1.2.2 Increase fees (3 tactics listed)
1.2.3 Initiate or accelerate fundraising (15 tactics listed)
1.2.4 Expand or add services (14 tactics listed)
1.2.5 Increase productivity (7 tactics listed)

2. Structural strategies. These involve changing the mission of the organization, its internal structure, or its culture. Examples include checking to see if the mission is still viable, moving from direct service provision to prevention, spin-offs, acquisitions, and mergers, and major changes to the culture that improve program delivery while reducing expenses.

2.1 Modify the mission (6 tactics listed)
2.2 Modify the structure (9 tactics listed)
2.3 Modify the culture (9 tactics listed)

3. Engagement strategies. These strategies require much greater involvement of business, religious, philanthropic, governmental, and other systems. An engagement strategy requires an organization to involve many more people in both planning and implementation. The strategies usually take longer to enact, but they tend to deepen the roots of the organization.

3.1 Engage other nonprofits (13 tactics listed)
3.2 Engage the community (6 tactics listed)
3.3 Engage the business community (10 tactics listed)
3.4 Engage the public/government sector (6 tactics listed)

Our book, Coping with Cutbacks, has much more than the taxonomy listed here. The heart of it is two "process" chapters that help you understand how to change your approach to resources and generate new strategies for dealing with resource problems. But for those of you experienced with leading organizational processes in tough times, the taxonomy above will, I hope, be enough to get your brain moving in some new directions.

Sincerely,

Vince Hyman
Publishing Director
Fieldstone Alliance

February 16, 2005