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Breaking the Nonprofit Starvation

Cycle

September 15, 2016

David JohnsonInterim Executive (CRO, COO, CFO) Restructuring and Turnaround Advisor

Abraxas Group LLC

www.abraxasgp.com

“Nothing could be worse than the fear that one had given up

too soon, and left one unexpended effort that might have

saved the world.”

‒ Jane Addams

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A Scarcity Mindset

• The nonprofit industry is severely inhibited by a mindset of reflexive scarcity and incrementalism.

• Nonprofit leaders, and boards, see enticing options, but many cannot see a feasible path toward pursuit of those options.

• The challenge now is for nonprofits to take control of their destinies and remake themselves to better serve their missions.

For nonprofits to reach their full potential, the scarcity mindset must be overcome.

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• Nonprofit funders have increased pressure to reign in overhead expenses.

• This pressure has created a vicious cycle of underinvestment at many nonprofits.

• As a result of this underinvestment, many nonprofits are falling behind.– Staff Morale

– Program Reach

– Donor Development

Funder Pressure: A Vicious Cycle

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Source: The Bridgespan Group

• Nonprofits facing budgetary pressures are tempted to understaff programs and keep salaries at below market levels

Losing the Hearts and Minds of Employees

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Salary

Support

Development

• Employees willing to accept the low pay also find a lack of staff development opportunities, as well as overworked managers unable to assist

• Employees feel increasingly underappreciated and overworked

Building a Strong Core

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• A viable nonprofit is one with sufficient core mission support to expand.

• The goal should be to not only deliver excellence in current program offerings, but to expand and innovate.

Source: Nonprofit Assistance Fund

Unprofitable

• Funders dictate terms

• High turnover, low morale due to lack of funds for salaries and development

• Program innovation stalls

• Severe underinvestment in technology, marketing, and public relations

Profitable

• Sought out by funders

• Prized employer, able to attract, retain and develop talent

• Program innovation accelerates

• Strategic investments strengthen organization

No Margin, No Mission

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While nonprofit organizations do not exist to make a profit, a positive margin (program revenues + donations – total expenses)

is essential for the long-term health of an organization.

Programs

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Mission / Margin Analysis

Low High

High

Low

Marg

in

Mission

Failure to periodically assess the “fit” of programs operated by a nonprofit can do much to undermine an organization’s viability.

Strategy

What is the goal?

Competencies Funding

Components of a Nonprofit Turnaround

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Team

What are / should we, be good at?

What resources are available?

Who will implement the plan?

Trade-offs

• Turnarounds are always challenging, and in many ways the turnaround of a nonprofit is especially difficult.

• Painful decisions are necessary:

Laying off staff

Closing down programs

Etc.

It is exactly these decisions which lay the groundwork for a stronger, more vital organization in the future.

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The one common thread of successful turnarounds is the need to put an end to the status quo. There can be no return to the old way of doing things.

120 Year Old Social Service Agency

• Interim COO

• Managed turnaround

• Organization is now under new leadership and is

Substance Abuse Treatment Provider

Alternative Elementary School

• Board Member

• Oversaw development of strategic plan

• Growth has accelerated, and morale is improved

• Advisor

• Developed strategic plan in concert with leadership

• Organization returned to profitability and key initiatives are underway

Driving Change in Nonprofits

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• David Johnson is a career change agent who has served as nonprofit organizations as an advisor, board member, executive coach, and interim manager.

• David has several publications to his credit and is a regular speaker on the topics of change management, performance improvement, turnaround and restructuring. He received his MBA from the University of Chicago and completed his undergraduate studies at Fairleigh Dickinson University.

David Johnson

Abraxas Group LLC

www.abraxasgp.com12

Email: david@abraxasgp.com

Ph: 312-505-7238

Twitter: @TurnaroundDavid