Beyond Belt-Tightening Part 1, From Inertia to Action

Nonprofits seeking ways to overcome the financial impact of Covid-19 need to look beyond belt-tightening and begging for money to the money they already have. So says Sean Hale, Austin-based finance and operations consultant for nonprofits. In his 3-part series, Sean will share with us three habits that nonprofits can use to address financial challenges now.

Yes, most nonprofits have already tightened their belts and may need to do it a bit more before we see the end of this. Yes, we’ve had to ask donors and grantors for extra generosity. And if we can find a few thousand more beyond that, it just might allow us to avoid even more difficult steps like layoffs or closing the doors for good.

As Paz Padilla says: “We need to understand that this is more a struggle against our habits than against a virus.” I believe that a key tactic to overcoming the financial impact of Covid-19 is changing our habits.

In this first part, I’ll look at the benefit of turning inertia into action. Here’s a great example:

The day before C-19 closed my kids’ school, I had coffee with the executive director (ED) of a local nonprofit. He told me about his first month on the job, a few years back, and how he had noticed that their payroll company was hand delivering their payroll stubs (an unusual practice in the 21st century). He started asking more questions and learned that they were paying $40,000 every year for this service for just 30 employees! He switched to a modern payroll service and was able to save $37,000 per year!

For years, the organization had been paying way too much for that and many other things. By the time he was done changing inertia into action, this ED had found more than $70,000 in savings! The question to ask is: How did this nonprofit end up wasting 5% of their budget each year and not even know it?

This kind of situation happens more often than you think, even to good nonprofits with good, smart people working for them. Nobody ever sets out to waste money. However, they do get busy. They get distracted by something that needs immediate attention. Inertia sets in. It becomes habitual. Before you know it, what might have been best practices twenty years ago becomes “the way we’ve always done it” and never gets reconsidered. It can become invisible and forgotten, even during a crisis when every penny counts.

What new habit can get us from inertia to action?

The answer is getting perspective and following through on it.
The new ED in our example came from outside the organization. He had strong allegiance to the mission, but not to the “the way we’ve always done it.” This allowed him to see things with fresh eyes and ask questions that were unlikely to occur to people who had been with the organization for years.

How to get perspective

Can your nonprofit get this kind of perspective without bringing in new staff leadership? Yes!

Your options include:
Peer Groups: Do you have a critical mass of peer leaders and change makers around you? People who help you stay on top of best practices? If you spend time around people who are influencers in your field, it can provide critical perspective and insights into evolving best practices. It can bring out the best in you and motivate you to keep your organization functioning at a top level.

Your staff: How often do you ask your staff for new ideas and proposals for improvements? With the right encouragement, employees at all levels of an organization can help identify ways to work more efficiently and effectively. For example, in 2004 American Airlines found itself on the brink of bankruptcy. Management and the mechanics found a way to overcome what had been an antagonistic relationship in order to save the company and their jobs. The mechanics introduced improvements that ultimately cut the cost of the work they did in half! Even if you have a strong relationship with your staff, have they received the right encouragement? Do they know you’re eager to listen to their ideas to save money and work more efficiently?

Your next steps

Are you ready to turn inertia into action for your nonprofit? Here are some questions to help you build the new habits of getting perspective and taking action:
• If it could mean thousands of dollars in savings, would it be worth a little extra effort right now?
• Where does our organization have inertia? This might be the project that’s been put off forever. The “leaky faucet” that hasn’t been fixed. The software search and upgrade the organization needs but hasn’t been able to make time to do it.
• When’s the last time I checked in with a peer group? If it’s been a while, can I pull together a virtual happy hour? If my peers have never gathered to compare notes, can I pull together a virtual coffee and get the process started?
• Have I engaged our staff? Do they know their ideas for efficiency and savings are valued? Do they trust that even if an improvement makes their position obsolete that they can count on finding a new position with our organization?
• Who else? Who else might help me gain perspective on opportunities for savings and efficiencies? People inside my current network? People outside my current network?

If you would like more examples of how other nonprofit leaders have transformed inertia into action and saved thousands of dollars for their organizations Check out this portion of Sean’s April 2, 2020 webinar.

Sean’s next blogs will discuss more habits to help your nonprofit move beyond belt-tightening: “returning to mission and values” and “using the right tool for the right job.”

Bio
Sean Hale, of Sean Hale Consulting, has served nonprofits for more than twenty years. Most recently, as Mission Capital’s Chief Financial & Operations Officer, he made improvements that reduced waste, generated new revenue, boosted staff productivity and morale, grew financial transparency, and shrank risk. Over his career, he’s also helped boards and management to navigate complex situations and consistently left the organizations stronger and ready for their next stage of growth.

Posted in Behavior change, Financial management, Leadership, Operations.