For Non Profits

The PeopleCap Playbook

Timely insights and actionable people strategies for leaders.

Navigating an Unexpected Funding Shortfall

the word budget being cut by scissors

It’s a nonprofit leader’s nightmare: an overnight funding shortfall that’s completely beyond your control. I know. I’ve lived it.

I’d had prior experience paring back rapidly when a major funder reframed their priorities and my budget took a 40% hit. But in that situation, I had already decided the program I’d inherited was bloated, low impact and not fully in our wheel house – I knew we could reimagine the program to align better with our core competencies and drive more impact for significantly less money. So, I was already in the right frame of mind when the funder’s directives forced me to cut the program’s budget from about $1.4 million to approximately $800,000.

That experience was invaluable when the next major funding cut several years later was much more drastic and not at all anticipated. In 2008, my major funders, Microsoft, Best Buy and Sprint, all felt the economic downturn in different ways, each of which was once again significant to my budget that now encompassed a larger cadre of programs. A budget of approximately $3 million had to be cut nearly in half. We were already into the fiscal year spending down pledges that had led us to build out a strategy, promise outcomes and staff our team accordingly. These were all long-term funders who had been committed and reliable partners. Beyond their control, funding cuts were inevitable.

I had 48 hours to develop a plan. The challenging period required me to dig in, solve problems and communicate effectively with senior leadership.

A colleague and I spent those 48 hours sequestered in a hotel room pulling apart and rebuilding a puzzle: a puzzle that included people’s livelihoods, years of investment into nationally deployed programs and real outcomes for youth across the country.

We started to pull small amounts from every line item across the budget. It didn’t get us very close to our mark. I suddenly realized we had two choices: (1) to impair every program and initiative under our purview in order to keep them “alive” or (2) to determine which programs had the absolute largest impact for our youth and completely carve off the ones that either were not as impactful or could potentially be more readily “sold” as a future independent funding opportunity.

We went with the second option and worked to ensure that each program we kept would have the staffing and resources to be fully successful. We had to make some really tough decisions. We were fortunate that, amazingly, we were able to keep most of our people. And, after the dust settled, our heart rates normalized and our team overcame their shock I realized we were a stronger team and were developing and deploying stronger programs. Sometimes being forced to completely re-envision your organization can be an opportunity.

My recommendations for anyone going through a sudden funding shortfall:

  • Define impact for your organization and determine which programs drive the most impact
  • Ask yourself whether your approach will leave you weakened across the board or with fewer, stronger programs
  • Determine what talent is vital to drive that impact as well as keep the organization sustainable
  • Make the tough calls: take the opportunity to really face what is most important and carve off the rest

Had I never lived through it, I can’t imagine I would be saying this: facing a funding crisis can become the opportunity to reset your priorities and reinvent your organization to be more “relevant, vital and healthy” (Kate Barr).

As always, call us if you need help reclaiming your aspiration, reimaging your organization and walking through a decision making process to become stronger in the face of a funding crisis.