Guest Blogger

Surviving The Recession

Filed By Guest Blogger | March 26, 2009 12:30 PM | comments

Filed in: Politics, The Movement
Tags: LGBT organizations, merging gay groups, recession, restructure non-profits

Editors' Note: Guest blogger Dixon Osburn was the Executive Director of Service Members Legal Defense Network for 13 years.

Dixon_Osburn.jpgIn my last guest post, To Merge or Not To Merge, I argued that the recent call for LGBT organizations to merge to fight off the recession conflated three principles: sound business reasons for merger, taking sensible steps to ride the recession wave, and re-imagining the equality strategy for our movement. I specifically argued that there are reasons to merge and reasons not to.

There are at least five reasons why one or more organizations might consider merger advantageous: to grow revenue by merging organizations with distinct donor bases, to increase synergy by combining similar programs run by different organizations, to diversify by combining organizations with distinct missions and strategies, to improve economies of scale by reducing duplication in overhead, or to eliminate competition.

I argued that just as there are reasons to merge, there are reasons not to merge. The actual financial costs of combining one or more groups may exceed the benefits of merger. The groups may have different political philosophies or missions that are not compatible. The more financially stable organization may be less adept at producing results, effectiveness that may get lost if the smaller organizations gets swallowed up. Lastly, organizations failing financially may simply not be worth saving through merger. Indeed, recessions are not the reason to merge, but may provide an opportunity to consider whether merger is a wise strategy.

The question that is before us as a movement is whether our leading organizations need to simply make adjustments to survive the recession or whether the recession provides an opportunity to re-imagine our movement for equality.

Recessions are tough. Some organizations may fail. Others may survive, but lose significant staff or programs. The necessity of tightening belts may not be a reason to merge, though. This column focuses on steps organizations should consider to ride out the economic crisis. My next column will focus on whether we should rethink our movement-wide strategy for equality.

To survive, there are three fundamental steps that organizations should take during an economic downturn: focus on core strategy; build, maintain or minimize loss of revenue; and cut expenses.

The first step organizations must take during the recession is to recommit to their core strategy. Organizations should review their mission, goals and objectives and ensure that the programs are fully aligned with the core strategy of the organization.

What is you're reason for being? Whom do you serve? How do you accomplish your goals and objectives? Is your primary focus local, statewide, national, or global? Are your goals SMART - specific, measurable, action-oriented, results-oriented and time-determined?

What are the organization's strengths and weaknesses, and what are those strengths and weaknesses relative to other organizations conducting similar activities? What metrics has the organization developed to gauge success against its strategy, and what do the metrics indicate about the strategy's efficacy? Any questions about what programs to shed should be driven by the organization's strategic plan.

The second step organizations should take during this recession is to strengthen its fundraising program. The key to any strong fundraising program, like any stock portfolio, is diversification. Organizations that rely heavily on a handful of donors are at greater risk of failure. Those that rely on one revenue stream from foundation, corporate or government grants also face greater risk of going under.

In today's market, most corporate grants have dried up. Foundations that are trying to protect their endowment are either making no grants, or no grants to new grantees. Some new government grants may be available through the huge increase in federal spending. The key to any solid fundraising effort, though, remains through individual donors. The key to individual donor fundraising is building and maintaining strong relationships.

Organizations should review their fundraising plans frequently given the current economic crisis. Conduct quarterly trend lines rather than annual trend lines so that the organization can make adjustments more rapidly. Review fundraising assumptions with a fine-tooth comb.

Organizations with major donor programs should stay in constant communication with the major donors and have honest conversations with them about their ability to give this year. Adjust your budget accordingly. Continue to aggressively reach out to prospective major donors who may be better able to increase their giving as other donors retrench.

Organizations with annual giving campaigns should be prepared to ask for smaller gifts, but ask for them more frequently. In a recession, a donor may not be able or willing to write a single check for $100 this year, but may be able to give you five gifts of $20. Strengthen your electronic and online fundraising appeals, but do not cut your direct mail programs, as the two work hand in hand.

For all of your donors, demonstrate care and concern for them. If they have fallen on difficult times, invite them to events free of charge. They will remember the courtesy. Thank them profusely at every turn. Personal contact is key -- from staff, board members and clients. To all donors, talk about your continued programmatic successes, while demonstrating frugality and prudence.

If the organization provides services, look to expand services geographically. If the organization has reserves, and every organization should plan on reserves of a least six months, borrow from them. This is your rainy day fund, and for some organizations, it is pouring.

There are many other tips on how to fundraise during a recession. This is the time to implement best practices and diversify the fundraising base if it has not been done before.

The third step that organizations should take during the recession, if needed, is to cut expenses. Postpone any expenses that are optional, including conferences, travel, or new brochures. Renegotiate rates with consultants and vendors. They are hurting for business as well, and want to retain their customers. Put into place austerity measures that rein in spending on supplies, mailing and other line items. Cut the frills from events. Look for free services including web hosting and email service. Share office space or personnel with allies. Be honest with the staff about the organization's economic picture and invite them to identify solutions. These are the easy adjustments.

The hard cuts are those that involve staff. Personnel costs are typically the largest budget item, and the only way to make significant cuts in the overall budget. Before lay offs, though, consider furloughs, reducing the work week by five hours, reducing salary across the board by 5%, suspending certain benefits, or imposing a hiring freeze. If lay offs are inevitable, let the mission and strategy drive those decisions. Stick to the core business.

Some organizations will adjust to the economy by taking prudent steps to strengthen their strategy, preserve their fundraising base and cut costs. Some organizations may not survive. For any individual organization, the question of merger should be driven by their own strategic plans. For the movement overall, however, the recession may provide an opportunity for leaders to rethink the movement's strategy for equality and demand certain changes. My third and final column in this series will examine some of the strategies leaders could explore to strengthen the LGBT movement.


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Very hesitant about the merger idea now...
If HRC were the only game in town, would we see the new ENDA policy statement?

And how easily would they violate it again were there no effective counterweight to give voice to our collective discontent?

Most are in competition to smooze the same wealthy donors. How would a merger work ? There are only so many "angels" around.

Great series, Dixon. You raise some good points.

To Maura's comment: I agree it would not be good, for any number of reasons, if HRC was the only game in town. I think another way to look at the matter of mergers, however, is whether there are broad categories of organizations that make sense to roll together, for example, legal organizations like Lambda, GLAD, and NCLR, or more legislative/ executive focused orgs like HRC, NGLTF, and the Victory Fund. (Let me be quick to add: I'm not suggesting that it's necessarily a good idea for those organizations to merge--only that that's the type of question we should be asking.)

On the issue of cutting expenses, here's one idea I've thought would be good: The quality of Web sites for smaller LGBT orgs varies greatly. If there were a structured yet somewhat customizable Web service for these orgs to share (say, a hosting and content management package), because the orgs pooled their IT money, then it would be easier and cheaper for them to develop and maintain their sites. (People at the individual orgs could create the content. A handful of folks could maintain the infrastructure for everyone, since it would all be on the same backend.) Or they could all ditch their standalone sites, but for an introductory page, and move entirely to Facebook. (Again, not sure that's a good idea, but some of the smaller orgs might find it useful.)

I'm guessing that shared services like that may in fact help to avoid full-scale mergers. Running the same software does not mean sharing the same views, so we would still get the diversity of opinion needed to make our movement flourish. (I'm sure there are other services that could be pooled as well--payroll, package delivery, etc.)

dixon, are you reading the comments people are posting here? i notice each time you post, the first concern that people raise is how a bunch of merged organizations would (or wouldn't) manage the diversity of the lgbt community. but i don't see you responding to those questions.

Dixon Osburn | March 27, 2009 2:14 PM

Jay -- I do read the comments. I am enjoying the dialogue. I agree with the concern that merging certain organizations would reduce the diversity of opinion in the movement. This series of blogs is intended to start a conversation about whether mergers are indeed appropriate and under what circumstances. Everyone keep writing! Your opinions are most welcome.

Feel free to add to the comment discussions, Dixon. Part of the fun of Bilerico is getting the author to further the post in the comments section by being involved in the dialogue. As you can see, Projectors hate someone who "posts and runs" the most. :)

I've really enjoyed the series, but I'm wondering if you'd be willing to go out on a limb here and list two orgs that it would be a good idea to merge and two orgs that it wouldn't be a good idea but has been discussed.

Everyday Transperson | March 27, 2009 1:20 PM

"The hard cuts are those that involve staff. Personnel costs are typically the largest budget item, and the only way to make significant cuts in the overall budget. Before lay offs, though, consider furloughs, reducing the work week by five hours, reducing salary across the board by 5%, suspending certain benefits, or imposing a hiring freeze."

OK, but let's talk about where the REAL costs are in non-profit personnel costs. Have a look, the salaries may surprise you:

http://www.washblade.com/2009/3-27/news/national/14269.cfm

Funny it was never mentioned once in this article about trimming the salaries of the top "executives" of these non-profits...........

Robert Ganshorn Robert Ganshorn | March 31, 2009 8:09 AM

The March 31st issue of "The Blade" shows the highest salary going to a DC HIV "meals on wheels" provider Craig Schneiderman of $382,200.00. His is a small org with 7.9 million in revenues and 50 employees. That is a scandal.

interestingly,"the hated" Solmonese's HRC is a much larger organization, but his salary is $338,400. Quickly beyond this the salaries mentioned drop to the 170K range which, depending upon skill set, is a good value for a chief executive. Much as you might want someone who is all heart (with holes in their pockets)there needs to be someone at the helm who understands how to run an organization.

Father Flannery and Mother Teresa are dead.

Keith Meinhold | March 28, 2009 2:00 PM

A merger strategy sometimes means survival. Some LGBT organizations with legitimate value are hanging on by a thread with the threat of going under. How many good organizations have we seen just disappear - thereby leaving their focus & constituencies unheard?

To me these are the obvious organizations that should be pursuing a acquisition/merger strategy.