Strategies for Hard Times: How to Downsize a Nonprofit

(Michael Seltzer is a regular contributor to PhilanTopic. In his last post, he wrote about the "new era" launched by the inauguration of Barack Obama.)

In recent days, a number of nonprofits have been forced to make painful financial decisions. The trustees of Brandeis University voted to close their art museum. The Bolshoi Theater of Moscow cancelled their upcoming overseas tour to Mexico. AARP has mandated that all their D.C.-based employees take three-week unpaid leaves. United Ways around the country have laid off staff. Pick up your local newspaper and you're likely to find more bad news from Nonprofit Street. And this is only the start of what is likely to be the most widespread belt-tightening in the history of the sector.

When nonprofits are forced to cut back, the human costs borne by employees, clients, communities, and the organizations themselves are often incalculable. How do you calculate the cost of higher student tuition fees in terms of their impact on families and kids forced to make different choices? Or the cost of cuts at soup kitchens serving homeless men, women, and children? Or of longer waiting lists at domestic violence shelters? How do you calculate the cost of damage to mission, reputation, and morale at a nonprofit forced to cut services even as demand for its services soars?

The short answer: It's difficult, if not impossible. Which makes it all the more important for nonprofit leaders to employ practices that mitigate, as much as possible, the negative consequences of any downsizing. If you're a nonprofit leader, I hope you never find yourself in that position. But if you do, here are five things you can do to minimize the cost to others:

1. Set an example
Boards should ask their executive directors to reduce their own salaries before they ask staff to take cuts in pay. Such an action makes a simple but powerful statement: We are all in this together.

2. Provide additional emotional and professional support to employees
As the recession tightens its grip, a growing number of nonprofit employees are facing serious financial choices in their personal lives. A nonprofit forced to downsize can signal its commitment to its employees' well-being by doing simple things like distributing a confidential survey to gauge what forms of assistance would be most valued and/or bringing in counselors to offer advice to staff.

3. Don’t blindside internal and external stakeholders
Keep your board, staff, and donors in the loop with respect to any variables and uncertainties in your organization's financial picture, and be sure to communicate any changes in that picture at your earliest convenience. Meet with stakeholders on a regular basis to solicit their advice and counsel, and to generate ideas and strategies for weathering the storm.

4. Focus on your core competencies
Every organization has its tried-and-true programs and initiatives as well as less secure and -established efforts. Now is the time to preserve the former and make hard decisions with respect to the latter.

5. Seize every opportunity to express appreciation to staff
Words can't be deposited in a bank. But "shout-outs" and acknowledgments of a job well done cost nothing -- and count for more -- than many of us realize. Don't be stingy with them.

I could go on, but this crisis isn't about me; it's about us. We're all in this together, and the surest way for us to make it through these tough times and come out stronger, as organizations and as a sector, is to stick together.

If you have an organizational survival story or strategy, we'd love to hear it. Use the comments section below, and let's get a conversation going.

-- Michael Seltzer