Cutting costs while preserving mission

Dianne Chipps Bailey and Ty Shaffer
Dianne Chipps Bailey and Ty Shaffer

Dianne Chipps Bailey and Ty Shaffer

Although we are beginning to see the signs of recovery, the recession continues to affect nonprofit organizations.

Nonprofits still are searching for ways to cut costs, both in order to deal with the downturn, but also to position themselves to thrive in the future.

But in the quest for greater efficiency, how can nonprofits ensure that they continue to deliver responsibly on their missions?

Here are a few important issues to keep in mind as your organization decides whether and where to make cuts.

Cut smart

Indiscriminate cost cutting can lead an organization away from its mission. Cuts need to strike an appropriate balance between financial benefit and continued operational effectiveness.

Begin with a review of programs and activities to determine whether your organization’s current operations match its stated mission.

If your organization has strayed from its mission, now may be the time to reorient its programming. Keep in mind that cutting in some areas may work against your ability to deliver on the mission.

For example, organizations should continue to prioritize accounting and legal compliance. Similarly, development should remain a priority for all nonprofits, so that they are positioned to benefit from gifts during and after the recovery.

Look for strategic partnerships (but not necessarily a merger)

In the wake of the economic downturn, a great deal of attention was directed to mergers in the nonprofit sector. But not every collaboration needs to be a step toward merger – in fact, merger may not be the best option.

Mergers in the nonprofit sector present unique problems, most notably the struggle to preserve the merging organizations’ mission. And where one of the entities is facing significant financial difficulty, a merger may negatively affect both organizations, but particularly the surviving entity.

There are other ways for nonprofits to partner with peer organizations, spread costs or pursue creative means for tackling problems together.

For example, organizations can combine to accomplish specific projects or longer joint ventures, particularly where those organizations have similar missions or serve the same constituencies.

Shared services, where structured appropriately, are another way to cut costs through partnerships with other nonprofits.

Involve your board

Healthy nonprofits have engaged and passionate boards of directors. In today’s economy, the need for active boards never has been greater.

The board’s key responsibility is to develop a strategy for the organization to fulfill its mission. If the board is not involved in decisions about where and how to cut costs, the individual directors may not be fulfilling their fiduciary duties to the organization.

Involving the board in these decisions will help ensure that directors understand the potential impact of the cuts, and will provide an opportunity for the board to discuss strategies to raise additional revenue to avoid the cuts.

Think creatively about new revenue sources

Consider whether there are opportunities to generate income beyond your existing donor base.

Keep your existing donors close – regularly and enthusiastically thanking them – but inspire your volunteers to identify new fundraising initiatives, including in-kind contributions and earned-income strategies where appropriate.

These difficult economic times require bold leadership. Professional staff and the volunteer boards of directors must work together to ensure that nonprofits survive the downturn with missions and resources aligned for maximum impact.

Dianne Chipps Bailey and Ty Shaffer are attorneys at Robinson Bradshaw & Hinson, P.A., a full-service corporate and commercial law firm with more than 130 attorneys. The firm’s nonprofit practice group is dedicated to the representation of nonprofit organizations, their senior management and volunteer leaders. The firm has offices in Charlotte, the Research Triangle and Rock Hill, S.C.

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