Executive Management Workshop

1. Executive Management Workshop Strategies For SurvivingThe “Great Recession”

2. News Flash Joseph to Pharoah: “The Lean Years are here.”

3. Ground Rule # 1 “The only way past this thing is through it.”

4. Ground Rule # 2 “Thou Shalt Not Whine.”

5. 3 Strategies That WON’T Work • Holding your breath, avoiding change, and hoping the economy improves soon • Growing your way out of your deficit with lots of new programs • Achieving a new more just social order as your main short-term survival strategy

6. How Bad Is It? • “Last year was also the worst year economically in America since the Great Depression.” • “Total charitable giving fell 3.6% (-3.2% adjusted for inflation) in 2009….This is the steepest decline in current dollar terms since Giving USA began its annual reports in 1956.”Source: “Giving USA 2010: The Annual Report on Philanthropy for the Year 2009”, The Center on Philanthropy at Indiana University, released June 9, 2010.

7. How Bad Is It? The Foundation Center surveyed over 1,200 large and midsize foundations in early 2010 • “Challenged by an prolonged economic downturn, the nation’s grant-making foundations cut their giving by an estimated 8.4% in 2009….” • “The decline is the steepest since the center began tracking the data in 1975.”Source: “Foundation Giving Declined by Record 8.4 Percent in 2009, Study Finds” Chronicle of Philanthropy, 4/19/2010.

8. How Bad Is It? Nonprofit Finance Fund surveyed 1,300 CBOs in March 2010 • 32% ended 2008 with a deficit • 36% ended 2009 with a deficit • 35% ended 2009 with a surplus, but only 18% expect to end 2010 with a surplusSource: “Nonprofits Anticipate Challenging Year, Survey Finds” Chronicle of Philanthropy, 3/23/2010.

9. How Bad Is It? Nonprofit Finance Fund surveyed 1,300 CBOs in March 2010 • 59% expect less government funding in 2010 • 55% expect less foundation funding • 44% expect less corporate support • 23% expect less individual contributions Source: “Nonprofits Anticipate Challenging Year, Survey Finds” Chronicle of Philanthropy, 3/23/2010.

10. How Bad Is It? Nonprofit Finance Fund surveyed 1,300 CBOs in March 2010 • 12% have no operating cash available • 18% have 1 month of operating cash on hand • 31% have 2-3 months of operating cash on handSource: “Nonprofits Anticipate Challenging Year, Survey Finds” Chronicle of Philanthropy, 3/23/2010.

11. The Lean Years Are Here • FAT YEARS:1992-2002: number of non-profits rises 76% • LEAN YEARS: • 2002: first all-GOP budget • 2005:15 federal programs end • 2006: 39 federal programs end • 2002-2006: nearly 2/3 of domestic discretionary programs lose ground to inflation, 18 of 23 line items in HUD budget are reduced

12. The Funding Outlook in 2006 Was Grim The severe cutbacks the federal government has made in financing for social programs in recent years, often accompanied by similar reductions in state funds, have endangered many community-based organizations that have provided essential services to the poor, minorities, and other needy people. Foundations and wealthy people have not filled this budgetary gap. In fact, many grass-roots groups, especially in the South, report that philanthropic money has become scarcer. The result: Many small nonprofit groups have either gone out of business or have had to reduce their programs and staff. Even some well-regarded national organizations have been forced to close because they had insufficient funds. Source: Chronicle of Philanthropy editorial, 2/23/06.

13. Then Things Got REALLY Ugly. • 2002-2009: Rising costs, rising deficit, and tax cuts all force federal spending cuts - lead to state/local cuts • 2007-2008: Credit markets collapse: credit dries up • 2008-2009: housing market crashes - home values (and individual wealth) plummet • 2008-2009: Stock markets collapse: foundations lose 30% of assets, individuals lose much of life savings • 2008-2009: Unemployment rises, state and local income tax revenue falls • 2008-2009: NYS loses hundreds of trillions of finance-related business, 25% cut in discretionary spending seen

14. When Will All This Go Away? • Credit markets collapse: credit dries up • Stock markets collapse: foundations lose 30% of assets, individuals lose much of life savings • Housing market crashes - home values (and individual wealth) plummet • Unemployment rises, state and local tax revenue falls • Rising costs, rising deficit, and tax cuts all force federal spending cuts - lead to state/local cuts • NYS loses hundreds of trillions of finance-related business (investment banking, mortgage derivatives, insurance on mortgage derivatives)

15. “Nonprofits Imperiled By Low Reserves:In Tight Times, Lack of Cushion Can Mean Failure”Washington Post, 6/24/09 More than half of Washington area charities had dangerously low operating reserves even before the recession began, leaving them especially vulnerable to service reductions in a time of sharply declining revenue, according to a new report. Fifty-seven percent of charitable organizations had less than three months of reserves -- the industry standard -- in the bank in 2006, according to a study scheduled to be released today by the Urban Institute, a Washington-based think tank that specializes in economic and social policy. Operating reserves are considered crucial if nonprofit groups are to weather a recession, but 28 percent of area groups had none.

16. SHNNY Survey, May-June 2010 Survey Sample # Responding % of Total Annual Budget Size 6 12% Under $1 million Small Medium 24 $1-5 million 48% Over $5 million 20 Large 40%

17. All Agencies # Days Small (under $1 million) Medium($1–5 million) Large(over $5 million) SHNNY Survey, May-June 2010 Operating Reserves (n = 48) 1 - 15 13% 17% 9% 16% 16 - 30 25% 17% 43% 5% 31 - 90 27% 33% 26% 26% 91 - 180 25% 33% 9% 42% 181+ 10% 0% 13% 11%

18. # Days All Agencies Small (under $1 million) Medium($1–5 million) Large(over $5 million) “Flying Without A Net”SHNNY Survey, May-June 2010 Operating Reserves 52% 21% Less than 31 days 38% 34% 78% Less than 3-month “standard” 65% 67% 47%

19. “Nonprofits Imperiled By Low Reserves:In Tight Times, Lack of Cushion Can Mean Failure”Washington Post, 6/24/09 "It's an amazingly high percentage that have less than the recommended three months of reserves," said Thomas H. Pollak, an author of the report, the first of its kind in the Washington region. "In some cases, they got too accustomed to the economy zooming along and didn't appreciate the risk they were facing." Operating reserves are especially critical for nonprofit groups because of the way they receive funds. Many rely on occasional large gifts and grants rather than a consistent stream of revenue throughout the year. If a government grant is delayed or a foundation cuts its giving, charities without reserves could be forced to reduce services, lay off staff or close.

20. SHNNY Survey, May-June 2010Significant Funding Slowdowns (n = 42) Funding Source % of Agencies State 28.6% County 23.8% City 23.8% Other 31.0% At least 1 of above categories 66.7% At least 2 of above categories 38.1% 3 or 4 of above categories 14.3%

21. Impact Large(over $5 million) All Agencies Small (under $1 million) Medium($1–5 million) SHNNY Survey, May-June 2010 Budget Impacts (n = 42) Laid off staff 36% 0% 48% 31% Closed programs 29% 40% 29% 25% Lost 5% or more of budget 45% 80% 48% 31% Lost 10% or more of budget 17% 60% 14% 6%

22. What’s Different Now? • A sustained economic downturn is likely • Credit is currently almost non-existent • Governments are having trouble paying bills • Grant programs are being eliminated • Many grant programs make fewer awards • More agencies compete for remaining grants • Bottom line: you probably won’t be able to grow your way out of deficits now

23. What Can You Do? • Accept downsizing as almost inevitable • Learn to do “strategic devolution” • Identify your core programs: • Essential to your basic mission OR • Essential to strategic future plans

24. What Can You Do? • Focus on cash-basis more than accrual-basis financial reports • Monitor cash position frequently • Monitor total of available cash + credit compared to outstanding bills • Calculate your “break-even point,” your “breakdown point,” and the size of the “red zone” in between those points

25. What Can You Do? • Slash deficits • Downsize swiftly (your cash cushion won’t soon return!) • Monitor cash flow often but consolidate cuts so your agency can move past the pain • Close non-core programs that seriously hurt your cash flow (even if needed, successful, and operating within their budget!)

26. What Can You Do? • Avoid small grant programs (unless essential to core programs or strategic initiatives) • Avoid partially-funded programs (unless essential to core or strategic initiatives) • Focus grants on existing core programs and major strategic initiatives, rather than scatter-shot new ideas

27. What Can You Do? • Evolve rapidly in response to changing funding environment • Build in capacity for change • Use proven evidence-based model programs • Document outcomes (knowledge is power!) • Collaborate for more impact and significance • Focus on cost-effectiveness

28. What Can We Do Collectively? • Lobby together for help from city, county and/or state governments • Resisting all budget cuts in this environment is probably futile • Try to replicate approaches used elsewhere

29. What Can We Do Collectively? Model #1: the “Philanthropic Liaison” • Being used in Newark, Philadelphia and soon in Oakland, CA • Probably not worthwhile for small grants (could cost more than it brings in) • Best for big grants that require both: • A big transformative vision AND • A big investment in schmoozing

30. What Can We Do Collectively? Model #2: the San Francisco model • Government and foundation officials developed plan to boost CBO efficiency • Support mergers and closures by:a) identifying potential partnerships and b) providing money and managerial advice • Promote use of “management services organizations” that centralize and consolidate administration to reduce administrative costs • Encourage revenue diversification

31. What Can We Do Collectively? Model #3: Mayor Bloomberg’s NYC model • Created a revolving loan fund for charities • Expanded a bridge-loan fund for charities for $8 million to $20 million for charities with city contracts who need short-term cash • Continues the Mayor’s Fund to Advance NYC, a nonprofit group that raises money for charity programs run in partnership with the City • Created NYC Service to simplify volunteer recruitment for both CBOs and volunteers

32. What Can We Do Collectively? Model #3: Mayor Bloomberg’s NYC model • Recruited 4 philanthropists to create a program to pair business executives with CBOs • Improved a hotline that CBOs can call for management advice • Created a new website to provide advice and resources for CBOs • Appointed a “non-profit contract facilitator” in Mayor’s Office to answer CBO questions

33. What Can We Do Collectively? Model #3: Mayor Bloomberg’s NYC model • Plans to develop a group-purchasing program to enable CBOs to buy good and services in bulk • Plans to expand a warehouse where CBOs can secure donated supplies • Plans to find ways to cut CBO energy costs • Plans to issue a standard contract to social service CBOs and simplify contracting process

34. For more information, contact: Karl Bertrand, L.M.S.W., President/C.E.O. Program Design and Development, LLC 47 Wayside Drive White Plains, NY 10607 (914) 592-1272 KBertrand@programdesign.com www.programdesign.com