How Nonprofit Leaders Can Adapt to Change in a Climate of Political and Financial Uncertainty
Hello. Welcome today's webinar my name is Matt Hardy I'm the, head. Of programs at social enterprise and deputy associate dean at Columbia Business School, just. For a few logistical notes before we start a recording. Will be available after the webinar you, can tweet about this webinar using, the hash tag hash. CBS. Exec, and be. Sure to put questions in the Q&A box we'll be sure to cover them in the last 10 minutes of the webinar I'm. Pleased to introduce professor ray Horton a long-standing, faculty, member of Columbia. Business School and founder of the social enterprise program, thanks, so much ray for joining us today happy to be here so today, just to start us right off and, to frame the conversation, we're. Gonna be talking about hoping. For the best but planning for the worst and this. Is really grounded in Ray's research. Work. And scholarship, and political, economy as a political. Scientist and his, course the modern political economy, at Columbia, Business School. So. We're going to talk about the current political and, economic. Environment and, what that might mean for nonprofit. Organizations. Where. Should we start. Well. Recognizing. That in. The life cycle of nonprofits. And nonprofit, finances. There are good times and bad times. And. I think in general over, the course of the last eight. Or nine years, most. Nonprofit. Organizations. About a pretty good time financially. I'm. Very worried, because of the Trump, administration. And. The fact that it's a quite right-wing. Political, slant, at this stage of the game I'm. Worried, about, some. Substantial, impacts. On the finances. Of not all nonprofit. Organizations. But of some nonprofit, organizations. Coming from two things one. Is that. The. Tax and Jobs Act which, was. Passed. In December I, believe December. Of last year, I had a couple of provisions that are going to really have a major impact on, the finances, of some nonprofit, organizations. You. Have to itemize, in order to make a contribution, to a non-profit, and, the, tax law was, changed so that. There. Was a doubling, of the standard, deduction which, means that the number of people who Ida Mize is going to be sharply reduced, and that's going to have a huge impact on, charitable, donations, the, second change was a doubling, of the estate and gift tax, which reduces, the incentives, of wealthy people to. Reduce, their taxes, by giving to nonprofit, organizations, so those two, changes. Alone, could. Have a major, impact in, general, on. Financing. Nonprofit. Activities, through charitable, donations. It's, estimated that that could amount to six to nine percent. Annually. Not just a one-shot but, every year a reduction, in that particular, aspect of nonprofit, financing. And. The, second issue which, is I think in, many respects, perhaps more damaging, to nonprofit, organizations particularly. In the social service area is. That the Trump administration has. Made it very clear that while it is not touching entitlements. At this stage of the game it's cutting, in its, budget, almost. Across, the board. Programs. Funding, programs, for the social services, so those two things, could. Have a major impact as, I said on some nonprofit, organizations. Going forward, and we, ought to be thinking about that, and. These two, changes. That you're that you're thinking about thinking about and, how they might affect the revenues, of nonprofit. Organization, should be causing. Nonprofit. Leaders to think a bit differently about. The, future of their organizations, how, they'll be funded, where their revenue will be coming from and that, gets us to the this idea around scenario. Plans and, this. Is a topic that was, hugely. Popular, post, financial crisis, because. All nonprofits.
Were Seeing drastic, reductions, in their, budgets and funding streams so. When you think about scenario, planning how. Do you think about this. This. Initiative, that many nonprofit, leaders should be thinking about should be taking on and. Not, just taking the current state as a given. For the future state around, funding and financing, well. So. It's a great question and, it's not an easy question to answer. Scenario. Planning really, means making some assumptions, about what lies ahead and, thinking. About what you would do in the event those assumptions turn out in. Good time scenario planning. Revolves. Around the fact that you might expect more money and. Therefore, may have an opportunity either. To expand, the services, you're providing a, current, or perhaps adding, new services, to your repertoire, the. Kind of scenario planning, that I think we're talking about today is based on the assumption, that in fact things could get worse and, force, you to re-examine, many. Of the basic assumptions, that you've made in the past about the dynamics, of your organization. So when, you think about that, what's. A with a clear first step what should be maybe, executive, directors nonprofit, leaders when they look internally, at their organization, where, should they maybe focus, their attention what should they really be paying attention well I think, the first step would be to, think about how they want to go about doing scenario. Planning most nonprofit, organizations. Are probably not going to have somebody on staff expert. Right in, scenario planning so, I would think that a good first step for nonprofit. Leaders would be to reach out to organizations that, in fact specialize in scenario planning may, fall into the rubric of risk management may, fall into the just the general consulting, assignment but it's, a kind of required. Specialized. Skill, that not most, I think most nonprofit, organizations. Are not, going to have in-house. But. You know basically what. We're talking about is, trying to do, the. Same or. More. Ideally. With fewer resources, and, that means you know asking some very basic, questions about your current operations, right. For. Example, oh yeah I was just gonna say we've been talking about primarily revenues, yes so. When, you we're, using that lens yes to start thinking about investigating. The state of our organizations. What. Are your thoughts there well I mean, you got to think creatively about, additional, revenue, sources. You. Know one of the the, economy actually is quite strong right now the stock market, is way up one of the beneficial, aspects, of the stock market being so up is that the finances, of nonprofit, foundations, right are much improved so, you could begin to think well if I'm going to lose a dollar here because of the impact on individual, or charitable donations, I may, be able to make up that, and perhaps even more if. I'm able to get some additional support, from my foundation, partner so I think reaching, out to. Foundations. And bringing them into the process as, partners, and thinking through as possible, calamity, is a good first step a second. Would be to think about increasing the number of dues paying board, members, that's a constant, problem already, for nonprofit, organizations but. It increases, the incentive substantially. If you're heading into a period where your revenues, are going to suffer so those. Are a couple of the things on the kind of revenue side that I want to do and, if we think about if. If. Some of these ideas. Bear. Fruit around, the future state of federal. Funding and individual, donors potentially, going down due to the text the, changes in tax law.
We're. Getting into a topic around retrenchment. As well, which. Again was, a very popular topic post, financial crisis, and, we're. Thinking about scenario, planning if revenues were to decline by X amount what. Might that mean in terms of retrenchment and, and, how do you think about retrenchment, yeah I mean. Fortunately. We have a little experience, here Myra, transmen - well yeah I mean retrenchment. In a in a sort of a commonplace, sense, means doing it, means operating, with fewer resources. And. As I was saying we have some experience, here because, of, the, financial crisis, of, 2008. Caused, many. Organizations. To have to rethink. These. Conditions, of their operations, under a period of retrenchment but, the. Truth of the matter is nonprofit, organizations. Are what. We call labor intensive, organizations. Most. Of the expenses of a nonprofit organization, revolve. Around the, number of employees, that you have and the salaries, and benefits that, you provide that's just a very tough fact, of life and, so. If you're going to have to think about doing. More or the same with less or more, generally, increasing, the efficiency of your operation, you're gonna have to think very seriously about how you manage, the human resources, at your disposal. Have. You got the right number of employees. Are. They paid the right amount of money and. Are your fringe benefits, at the right level, you may have to think about, some. Very difficult, choices. Regarding. Who, stays on the payroll, and. These. Are very difficult and, I when. We've talked about this in the past with nonprofit, leaders they, inevitably say you know part of our mission is to, not. Lay people off or not change the work rule surrounding, the organization, it gets you back to that basic question, what's the fundamental mission. Of your, organization. And if you're faithful to that it. Helps you make some difficult decisions about. Your. Staffing. Your. Technological. Needs. And. Another. Issue that I think is important, for nonprofit, organizations to think about is space space. Utilization, is we, see a lot of nonprofit. Organizations in, our programs, that will be very quick. To admit that they have excess capacity they, have more space than they're currently using so you know one idea is to think about how you either. Sublet. To another nonprofit, organization. Or how you go out and and. Downsize. Your organization. And use viewers, unless your space, another. Area I want to make sure that we also cover in this because we're talking about staff, and head can as the primary, cost, driver for, operating, budgets of nonprofit, organizations. But. It also gets the question on the programs, and services that you're providing yes, because if we're going to be changing, a, reallocating. Headcount, staff. And, what are those staff going to be doing in the form of programs, and services, this. Gets your point around being laser focused, on mission but. It could mean. Winding. Down programs, it, could a, potentially. Looking to partners, to take on programs, code deliver, certain. Services, given if you have. Recipients. Of your services that are incredibly high need and that risk they still need these services, they. Can't just vanish into thin air but. What. Are you going to be doing in. The forms of alliances, partnership. Collaboration, if you, are seeing a reduction. In your yeah that's, a great point I think man I mean again it gets back to the idea that if, you're leading a nonprofit organization and.
You're Beginning to think about some, scenario. Planning along the kind that we've talked about you shouldn't be doing it in vacuo, you shouldn't be doing it in isolation you, should be doing it in context, with other. Nonprofit. Organizations that, are essentially, in the same kind of service delivery basis. That you are in a sense you, might think of them as your competitors, some of the times because historically, your complain right but in this situation you need to start thinking about them as collaborators as, somebody as groups that you can join with together to do exactly what you were talking about and that is minimize. The. Impact, of a difficult, financial situation. One, the quality, of human beings lives which, is ultimately what these. Organizations, are up to that's what they're there to do I. Think. Maybe a point of advice that we want to make sure that we highlight for the people watching this webinar is that there are formal. Member, associations or. Alliances or, advocacy, groups that are tied to their missions or serving their missions and in different, ways and really, to be aware of who. Are other. Nonprofit. Leaders or folks in the sector that may be our advocacy, you know advocating on behalf of their missions and services, and have member, associations, or alliances. That you might not currently be a member of that you could join and, also. Join. Informal, networks of other nonprofit, leaders in your space that maybe you did the US competitors, but nothing to be future collaboration, yeah and, I think the in. Terms of advocacy there's one other group that, we might sort of talk about and in, New York City it's a very important, group and that's, local, legislatures. Who ultimately, through the control over the city's budget have some ability. To affect the supply, of money for nonprofit, organizations, so I think if. You're gonna get into the advocacy, business, and you've been a little lazy in the past about relating, to the members of the City Council or the state legislature. Who, have jurisdiction over, your set of programs, and you ought to be really. Reaching, out to them in a much more substantial fashion. So I think I think you're right I think advocacy and, lobbying, become. Important, resources, again, not, the kind of thing that you necessarily have to do yourself, organizationally. But something you do with partnership, with cohort. Organizations. Doing some other things with foundations, that are funding, similar, programs. You. Know again to try and make sure that there's some offset, to minimize, the financial impact, of what I think is lying, ahead threaten profit sector I think that's a natural segue, to this last piece that we wanted to cover that really even if we started off with the negative perspective. Of, the. The horizon, of what might be coming down the pike for, nonprofit. Organizations by their. Their revenue, streams we think that all is not lost for, them and we've started to talk about these various ways in which nonprofit, organizations, and. Leaders, of, those organizations, should be thinking about their. Missions their programs, their services, their staff that. In the face of potential. Headwinds. In terms of their revenue sources and and and, the state of those funding sources we think that they can. Be doing some things proactively. To. Try to mitigate that, exposure to that risk and we've. Touched on this in terms of alliances. Building. Partnerships, reaching. Out to leaders of other nonprofit, organizations, and operate in a similar space they're reaching similar clients, or constituencies. Offering. Similar services. And do. You have the informal, connections and relationships, that if, things, do start to turn south, those. Can be trusted partners, and advisors, making, sure that. Those essential, programs and services are going to be provided, and how they, might be provided how. You might share resource, staff. Bid. On. RFPs. Or request, for proposals together as partners. In order to maximize. Their. Respective. Resources, to towards. A similar mission. Let's. Talk about the foundation, in the philanthropic community, as, a, source of. Potential. Relief or, assistance, in the face of declining revenues. That's. Also, a step we think nonprofit, leaders should be proactive about you, should be reaching out to your program officers, or the heads of their foundations, that are currently funding, your organization, and, let. Them know that you're thinking about this in this way and if. You were to have certain areas of risk, certain. Programs that were at risk are or even that you're serving populations, that are potentially targeted, by the by.
The Current administration how. Are you going to make sure that those programs and services are going to be provided. Are, they on board are they on the same page and will they put the resources behind that, in, order to make sure then, those programs, are going to be continued, to very. Well put I think. You know to. Get back to the sort of basics, you if for. Example you're, the, head. Of a nonprofit organization that's. Watching this webinar. What. We're really saying is that you may have to do some really difficult, in-house. Looking, at your operations. But I think we're also saying, don't. Be too in-house, in other words realize, that you're in a situation, where collaboration. With other organizations is. Extremely. Important, so, you can't think of them as simply competitors, think about them as, collaborators, as. Colleagues, who are need. To band together and, what we, think may be a very difficult time, and we do see that in the sector it's not as if we think this is a non-existent. Dynamic, within an opera it's quite common to do collaboration. Operations. At. The same time we're emphasizing it. Because. We think that's going to be crucial no that's right and, in the senior, leaders program for example when we sit down and talk with the executives, and senior people and the nonprofit, organizations. That participate, in those programs they. Know each other. It's not as if they operate, in silos I know who their colleagues, are and they know who their competitors are, and so I guess. What we're really saying is that they really need to begin to think more inclusively, about, the, piece of business that they're in in order to minimize the impacts, of what my every might be a very difficult time going forward, I guess. One other thing though that maybe. We are, over, generalizing, too much and that is not. All organizations. Are. Going to get hit hard right. Organizations. That rely heavily on charitable, donations. Are going to get hard hit hard but not, all organizations are particularly dependent, on charitable organizations. And, there are some organizations that, are providing services that don't fall under the general rubric of. Social services, and, in some respects they may be spared, some, of the problems that we're talking about so I I don't want to over dramatize like, the sector as a whole is really heading, into a serious, right, serious, period but but but we. Are saying is that individuals. To take a careful, look at their organization. To see what, kind of exposure they might have and, what is shaping. Up to be a kind, of harsh, turn to the right, politically. At. The federal level of government, so. Just. To re-emphasize, for, those watching we're talking about an internal audit you're looking at your sources, of revenues, given. What you're stating, about changes. To tax and charitable giving in charitable donations, as, well. As shifts. In the priorities, of spending, at the federal level could. Mean certain, levels of risk and exposure, we. Even within certain program lines within when a nonprofit. Organization and, that, you need to be aware of where, that risk may lie to what extent, and then what scenario, planning you might be doing in those areas, and then the external facing component.
Is Who, are the collaborators, peers, colleagues that can help also offset or, mitigate, that risk that, you know exists, given. Your, portfolio. Of revenue mm-hmm, just, want to reiterate we are getting some questions and hear, from the. Audience thank you very much please keep them coming. One. Question here from Lee. When. You think about governance. And this is a bit, separate what we're talking about but the role of the board you know. We. Want to emphasize we and we didn't emphasize on, our remarks, the role of the board we. Both stood on boards you know we should. Probably. But. If you're running a non-profit and, you're listening to this webinar, about. The first thing you should probably do is pick up the phone or send an email to the chair of your board and say we need to start thinking about the possibility, of a downturn, affecting, our organization. That's right great great question, and not just your board chair potentially. The chair of your fundraising, and or finance enemies, well I think you rely on the chairman, of the board the chair the board chair to sort of organize the rest of the board for you but yeah it's absolutely important. Be in touch with the board chair and this is an interesting dynamic for a lot of nonprofit. Leaders is that managing, up components how, do you be. Proactive as having difficult, conversations with. A board chair and. That, relationship, is going to be crucial as both, a resource, and. An ally, to, they're reaching out to the rest of the board that. Could come, in the form of additional gifts, and fundraising, it could be helping, them ring. The alarm about potential, programs, or services that could be at risk as well, as asking. The board to maybe start to lean on their networks a bit more both, in the form of fundraising. But also expertise. And. We talked about this earlier if maybe. You don't have the resources to go hire a consultant, to come in and do, some scenario, planning or at least conceptualize. How you go about scenario. Planning for, your organization, but, there could be individuals. Within the board or the board's network, that. Could be helpful and thinking. About risk, mitigating. Risk and. Also, retrench, Men and downsizing they could have other experiences, themselves. And their own professional practice where they. They've been through that process and. It, could be very helpful in helping the. Leaders of nonprofit organizations. Think. Ahead and how they might, manage. That process yeah. We. Have. Another question here. Do. You think you're being too negative. We. Worried about that from song right. Do, you think you're being too negative about the future isn't it possible that. The. Economy, will. Continue tugging, along and, that, these. These, things, that you're seeing on horizon whether, it's at the federal spending, federal, spending level or, the, changes, to terribly, it won't, won't. Be as as dire as the, experts, in aspirin yeah a couple of things well even, if the economy continues to chug. Along. The. Priorities. Of the federal leadership. At this stage of the game or continue, going to continue, on the tax cut front particularly, for wealthy people and I suspect, they're not going to turn around with respect to social. Services, either and, the other thing that we haven't talked about and I hesitate to do it because it's a. Very shaky, kind of prediction, thing we haven't had a recession, in the United States for 10 years as a, long time so, there's a possibility sitting.
Out There which they didn't want to bring into the conversation this, morning that their autumn that there might be a, downturn. Running ahead which is going to just amplify the problems, we're talking about today, and. That's getting to, be really negative but if these things starting to happen concurrently yeah, that's. That mix, that, we, might have seen back in o8 maybe. That's the same level of severity but having, you know the potential, downturn. In the economy the. Effects of tax tax, law and the affective shifts, in federal, spending prioritization. If. Those three things happen. Roughly, at the same time or any level concurrently, I think that could really. That. Should raise a lot of red flags I think for a lot of nonprofit organizations because, when we saw this we call them the dual pinchers. Back. In post, financial, crisis. You saw a downturn in the economy a, downturn. In funding, and resources for nonprofit, organizations to, demand. An increasing, demand for those services, that you're there to provide, so, you're getting squeezed, really. On both, sides. Let's. Hope that the. Economy, continues, to be strong. This. Is an interesting question. From. Anonymous. I serve. On one nonprofit board we're planning consists of deciding, what the next potluck, of dishes will be how. Does one shift thinking, to planning strategically. Over the long run. Leadership. If. You're running an organization's, that's focused on potluck, you better spot, washing you, better start being a leader in that organization. I think. You might have the wrong board. You. Know and, you and you might need to really be thinking about seriously. Hmm. Making. You, know transitioning, folks off the board, or. Leaving the organization and going somewhere else where you could do something more valuable. That. Could be but, before before, maybe if you're still committed to the mission and if the board really isn't an operating at a high enough level a non-profit. Leader can take upon that mantle if they have a real true, ally in a board chair. That. We need a more. Sophisticated board. Yes that's, operating at a higher level in a professional level then we'll be, the true resource that needs to be from the nonprofit organization, yeah so I think, our answer there which is a bit of a difficult. One is you need to think about who's on your board do, they need to be there any longer and if not start. Moving them off right and start, building a pipeline of future borgin yeah I think, this. Is really not sort of specific, to the topic today but but the importance, of boards, and nonprofit. Operations. I think with so many leaders of nonprofit. Organizations at, the staff level don't. Spend enough time cultivating, the resources, on their board it can be a tremendous, asset to a nonprofit organization. To have a great board. There. Are a few questions here that are getting to run the sustainability, question. Even. Sustainability. In terms of the. Organization continued, to to. Serve its mission, even. Post-reduction so. If you're having. What, I think what that the. Questioner is asking. Post-reduction. Post, retrench meant, what. Can leadership, and management look like in order to ensure that that, that. Downward trend. Doesn't. Contingent, continue yeah so it's like, establishing. The baseline from which you can recover right. That's. A very difficult question. And. I think the answer, to it really is again. It gets back to this idea of mission, what in fact is this organization, that you're running. Committed. To doing and, how. Do you think. About the use of your resources and. The use of your board not just your own financial, resources, in a way that. Lets you think about an immediate downturn, sustainability. Is a very complicated issue it's going to get a little bit more complicated but in shelah you. Can count on the fact at some point in time that the. The politics, of the country are going to change the, finances, of organizations. Are going to improve and you might be able to have a very strong base from which to build up, going, forward you, don't want to kill yourself in the process of decline you'll want to keep yourself sustainable.
So That when things begin to turn around you have a firm foundation upon. Which to build and. That's. A true leadership message, I think that has to come from the top of the organization, because they need to be you know it's crystal, clear on. What, our core, services, are here this is what we are here to do how. We're gonna do it and this funding, is going to be. Sufficient enough to, continue. The services at this rate you know for this period of time and then, with that clarity you can then draw in potential, new resources new donors, or your board or your foundations, philanthropic. Community, to make. Sure that sustainability, continues, I think the other thing that comes to mind is you might have a fairly demoralized. Staff, from. Having to go through this process so it's really important, that you maintain the esprit de corps of the organization. And the commitment, that you are going to sustain this organization. And see it through so. It can return to moments of glory down the road our colleague, Joe brockner in the management division and also faculty, director for a number of our programs for nonprofits, has done a fair amount of research on survivor's, guilt even and nonprofit, organizations because. Retrenchment. And layoffs and that, view, from the top of. Of. Clarity. Around this is what this is the change that's happened this is the process that we've taken and here's our vision and move so we're yeah that. Is going to be integral. To the, the future state and the success of the organizational only even knowing that there's gonna be morale. Is gonna be down and, people are gonna be feeling. For their colleagues that got let go and they're gonna be feeling for their clients and constituents, that, are seeing a reduction in services, you, still, have to keep such a laser focus, on that mission and that core service, and that will get you through I think that period and, you know I guess in one way or another what we're saying is, this. Is a time for the leaders of nonprofit, organizations to, really win their Spurs. It's. A time when they. Need to really exercise their. Leadership and, their management, skills in a way that they haven't done before that's what we're up to in our executive, education programs. Exactly, is sort of developing the leadership and management skills of, the, nonprofit, sector, and. Our hope with this, webinar and also our programs, and services that we're. Able to help strengthen the sector by connecting, them with thought. Leaders at the business school but then also with each other yes and, that brings us right to 12:30, so, we want to thank everyone for joining our webinar today we hope you found it useful informative. And. Educational we'll. Be continuing the conversation, after today and thanks. Very much take care. You.