Executive management in hard times - Retrenchment, reflection, transition, recovery
What’s a nonprofit executive to do when all the forces of nature, politics, and the economy conspire to thwart organizational (program and resource) development?
The answer lies in leveraging the crisis strategically for the opportunity that lies within the eye of the storm, in daring to lead beyond expectations and risking professional comfort.
Yes, a unique and seismic convergence of economic (the Great Recession and its aftermath), political (Congressional stalemate on the national budget and sequestration), social (demographic shifts and changes in attitudes and values regarding social responsibility), and technological (the democratization of social media and alternative forms of charitable expression) have taken a financial and programmatic toll on nonprofits. Today’s storm is unlike those of past economic downturns in both scale and duration.
In other words, times are rough for nonprofits, and every indication is that they are going to get even rougher and more challenging. These dramatic changes in the marketplace have broad implications for organizational governance and for the viability of the conventional nonprofit business model.
A number of long-standing organizations have fallen by the wayside. Some are gone because of failures of governance, others because of funding cutbacks they could not withstand, others for their inability to adapt to a highly competitive marketplace. Still others remain at risk, with zero margin for error and limited internal capacity, drawing on their reserves (if they have any), making last-minute appeals to live another day, or doing far more with far less.
But, the forward-looking executive will recognize that the successful and sustainable organizations of the future will be those that are organized and positioned for adaptability and innovation in a marketplace of changing needs, attitudes, preferences, and points of access and that are willing to make structural adaptations to meet new realities. And there is no better time to trim the sails and toss impediments to progress overboard!
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Think about the following developments and trends:
- With the full implementation of the Patient Protection and Affordable Care Act looming in 2014, a shakeout among behavioral health and social service organizations is likely coming. I expect that many single program-focused agencies no longer will be viable; some will dissolve; others will merge into larger integrated organizations.
- The concomitant trend in behavioral health, primary care, and social services may well be the consolidation of entities into vertically and horizontally integrated enterprises that have the capacity for greater economies of scale and the technological capabilities to measure outcomes and manage new performance-based reimbursement strategies.
- The methods, channels, and venues for service delivery will change. Caretakers no longer will be office-based, but will be mobile with remote connections to servers.
- The methods of cost reimbursement are changing and are performance-based. Organizations that are equipped with the technology to establish and track metrics and monitor and control costs will have competitive advantage.
- Arts and cultural, environmental and educational organizations are similarly challenged by the impact of new technologies on audience or constituent behavior and more accessible and affordable alternative forms of entertainment or expression, let alone evolving and changing tastes and values.
In today’s marketplace, where the speed and substance of change is more volatile than ever before, the fundamental challenge is to rethink operating premises and structural arrangements and develop strategies that are best suited to achieve or recalibrate the terms of organizational effectiveness, which I define as the ability to realize corporate objectives in terms of relevance, efficiency, effectiveness, and impact.
Periods of retrenchment, then, if wisely leveraged, are opportunities for strategic reflection, restructuring, and mapping pathways to recovery or transformation.
It means reevaluating the skill sets, competencies and perspectives required at all levels of the organization (from line staff to management to board members) to fit a culture of adaptability and innovation. It means removing deadwood from boards of directors and ensuring that those who remain have accountability for both their fiduciary responsibilities and their obligations regarding institutional support. It means creating a new balance of power between boards and executives and limiting the ability of boards to go rogue or dysfunctional. It means openness to strategic alliances or consolidations that add value to the customer and the community, even if it entails absorption. It means curtailing strategic planning processes that are neither strategic nor planful but operating with active opportunism and entrepreneurialism.
If there is an overarching principle, therefore, that should frame executive policy and action, particularly in hard times, it is not solely to preserve operational and programmatic continuity and quality but also to reposition, redesign, and reallocate resources in ways that serve the common good.
It’s a stunning and provocative challenge for executive leadership, and, if met, will inure to the betterment of the nonprofit sector and society.
Herb Paine is a business strategy consultant specializing in organization development, governance, turnaround management, and mergers. He can be reached at firstname.lastname@example.org.