Many Canadian charities were already struggling to meet rising needs. They certainly didn’t need a postal strike during their biggest fundraising time of the year. Even though many donors now give online, many of the older and more generous donors wait for a letter and mail back a cheque. I hope most of them still will, now that the mail is being delivered again, but the lost donation revenue could be a final straw for some.
Sadly, the ones that disappear may have been offering invaluable services to their community. I believe that trying to save those services, especially for those who have no real alternative, needs to be the priority when making tough decisions.
What can a desperate charity do?
1. Probably not a merger
Organizations in financial difficulty are not attractive merger partners. Nor do they have time to find the right partner, work out all the many issues (including but not limited to name, strategic plan, staffing, assets, leadership, programs, volunteers, corporate services, membership, bylaws and especially culture).
Those who have led successful mergers talk about eighteen-month or longer lead times! And there are usually significant costs for accountants, lawyers, HR specialists, governance and/or change management consultants, Special General Meetings, and probably some severance packages.
2. Back to the Kitchen Table?
Many charities started as all-volunteer, and many stay that way. But those that need professional skills, dedicated facilities and accountability to donors, grantmakers and governments can rarely maintain significant services and programs without staff expertise.
Anecdotally, some rebuild. I suspect we don’t hear much about the larger number that start a downward spiral and never turn it around. What makes you think yours can?
3. Acquisition Maybe?
In the voluntary sector, acquisition of small or struggling charities by larger, better funded ones sometimes gets called a merger to help save face. But it’s really a transfer of assets with the struggling one having some influence but little or no decision power. They are much less likely to get seats on the board or be able to protect their staff. But if the programs and services are continued with sensitivity and high quality, clients and other beneficiaries may not care.
It’s likely that some donors and volunteers will be lost, but charities really don’t exist to serve them. In dire circumstances, the focus must be on those who need the programs and services.
I acknowledge that a huge number of our charities were started because the existing ones in the sector were not culturally competent to serve your beneficiaries. But many of those have been trying to get better at diversity, equity, inclusion and belonging, and could get even stronger if your program staff joined them. If you can, offer education in how and why your services and programs differ. I didn’t say any of these choices were easy.
4. Less Dramatic Downsizing
A strategy session that considers which programs and services could survive if others were stopped or transferred is a must at this stage before taking drastic action. Consider not just which ones attract funding but which are needed most.
You keep the highly impactful, critical well funded ones if at all possible. Duh!
Important programs that have failed to attract enough funding but can no longer be subsidized might survive if transferred to, or run jointly with, an organization with a stronger fundraising program or better reputation with grantmakers. DON’T just drop programs critical to your community and hope; negotiate wisely and help the clients transfer.
Less critical programs sometimes exist to subsidize the critical ones. For example, a swimming pool used for therapy or health may be open at other times to paying members of the public. Such services don’t have to stop if you are still able to offer them.
And the poorly funding and not critical programs? Either they came from mission creep or have outlived their once-useful life. The crisis is doing you a favour by forcing an end to programs that may have continued as someone’s pet issue or misunderstanding. I once found an organization’s flagship, much heralded, most important program had in fact dwindled to 3 clients in an organization that served hundreds every week. The leaders simply hadn’t checked. Cancelling such programs might be enough of a lifeline to keep the charity going.
Of course, it’s also a good time to cancel expansion plans and expenditures that can be deferred until the financial situation is stabilized. In considering which expenses to cut, remember the extra stress staff members are experiencing; this isn’t the time to cut benefits or professional development.
5. Orderly Wind-Up
Perhaps the declining revenue relates to reduced relevance of the mission, or good alternatives for the programs and services. It’s time to stop and put community resources, including volunteer time, and your assets, to better use.
Nearby partner organizations may be able to accept a higher rate of referrals for those most in need, and might even hire some of your staff, especially if some ongoing grants can be transferred.
Accountants, lawyers and a special members meeting will likely still be needed. Staff need support, such as outplacement services, references, termination pay and an effort on the part of managers to find them similar positions if the partner organization can’t take them. So don’t wait until broke.
DON’T be like the incompetent, totally unethical leaders we saw with one Toronto charity who didn’t even communicate with the staff. They just locked the doors and put up a sign. It was disgusting.
6. Urgent Appeals
Does the charity matter to the community at large? Has it made itself so indispensable the community will not let it fail?* Who would truly miss it, of those not directly involved? Who would have to deal with the impact of closure (like emergency rooms if harm reduction sites close)?
While considering the options above, why not communicate the situation widely to the community? Include not only your donor, volunteer and grant-maker base but also local politicians, business associations, major employers and foundations that have never given to you. Talk to senior people at your local United Way, community foundation and others with a mission of supporting the community. Make sure to include former board members and executives who left on good terms.
I’ve seen such appeals work sometimes. It certainly helps to have a strong champion like a very influential mayor. I haven’t seen any research on the factors influencing success.
Trying this approach is an excellent way for your current board members to really speak from the heart to their networks. If the appeal works, you’ve broadened your support for the future.
7. Closing
Before the postal strike happened, and my hip replacement surgery, I was drafting a blog on leadership issues with major restructuring. But the Options issues seemed more timely. I’ll post another blog soon on the original topic.
* Phrase courtesy of Hildy Gottlieb, Creating the Future.
