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I have worked in a number of settings recently where it appears that the different aspects of the enterprise's operations are in competition with one another for resources. For instance, a service organization constantly wrestled with balancing the needs to pay staff against the expenses of running programs and maintaining a facility. As part of its mission was to reach out beyond itself in support of other organizations, the funds needed to do this also competed with the staff, programs, and facilities. Each part of the organization felt the financial pinch.
We have discovered that many service-oriented enterprises (across sectors and industries) wrestle with these balances between staffing, programs, facilities, and outreach. Balancing these four areas is part of active steward leadership, and steward leaders face this acutely in their role as managers on behalf of owners. Pinch points like these can hurt the entire organization when the different parts are set in competition. We are often called in to work to resolve the organizational pain this causes.
In these settings, we find the balance easier to maintain if the following is true:
- Leaders budget forward from income, rather than backward from current expenses.
- This planning leaves room for margin so as to be able to maintain core operations despite fluctuations in cash flow.
- Plans tie programs and facilities together as a cost since most programs require facilities to house them. (Travel costs are also included here.)
- Growing organizations (or those intending to grow) maintain at least 15% in outreach funds against the other two areas.
- Leaders recognize that staffing will almost always be a greater portion of the remainder (vs. facilities and programs), even in volunteer-oriented organizations. However, if the program / facility portion is less than 10% overall, the organization may either be over-staffed or have under-developed programs and potentially deferred maintenance on facilities.
When we conduct our financial health assessments, we find that the balance between these areas can fundamentally shape the organization's outcomes. Steward leaders who want to meet the ownership goals for their enterprise continually look toward the capacity of their enterprise to meet them. Keeping these areas all in balance can improve both short- and long-term outcomes and impact.
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