Tag Archives: Coronavirus

Should Your Nonprofit Spend Endowment Principal to Cover Budgetary Shortfalls?

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MJALibs to help with budgetary shortfalls

Raising an Endowment

When thinking about an endowment, the possibilities seem endless. Will you have an additional $50,000, $120,000 or even $200,000 every year? Will you be able to cover budgetary shortfalls or expand your services and/or the number of people you serve? Will monetary stress disappear from staff and board meetings?

The Realities of Having an Endowment

For many organizations, having an endowment – whether inherited by the nonprofit’s current staff and board or raised in recent memory – is essential. Most of the time it does what it is supposed to. It helps the budget by providing operating revenue to be used on an annual basis. But, when the organization has a budgetary shortfall – like organizations may be experiencing or expecting during this pandemic – it can be tempting to take principal from the corpus of the endowment. Consider this a warning, it is a slippery slope.

Well, from an MJA new business perspective, it’s a great idea! Organizations often engage us to raise money after they have reduced or depleted their endowments. But, we also give advice to our clients to prevent this from happening. In fact, this is blog post based on an exchange I had with a client just this week.

The Slippery Slope

It starts with an unusual need. A new roof or, let’s say, a pandemic. You need to cover $100,000 one time.  So while it feels wrong to take out principal, it may be urgently necessary. But, once you start taking out principal for the annual budget, it is then easier to go to the well again and again for capital needs and budgetary problems. It is much simpler to get board approval to take out more money than spend time and/or money on a real self-examination. That would require looking at the organization, it’s mission, the current needs of the community, reducing expenses, the annual fundraising, etc.

The reduced endowment is a future problem when the lack of annual funding is current problem.

Before long, instead of $75,000 a year towards the budget it is $40,000 – causing a larger annual deficit/budgetary shortfall every year. And then you must spend money to engage us to help you raise funds to increase your endowment. It’s a vicious cycle we are committed to assisting you to avoid.

If you do decide to take out principal, “just this once,” make sure there is a Finance policy in place. To ensure this does not happen again.

So, if you are confronting financial challenges that have you looking at the balance in your endowment as an easy answer, what do you do? It may seem hard to fundraise in this climate. It is different – but not impossible. (Here is a webinar that will give you some tips). Consider a self-examination (we offer a special Organization and Development Assessment to our clients which we can tailor to your needs).

Want Your Own Endowment?

And of course, if you want to raise an endowment, click here to schedule a time to talk. Yes, we are still raising endowments during the pandemic. Our world still needs nonprofits. Nonprofits still need funding. And donors, still have money to donate – maybe not all donors – but many still can, and want, to give.

Nonprofit Hiring in the Time of Layoffs, Furloughs and Unpaid Leave

We are living in a brave new world, the world’s largest work-from-home experiment. While remote work is certainly not a new phenomenon, the Coronavirus outbreak has forced nonprofits to transition without preparation. This sudden change has put a strain an organization’s ability to perform the basics of nonprofit hiring and recruit new employees.

What makes the current situation especially daunting and difficult for organizations and executive search firms like ours? Simply, most nonprofit hiring programs have been heavily reliant on face-to-face interactions. How could you get a good read on the personality and motivation of a candidate if you were not sitting directly in front of him or her?

Now, we are all more keenly aware of the importance of agility and digitization of recruitment and onboarding processes. Nonprofit hiring is changing, and we, as a sector, need to catch up.

For all too many organizations, this pandemic has led to layoffs, furloughs, and unpaid leave to stay lean and minimize losses. This creates an advantage to the bold enterprise which seeks new talent.  But full-time remote work has become, and is likely to remain, the new normal.  The question is are you ready and equipped to pivot your recruitment process to go fully virtual?

Best Practices

In a virtual world, candidates encounter their new employers through a process that is regrettably often confusing and disorganized. To make the recruitment process the most effective it can be—both for the organization as well as from the candidate’s point of view, we recommend the following best practices:

  • Engage a search firm, like Mersky, Jaffe & Associates with years of demonstrated experience in recruiting and hiring in a virtual environment.
  • Conduct an Organizational and Development Assessment. Additionally, interview key stakeholders about the job and ask them to help define the characteristics of the successful new hire.
  • Create a clear, results-oriented position description.
  • Identify and train the hiring officer who will screen the initial candidates and select two to advance to the second level.
  • Determine who else from the staff needs to meet the two semi-finalist candidates, one-on-one—members of the team, supervisors, or senior management.
  • Select volunteer leaders for a third round of one-on-one interviews to interact with the potential new hire.
  • Create an on-line feed-back form to gather reactions from all those who have met with the candidates. (Connect with me by clicking here if you would like a sample form for feedback that you can employ.)
  • The hiring officer then collates all the responses from the feedback forms and decides on the finalist.
  • Confirm that the finalist will accept a satisfactory offer if it is made, subject to reference checks and a one-on-one meeting with the CEO and Chair of the Board.
  • Check references,
  • Negotiate final terms and conditions.

If organizations continue to be reactive and employ antiquated nonprofit hiring practices, it will have devastating consequences if the future of work continues as full-time remote work.  Schedule a time to speak with me about your executive search needs in this new world by clicking here.

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MJA Executive Search in the current environment

Last winter, we announced that we would be listing compensation in our job postings to increase transparency and, in our small way, address the issue of gender inequity in salaries in the nonprofit world.  But, as I have noted above, the world of work and recruiting has changed.  In some cases, we are seeking new executives in organizations that are experiencing lay-offs, furloughs, and job elimination.  It is indeed a different world.  As such, we have suspended this practice until we return to a time of greater equilibrium.

See the current Executive Search Opportunities by clicking here

Stewardship in the time of COVID-19

Stewardship in the time of COVID-19

Different nonprofits have handled the coronavirus pandemic in different ways. In addition to having most, if not all staff, working from home, many have had to furlough, reduce salaries and/or shift around job descriptions among the people who are still working. Times are tough and it is unclear when things will return to any semblance of normal.

But we are weeks into the pandemic and if fundraising is still on the back burner, it is time to move things around. Otherwise it will be impossible to get up and running once things turn around. And stewardship in the time of COVID-19 is a place to start.

We must acknowledge that the news is horrific. People are sick, losing their jobs, and going stir-crazy. And that doesn’t include the issues of gaining weight and drinking too much while somehow overwalking our dogs. How could a nonprofit ask for non-emergency money? Many funders are honoring their commitments. Non-galas will be all the rage this spring. And asking exactly how your major donors are faring during this time will be more important than any prospect research from the past.

In other words, nonprofits will have to find a way to connect with volunteers, members, and donors if they ever want to reopen their doors. And whether you are asking for donations or not, stewardship in the time of COVID-19 should be a priority at every organization.

What are other nonprofits doing for stewardship in the time of COVID-19?

Not counting healthcare or human services organizations and others that provide emergency services, I have seen:

  • religious organizations offer virtual spirituality, classes, and community
  • arts organizations provide access to recordings and articles, lunches with famous actors, playwrights, novelists, etc., and creative connections
  • athletic nonprofits offer classes, book groups, and workouts
  • business associations offer ways to learn from peers and virtual classes
  • other organizations offer resources such as virtual book clubs, virtual coffees and podcasts

What is the one thing they have in common?

They are reminding their supporters that they serve a purpose in our world. There are donate buttons on most emails.

Even if no one clicks through now, these organizations are making the case for their intrinsic value and are asking for support. Organizations which are afraid to remain in touch with their volunteers and donors and only resurface months from now to ask for money will not survive. Nonprofits need to maintain contact all along the #StayHome way, stewarding donors – while providing us all with a combination of programs and learning opportunities to demonstrate their value.

We will remember the plays we watched or the class we took and think of the organizations which shared them with us with a smile. And, we will want to donate to them, if and when our funds allow. Because, when we emerge from this chaos, we will need connections, and nonprofits, more than ever.