FIO Partners Perspectives

Organizations That Can Learn Will Survive

There has probably been no previous time in history that nonprofit organizations are so in need of organizational climates that promote both critical and creative thinking.  As the sector retrenches, and CEO's make tough decisions about who stays and who goes, it is easy to shift a culture, inadvertently, from one of accomplishment to a kind of paralyzed bunker mentality. At the very moment when every CEO needs each remaining employee to use every ounce of brains, intuition and creativity they possess, fear and insecurity about what the future holds can drive employees into a "head down, keep quiet, and keep out of sight" model of behavior.

So, what can a CEO do to maintain a powerful culture of inquiry despite the contraction of resources? One of the approaches I like best comes from Tony DiBella's How Organizations Learn. Written for for profit businesses, I have taken his list of what he calls "facilitating factors," and done some translation for nonprofits and this particular time in the sector's history.

This is a time of exponential change so the importance of scanning the environment for changes in fields of services remains.  There are several areas of nonprofit practice that are undergoing re-engineering, particularly those that are funded by state government or federal Medicaid dollars.  As well, change is coming from the shifts in consumer demand that are influenced by the economic upheaval and by other organizations choosing to close programs.  Watching what competitors and collaborators are doing has never been more important.  CEO's must help their managers and staff understand the value and importance of observing these changes and bringing those observations into discussions of strategy.  Asking staff to pay attention, to be your "eyes and ears," and to bring that information to the fore, is critical.

CEO's must keep performance improvement on the agenda, despite cutbacks and increased stress.  Monitoring for performance gaps should continue at every level of the organization.   It is helpful to create a hierarchy of accountability to ensure the key success factors are watched at appropriate levels of the organization.  That means that the CEO must encourage and guide the process of defining what "performance" is and insist that measurement both takes place and makes sense.

Due to cutbacks, you may have people functioning in new or expanded roles.  It is the CEO's responsibility to create a climate in which people can identify mistakes they have made and learn from them.  Survival in this environment will require experimentation and it is highly likely that your people will not "get it right" the first time, or perhaps, even the second or third time.   The CEO has to make this experimentation acceptable.   There is risk in this new world and risk aversive organizations will not survive. 

This is not the time to wipe out your training budget. In fact, this is the time to intensify learning opportunities.  No money to do that?  Training is a great collaborative opportunity.  You run a training program and invite staff from other organizations to join yours…the conversation will be richer for it.  When they reciprocate, your people will benefit.   Have everyone in your organization read the same book and get them together with you to talk about what they think they learned.  Above all, show up at training and stay. Be part of the dialogue and be a role model for learning.

CEO's should be able to track how new knowledge comes into the organization, how it is disseminated, and, most important, the degree to which it gets used.  In considering how to use training resources, make sure the knowledge that the employee will obtain is relevant and immediately useful to their work.  Expect results from training and ask middle managers to determine whether there has been any application of new knowledge.

It is the CEO's role to insist on documentation of information related to performance. This is not about compliance data that your organization sends off to funders.This is about management information that actually gets used to change how practice occurs. There is no more powerful tool than setting specific targets for performance and that carries over to performance improvement.  Despite cutbacks, it remains a critical leadership function to set specific objectives that require the organization to improve its performance in key areas.

Don't feel so sorry for the pressure and stress you have had to create for your staff due to cutbacks that you forget to lead in this critical area.

How We Can Work Together Through Difficult Times

Many pundits believe that the nonprofit sector is in the most serious trouble in its history.  The sector in both the US and Canada has known only growth in its history, and, since 1977, expansion  in numbers of nonprofits and in revenues have far exceeded  the growth in business revenue in that same time period.  The recession is predicted by some to put 100,000 nonprofits out of business over the next two years.  Certainly there are very few nonprofits who are not struggling to keep their budgets balanced, and there are many who are failing to do so, dipping into reserves to stay open or laying off staff in large numbers, slashing salaries and benefits or closing altogether.  In my 25 years of consulting in the sector, I have never been asked to teach retrenchment planning, until now. 

As we look to the next couple of years, the economy may continue to turn around but there are structural problems that indicate that the climb out for the nonprofit sector will not parallel the private sector.   Those factors are:  the anticipated decline in foundation payouts due to the major losses in equity funding (according to some estimates the sector could lose up to 40% of foundation revenue); and, the serious, if not desperate, condition of state budgets across the country. Clearly this will most seriously impact those nonprofits who contract with state government.

As I work in various locations across the US, I am distressed that there is so little rational planning at the systems level going on at this juncture.  Most states are cutting budgets and nonprofit  contracts across the board.  There is really very little thought given to how human services can be re-engineered to ensure services to the most vulnerable clients or to bring about efficiency. Adequate retrenchment planning at the systems level should involve protecting those aspects of the system that will be most difficult to rebuild after the downturn,  targeting core competencies that must be protected, making choices about whose supports are needed most.  Are these easy decision?  No,  but they are necessary ones if our human service systems are to making any sense when things turn around.

The recently completed study of the Safety Net in RI by United Way and RIPEC is a great example.  The problems and the opportunities for addressing those problems are apparent but there is no political will to act.   Instead, changes in human service systems are happening but they are happening serendipitously as each organization makes decisions largely based on economics, about which programs stay open and which close.   It is impossible to envision what our human service systems will look like in a couple of years if this continues.  

So, in the absence of rational planning at the systems level, what should nonprofit organizations do?  I am fortunate to work with larger, rather than smaller, nonprofits who provide human services.  All of them will, almost undoubtedly, survive this difficult period and live to grow again when things get better. But none of them operate in isolation from a larger community of services.   In my work, particularly around strategic management, I encourage them to not just think of their own organizational survival in these times.  I encourage my clients to think about the organizations that support the populations they  serve and to consciously construct a relational map, if you will.  Then monitor  that map to understand the effects on the organizations in their arena.    Who are the organizations that refer clients to you?  Who do you refer to for ancillary or supportive services?  If your clients need housing supports, or basic needs supports, who is providing them?     Who are your competitors and what shape are they in?  What are their plans…which programs will they close or cut back on?  If you have partnerships with other organizations, how are they doing?  Will they be able to maintain their contribution to your joint work?  

This is a different kind of environmental  scanning than we are used to doing….searching out the vulnerable organizations and programs to determine the potential impact on the clients we serve.   This is information that large nonprofits need to have for two reasons:  first, if a competitor is closing a program, those clients may come to you for help.  How will you handle the increase in volume?  Or, if what has been a dependable source of help for your clients will no longer be there,  then the lack of that resource (food or shelter, for instance) could easily undermine or destabilize what your organization is trying to do. 

Once an organization's leadership understands what is happening around them, they need to learn to use the tools that the for profit sector uses in difficult times, to use models of consolidation:  joint ventures, management service organizations, networks, parent corporations and mergers.  They need to build a floor of strategic alliances under the service array that their clients need so they can continue to be successful.  Large organizations have a very distinct competitive advantage in this climate and that is the internal infrastructure and systems that they have built over time.  Most management systems have built in excess capacity…an MIS system that can track two or three separate subsidiaries can probably accommodate more.  Supporting the back office of a small agency is not more difficult than adding a program.   Working in partnership with organizations providing similar or duplicative programs, can spread overhead and reduce costs for both partners.    There is economy in jointly negotiating contracts for commonly purchased items.  There are ways to use corporate restructuring to collapse back office expenditures but still maintain the identity and special relationship with community that small organizations have.  There are even ways to make these relationships temporary;  if a small organization is able to go back out on its own when times are better, they can.   Mergers are a very useful way to save a set of unique competencies, or a special relationship with a particular community,  that would simply disappear if the current entity in which it is housed must go out of business. 

We need an explosion of understanding in the sector about these tools, about how useful they are, about how important they are as strategic alternatives for large and small organizations alike.  And we must remember, for large organizations to think this way and seek the learning that is necessary, is not about being altruistic…it is about building understanding of what it takes for their clients to succeed and then moving strategically to ensure those supports are still there (though helping a struggling arts or environmental  group is also a good thing).   The profit sector has used these tools to build market share and dominate, but that does not mean that we, in the nonprofit sector, need to behave in the same way.   This is not about developing  "power over,"  it is about developing "power with.'' It is about approaching these issues with a spirit of partnership and a strong focus on the ultimate bottom line…the long term health of our community.

Jane will be submitting this entry to the Providence Journal as an editorial. 

Photo Credit:  USAsearch.gov Public Domain Images

A New Dawn in Difficult Times

I woke this morning just as the sun was rising.  It was one of those mother of pearl sunrises with streaks of pink and grey and white.  As I watched, the sun inched above the horizon and then, I realized all of a sudden, started to rise at an angle, moving from one window pane to the next.   I was startled to see this and startled at being startled.  Had I really never noticed that the sun rises, not straight up in the way that it seems to set, but moving on a gently incline from left to right?  Of course, I know that the  earth revolves and the sun stands still and it would make sense that , as the earth goes round,  the sun would rise at an angle.  Perhaps the angle is steeper in Maine, where I am now, and that' s why I am seeing this now.  But I did have the sense of being reminded of something essential and fundamental and inescapable that is an underlying reality to whatever else is happening in the world.

This has been a hard week in which I have had the same conversation with my client CEO's over and over again.  These conversations went something like this:  "I didn't choose this career to turn away people in need, to cut my staff's salaries, to lay off colleagues of long standing.  I didn't choose this job in order to fight with politicians.   I can't accept that the work of my lifetime is now in the hands of seemingly helpless, hapless, clueless bureaucrats who have no idea what to do, who seem incapable of thinking clearly if they have less money to spend, who can't set or see priorities or make decisions on principle.  I didn't choose this;  I don't want this;  I don't like this."

The  impact of the economic downturn is now a  crisis for the nonprofit sector, a seismic shift in our reality.  But we have to remember that just as the sun rises, equilibrium will return.   New patterns will emerge and we will shift our perspective.  Within the seeming chaos of this contraction, are the seeds  of  order renewed.  When it comes, it will be like seeing something familiar in a new way. 

Photo Credit:  http://www.flickr.com/photos/pearbiter/

Introduction to Social Media...look - it's a blog post!

Are you as amazed as I am at how quickly time passes? It's been too long since we've blogged..but today I delivered a three-hour session on social media to a wonderful group in Bridgeport, CT.  The session was sponsored by the Fairfield County Community Foundation and the CT Association of Nonprofits.  As I shared with them the importance of the engaging in conversation via social media, I had to admit that FIO Partners had dropped the ball in recent months on blogging...alas.  [We have been twittering though!]  Today's session though was held in a room without access to the Internet which can be tricky when you are trying to teach social media.  There are a number of resources that I mentioned that I thought would be helpful to consolidate here - enjoy!

Today's slides: Introduction to Social Media 

FIO Partners Framework for Strategic Management:  This article describes the framework we discussed in today's session in more detail.  It is free with registration of your email.

Twitter Presentation:  Twitter & Your Business (We covered some of these slides today - but there is a bit more content in the presentation from earlier this spring which was developed for an association of communications professionals.)

Overall Resources: 

• WeAreMedia
• "Groundswell"
• NTEN

Nonprofit/Social Media Bloggers: [I've included Beth Kanter's blog - and a couple of others I enjoy!]

• Beth's Blog: How Nonprofits Can Use Social Media
• Amy Sample Ward's Version of NPTech
• Zen and the Art of Nonprofit Technology

Tools to Support Measurement and Monitoring:

• Google Analytics
• Google Alerts

Examples:

• Social Media Policies & Perspectives from Beth's Blog
• Comment Moderation Flow Chart from the US Air Force
• Current Statistics of Social Media Use/Social Revolution Video
• Using Advanced Search on Flickr for Photographs (scroll to the bottom to learn about the Creative Commons license) 
• Grasshopper (example of viral marketing) and Grasshopper Launch Video
• Taste of the Valley Page on Facebook (the benefit event I mentioned)

One additional resource that may be helpful is the comprehensive collection of tutorials and tools consolidated and brought together by the Case Foundation as part of their Gear Up for Giving effort.  

I love teaching this material and encouraging organizations to explore the world of new media...and at least, begin to consider how these amazing tools and technologies can support the positive change you are trying to make in the world.  The more you can link your social media activities to the strategic management of your organization and to clear objectives: the more successful you will be.    

To those who attended today's course - stay in touch!  I would love to hear how you put what we talked about today into action...post a comment or question here, send an email, or catch up with me on Twitter -- good luck!

And the time flies by...

Jane and I have recently realized that blogging is, well…it’s been difficult to get to these days.  This is not an entry about making excuses…it’s an entry about the challenge between delivering high quality client service and finding the time to be introspective about our work and to share that learning with you.    Very often, we will create a research document for a client or be asked to look into a specific trend in the nonprofit sector.  The document is created and then, that’s it.  Between clients and family commitments, we are struggling with how to capture our experiences and observations and, in many ways, cull out the essential learning for our readers.  That being said, we are turning over a new leaf and, in the coming months, hope to share with you more of what we are up to…and more of what we are learning while we are in the field.  

So what have we been doing the last few months?  Multiple projects spread over seven states and Canada for one thing.  The focus of our client engagements has focused in three main areas: 1) nonprofit collaborations and strategic alliances of all different forms, 2) strategic planning, and 3)information management.  We are currently providing support to the following kinds of nonprofit collaborative efforts:  the creation of  three nonprofit networks (for service delivery and for economies of scale), a management service organization, a parent corporation, and two mergers.  As nonprofit collaboration continues to be a hot topic, nonprofits are struggling with not only understanding the types of options available, but how to identify partners and then engage in a healthy, successful implementation.  Are you seeing this interest in your area of the sector as well?

We are also supporting a number of agencies in developing strategic plans.   You may think that a downturn is a difficult time to plan – but we believe it is, in fact, a perfect time to develop a better understanding of your organization’s current situation and plot an evidence-based course for the future.  From key informant interviews to internal capacity assessments, gathering information to create a common base of information to support decision making is the central tenet of our approach.  How is your organization looking at planning these days?  A luxury or a necessity?

And we continue our work on information management, supporting an intriguing study of how nonprofits do and don’t use information and evidence to guide decision making.  We are piloting a guide for program managers on how to think about the critical success factors for their programs and to link those critical success factors to data collection.  
 
Questions about our work?  Or questions about your work as it might relate to ours?  We would love to hear from you…

Photo: Flickr, l.i.l.l.i.a.n.

A bit of inspiration...

It's been quite some time since we've posted to FIO Partners Perspectives - but this seemed like the perfect way to jump back in... in these tough times, enjoy a bit of inspiration from the folks over at Grasshopper.

May this find you well....

The Recovery Act's Impact on HR

A colleague consulting firm of ours (Brockman, Coats and Gedelian in Akron, Ohio) has sent the following and asked that we alert our clients to the HR implications embedded in the Federal Recovery Act provisions. We are passing this along in case you are unaware of these implications.

The Recovery Act's Impact on HR

On Tuesday, President Obama signed into law the American Recovery and Reinvestment Act (the Recovery Act). This act will have immediate and possibly long term impact on businesses and their HR functions. One of the areas addressed is the extension of unemployment benefits. The current program that offers an additional seven weeks of unemployment benefits has been extended by nine months. 

In addition, the Recovery Act includes temporary changes to the COBRA law. The Act includes a program that offers employees that were involuntarily terminated between September 1, 2008 and December 31, 2009 assistance in paying their benefit premiums.  Qualified individuals will receive a 65% subsidy for their COBRA premiums. Employers will pay for this subsidy initially and then be reimbursed through a credit against their payroll taxes. This assistance will be available for the first nine months of the usual 18 month benefit.

These changes will impose a considerable administrative burden. Employers and their COBRA administrators will need to implement significant changes in a short timeframe. The following are some of the administrative processes that will have to be reviewed for potential change:

• Employers or their COBRA administrator will need to craft a specific Qualifying Event Election Notice to send to all employees who terminated employment since September 1, 2008. These employees will then have 60 days to elect COBRA with the new premium subsidy.
• Employers or their COBRA administrator will need to notify existing COBRA participants of the new premium subsidy and their new premiums going forward.
• Administrative procedures must be implemented to manage the changes (e.g., new premium rates @35%, new notices, and calculating the amount of the subsidy actually utilized each month so the proper amount can be credited against the employer's payroll taxes).
• A new COBRA Event Notice must be created to inform COBRA participants when they reach the maximum subsidy limit, and that their premium will revert to the full cost of the health coverage.
• The existing COBRA Initial Notice and Qualifying Event Notice will need to be modified to include the new subsidy rules going forward.

At this point, the subsidy provisions apply only to terminations through December 31, 2009. After that date the Notices and tracking will have to be changed again, to go back to previous rules.

About the Author
Jim Coats is a manager in the firm's human resources consulting practice, under its affiliate, BCG Resources, Inc. His specialized expertise gives our clients customized, cost-effective solutions to human resource-related projects and issues. With over 13 years of related experience, Jim's extensive HR background includes work as an HR manager in both the manufacturing and construction industries. Jim holds the SPHR (Senior Professional in Human Resources) certification and earned a BSBA in Management from The University of Akron. He is an active member of the national and local chapters of the Society for Human Resources Management (SHRM) and is chairman of the Governmental Affairs Committee for Akron SHRM and is also a member of the Business Development Committee with the Medina Chamber.

Upcoming Webinar Series - Strategic Alliances

Strategic Alliances:  Managing Decision Making Around an
Increasingly Likely Strategic Option for Nonprofits
4-Part Webinar Series

We are very pleased to announce that we will be conducting a four-part webinar series on Strategic Alliances for the American Network of Community Options and Resources (ANCOR). ANCOR is a nonprofit trade association representing and advocating on behalf of the more than 800 private providers of services and supports for nearly 500,000 Americans with disabilities that employ over 400,000 direct support staff in 49 states and Washington, D.C.

Dates: March 5, March 19, April 2, April 16
Time: 1:00 pm - 2:30pm Eastern
Presenters: Jane Arsenault, MBA, Principal, & Anne Yurasek, MBA, Principal, FIO Partners, LLC
Intended audience: Executive Directors, Emerging Leaders, and other interested agency staff

This four session course based on a case study will take decision makers through a strategic management framework that will examine the need for a variety of alliance models as tools to cope with an increasingly hostile environment. As leadership choices within the case unfold, the course will explore the options which are right for an organization and clearly define the roles and responsibilities of all members of nonprofit board and staff in planning and implementing an alliance. The FIO Partners Strategic Management framework provides a clear and useful conceptual framework for managing a nonprofit agency that can respond to increased accountability and rapid change. The model defines the four key tasks as: (1) consensus on vision, mission, values and agreement on strategic management tasks; (2) designing or redesigning the organization’s core; (3) safeguarding and supporting the core; and, (4) improving the core. As organization leadership moves through the steps of framing a plan, opportunities to work with other organizations will arise. Nonprofit leaders will learn to use collaboration as a strategic tool to enhance, rather than undermine, mission. This course will explore the various options for collaboration and consolidation and will provide insight into issues that may arise as a member of an alliance.  The course will also include an online learning community throughout the eight weeks to encourage knowledge exchange in between webinar sessions.

If you are interested in pricing and registration, click here.  If you would like to learn more about FIO Partners Strategic Management Framework, check out this article (free with registration). 

Ask FIO: Merger Liabilities

This is the first Ask FIO column, where FIO Partners responds to YOUR questions - it comes from an organization in California that is considering a merger.

"First, our potential merger partners have been told that a merger may reopen their 501c3 to being re-evaluated by the IRS. Second, they are afraid that they may be held responsible for any unknown future liabilities although we have declared all existing liabilities which we are committed to resolving before the asset transfer. I'm unsure how to proceed on these two issues. Any insights you could offer would be much appreciated."

Both of the issues you name are legitimate concerns…that is, they are not far fetched or impossible events.  That said, risk is part of life and risk management is often the best we can do.  Re: 501c3 status…if the missions of the two organizations are close, this shouldn't be a problem and a review is improbable.  If such a review did occur, your merger partner would be vulnerable if some part of their or your activities is not within the scope of the IRS definition for 501c3 status.  Is there cause for concern?  Have your auditors or theirs ever flagged this as a concern?  At worst, that part of the activities would be viewed as UBIT...unrelated business income and would become taxable.   To my knowledge, the IRS is not known for pulling 501c3 status outright unless there is flagrant abuse.

Re: future liabilities:  the largest areas of potential future liabilities are likely to be personnel and personal injury/negligence claims, with professional liability issues a distant third.  I assume you have insurance…your current coverage should extend to claims filed after the merger, if the events occurred during the time when the policy was active.  Check with your insurer(s) to make sure this is the case.   Your merger partner should be looking at your turnover rate, employee grievances filed, firings in the last few years, any charges of human rights violations, etc.  If there are no such incidents, then the possibility of something like that coming up is greatly reduced.  Similarly with negligence, personal injury, or professional liability incidents.  You should be obligated to disclose any such incidents that are not resolved as well as any that have occurred so your partner can determine if you had a habit of acting irresponsibly.  Again, no such incidents, and the risk of their having to deal with something is greatly reduced.

Essentially, there isn't a way for them to entirely eliminate any risk, but you should be able to build a base of information that allows them to clearly determine how much risk they actually have.  In the end, how risk aversive they are will determine what they do.

I hope that is helpful.

Jane

Got a question? If you have a question that you would like answered by FIO - just send it over to info@ fiopartners.com!

What will the new administration mean for the nonprofit sector?

As the administration of Barack Obama begins to move forward, we are hopeful - along with so many other Americans across the country.   There is no way for us to know what lies ahead for our nation, and more specifically, for the nonprofit sector; but there have already been some indications that the sector may be headed for some significant changes. 

• In the short term, the economic pressures will continue to force nonprofit organizations to do more, with less; to contract their services; to look for partners and to create innovate collaborative models - networks, parent corporations, and mergers.  Some have already closed down and we suspect more will follow.

• Some non-profits will be more adversely affected than others - as some states reorganize how they contract with nonprofits to provide services to vulnerable populations.  The economic downturn will make it harder for these nonprofits to cope with state-driven changes in funding models. 

• Although there may be trickle-down of funds from the possible economic stimulus package currently proposed by the Democrats - these funds may not arrive in time to avoid significant contraction at some organizations and in some areas of the sector.  We must remember that most of the stimulus package is not aimed at the nonprofit sector at all.  

But is it all gloom and doom?  

No, it is not.  We are seeing an interest…an inclination…a sense of hopefulness - that if the current situation is as bad as it is - perhaps this is a time to throw caution to the wind, admit that the old way of working doesn't work, and change.  Not small changes - big changes.   Organizations will be asked to shift their thinking - from competition to cooperation, from operating in a silo to the expansion of partnerships across a community, from leading to win to leading to influence and shape…a new paradigm. We see nonprofits banding together to make better use of their economic purchasing power,  to tackle significant community issues in a community or region, to redefine continuums of care for vulnerable populations. Each of us can do a part to contribute to this new way of thinking - this new paradigm of connectedness. 

It's a new day - and we are hopeful.  Are you? 

Photo Credit: PrinceRoy