Economic and fiscal issues are front and center these days. Regardless of your political persuasion, there are certain economic realities that we as non-profit operators will need to confront. Public revenues have declined sharply and states are cutting expenditures as 40 of 50 states and the District of Columbia have predicted budget shortfalls of greater than 5 percent of 2011 budgets. Across the country, the average predicted budget shortfall is just over 14 percent and $2.6 billion. This will affect how we operate as funding, both public and private, will shrink for non-profits.
As mission driven organizations, we need to find ways to do more with less. Unfortunately, non-profit organizations have always been resource constrained, with the needs of people far exceeding the services we can offer and the current economic state only exacerbates that fact. In order to best serve our stakeholders, we need to identify the programs that provide the greatest benefit in order to maximize our impact.
Instead of slashing expenses across the board, we need to make smart decisions that allow us to fulfill our organizational mission while becoming leaner, meaner, and financially sustainable. While fiscal management frequently takes a back seat at non-profits, it is the ultimate driver of what we can and can’t do. Making smart financial decisions allows for long-term sustainability and a more effective organization. The framework below drives fiscally smart decision making focused on achieving objectives and will serve to maximize finite resources during an economic recession and just as well in an roaring boom.
1. Laser like focus on your mission. Everyone in your organization should know the mission and be laser focused on achieving it. This includes knowing what your mission isn’t and avoiding activities and programs that, while seemingly appealing, don’t aid in achieving your ultimate objectives.
2. Have objective and measurable goals. Set achievable and objective goals aligned with your organizations mission.
3. Collect and track data. Collect and track the data to know what is working, what isn’t, how much it costs, and if you’re achieving your goals. You can use simple surveys and Excel spreadsheets or sophisticated dashboards populated by a database and significant analytics. Regardless, track what you do, how well it works, and how much it costs.
4. Use data to drive results. Make decisions based on data in order to maximize your organization’s impact and achieve your goals. When you make decisions about what where to make cuts or employ resources, it should be made based on where you can get the most bang for your buck.
5. Finally, invest, don’t spend, money. You have finite resources. Every dollar spent should be seen as an investment in achieving your mission. Use steps one through four to determine what works and where you can most effectively and efficiently direct human and capital resources.
Brian Kates is a Senior Investment Associate with the Charter School Growth Fund, a non-profit venture fund that invests philanthropic capital in the expansion of high quality charter schools all over the U.S. Kates’ gained his financial analysis experience in turnaround management, including working with a family business in Chapter 11 bankruptcy. Kates has worked with the Charter School Growth Fund for nearly five years and hold a Masters of Science in Finance from the University of Denver.