Moving Forward in Uncertain Economic Times
A Path to the Future for The Foraker Group
Experience tells us that when we face financial challenges the best approach is to plan for various scenarios by getting focused on what matters the most – then prepare to implement necessary changes when it’s appropriate. That’s what we’ve done at The Foraker Group, and we’re learning that other Alaska nonprofits are doing the same. Our planning model looked at potential shortfalls in revenue, and how those decreases will affect our services. As we have advised since late last year, these new economic times require all of us to stay calm, become more observant and disciplined, and focus on our mission and core services. Most important, we encourage everyone not to think of doing more with less, but rather how to do the best possible job with what is available.
We suggested using specific tools to manage these times such as the new financial format to monitor unrestricted cash, to develop a cash flow projection based on newly gleaned information from funders and customers on their expected level of support, and then to develop budget scenarios based on any potential income shortfalls compared to ongoing expense. We stressed that organizations should not randomly cut their expenses – but we did encourage frank discussions about what could be cut, if necessary, with the least impact on mission. For those that have taken these first steps, we offer the following as a next tool to use along the path into the future.
For those of you who have taken a stab at scenario planning, we expect that the first draft provided insight to determine what seemed most likely to occur, but perhaps it was not very specific on action items. Now we encourage you to take action by using that plan to look beyond this period of scarcity and look toward a new, steady economic reality. This way your organization can prepare to emerge stronger and with better insight into the way we do business.
Typically when we lose funding, our first reaction is to deny that it happened – or we get mad at the person who cut “our” funding – or even worse, we cry wolf hoping that either our funders or the public will come to our rescue. A next predictable step is that we over react, cutting expenses that may send us into an uncontrolled tail spill because we forgot why we (our organizations) are here in the first place.
Basically we do the very things that don’t help our cause in the short or long term. Instead, what if we think creatively about the future? In other words, what could we achieve if we saw the loss as a blessing, giving us time to focus on what is important rather than continuing work as usual on activities that may not be as critical as we think?
In a prior article, we encouraged organizations to turn to their mission, determine what is truly most important, and then re-focus on what is needed to accomplish that mission. All organizations, as they mature, begin to focus more on what they do instead of who they are. There is nothing better than a crisis to help us return to what is truly important. We need to reflect on who we are, not on what we do.
In order to understand “who we are,” we must dig into our organization’s history – examining our founding. For some of us that was only a few years ago, for others a bit farther back – but the founding is the key for the right kind of focus. Knowing who you are will help you survive in bad times and thrive in good times.
When most nonprofits are founded, one or a few very committed people with a dream were inspired to do something. The dream was often more ambitious than their pockets or talent, but they had the audacity to envision how they could address a perceived need. At some point, that dream became more focused and they took it to the next level and legally formed an organization. During that time, founders discovered the kernel of clarity needed to focus on what mattered the most. The founding of The Foraker Group may help you take this journey for your organization.
Foraker started only after the original idea for the organization had been incubating quietly for five years at the United Way of Anchorage. After several years, as that informal process became more focused and more people participated in the thinking, the specific vision for Foraker was articulated for the first time. That vision was to create an organization with the purpose of strengthening Alaska’s nonprofit sector. It was also determined that everything Foraker did would be filtered through the principles or values of strategic thinking, collaboration, sustainability, and relevance throughout the state. That describes who we are. From there we had to determine what we could do to manifest who we were.
We decided that to implement our vision we would provide affordable shared services, or backroom, quality, professional support for nonprofits. We also would train board and staff and provide organizational support though facilitation, planning and mentoring. Foraker would serve the entire Alaska nonprofit sector. And we would become as self-sufficient as possible on earned revenue.
Actually the original vision was for Foraker to rely completely on earned revenue from either nonprofit organizations, or from funders wanting to build the capacity of their grantees. But after two years of operations, the board accepted the reality that it would be impossible to serve all Alaska at affordable costs without a subsidy. So they developed the concept that has been maintained for the last six years which is to generate 80% of our income from earned sources and the remaining 20% from unrestricted grant revenue.
So here we are in 2009, contemplating what we can do to stay true to our founding vision and ensure that in a few months or years we emerge as an even stronger organization. That means we return to our first question: “Who are we?” Well, our founding describes this very well. We are an organization dedicated to strengthening Alaska’s nonprofits. We encourage collaboration, we are forward thinking, and we are relevant throughout the state with every type of nonprofit. Most important – we promote organizational sustainability for as long as there is a need for an organization to exist.
Then we address the second question: “What do we do to make that mission happen?” We provide services that are as sustainable as possible on earned revenue – services that are valued by our Partners and services that will help promote a sustainable sector.
So at this point of self-reflection the exercise gets harder. Some of the things we have done – that we have been most known for – are not necessarily the things that generate enough income to be sustainable, at least not in the way we have done them. That insight provides us the gift of clarity. It is obvious that we need to work on our sustainability by creating an environment where we maximize earned revenue while providing services we know nonprofits value.
In the beginning, Foraker was envisioned as a shared service organization. The original plan was to offer only those shared services we could provide over time without a subsidy. The first survey of nonprofits encouraged us to develop a backroom financial system, human resource support, planned giving support, IT, and health insurance. Now eight years into operation, we have developed programs and expertise in each of these areas, as well as other services we did not even envision. Some are totally sustainable without a subsidy and a few others may soon generate enough income to become sustainable. However, others have not or may not get there. So if we need to reduce expenses in the future, we may determine that one or more of those services may have to be cut.
No shared service has taken more time and money to implement than health insurance. For all the reasons we have described in the past, creating an effective and affordable benefit plan has been an elusive dream. Then last year, with support from the Rasmuson Foundation and a partnership with Premera Blue Cross, we began that process one more time. Thanks to Rasmuson, we not only have incentives to encourage participation, we have a subsidy that allows Foraker to invest the time needed to ensure success. The good news is that we are on schedule to realize that dream. We continue to sign employees into the system and, according to officials at Premera, we will succeed! But, using our model of generating enough revenue to maintain the program without a subsidy, if we’re unable to make the program work this time, we likely will need to abandon our effort to address that need.
Reflecting on our shared services, we now understand where we have opportunities to succeed. We will focus on those services that have the largest impact on the most Partners – and that generate enough revenue to sustain them – and we will do those. All other shared services would be decreased or discontinued. By focusing on our past, we understand that shared services is part of who we are, so we will provide as many as possible – but only if they run without a subsidy.
Another core service that we will continue as long as we have sufficient unrestricted income will be individual organizational development. If an organization needs a consultant for a service like facilitation, we provide that. We know our rates are below market, but it’s part of our mission to provide consultation for our Partners at the lowest possible cost. After some analysis, we have decided that if we charge for these services at the current or slightly higher rates (we have not raised these rates in six years), we should be able to continue our targeted consulting.
Foraker probably is best known for our educational and training opportunities. We have a curriculum that is the envy of other capacity building organizations. We have trained over 7,000 people around the state. When we started, we had a subsidy to underwrite this service. Today, all of those subsidies have ended. For that reason, we will spend considerable time over the next few months looking for ways to implement a cost-effective educational program.
Some of our programs are self-sufficient – like the RANA classes through Alaska Pacific University and the Nonprofit Management Certificate through UAF. However, our very popular classes that we have delivered in person around the state do not come close to breaking even. In February, we decided to adjust our community training schedule. We communicated with our Partners on this new reality and offered the hope that using technology we can still be “present” in communities around Alaska. Last year we asked for and received a significant grant from the Rasmuson Foundation that allowed us to secure state-of-the-art distance delivery technology. Our task now is to learn how to use it to bring classes to all our Partners.
All of us at The Foraker Group are dedicated to serving our mission. We believe that strengthening Alaska’s nonprofits results in a better quality of life for all Alaskans. In order to do that, we now must be more observant, more disciplined, and as a result, we will become a better organization. While the worldwide economic situation is not fully understood, in Alaska, in our sector, we know what we must do. We must pick ourselves up and do what we can with the resources we have. Let’s stop focusing on what we lost and begin to focus on what we have and where we will go. We will all benefit from that approach.