Organizational Transformation: Survive or Thrive?

Posted by Matthew Thomas

An organization in survival mode often works against its own opportunity to thrive. The mindsets of survival involve fear, mistrust of outsiders (because those outside are threats to survival), internal focus, and past-orientation.

survival kit sardine can thinkgeek.comThese survival mindsets lead to risk aversion, rehashing the same strategies the organization has used before with (at least perceived) success, increased use of technical solutions to problems, and simultaneous personnel entrenchment and turnover. Often, they also lead to excessive celebration of minor successes as bellwethers of nascent turnarounds, and the redefinition of new failures as successes after the fact (without having learned from the failure).

What organizations in survival mode don’t realize is that in most cases, while outside conditions and circumstances have changed around them (while they have faithfully trooped on doing their thing), it is their responsibility to wrestle with those changing contexts and engage change, rather than to blame the outside changes (culture shift, government regulation, new competitor, new technology, etc.) for their lack of current organizational health. These organizations have either ignored shifts early in their existence, or drawn lines in the sand against them that require loss of face to allow a change of approach toward the particular change.

By the time the organization reaches survival mode, its chances of survival (let alone achieving new health and thriving) are severely diminished: but diminished primarily by the organization’s own culture, leadership capacity and funding capacity more than anything else.

Organizations in survival mode with the best chances of thriving once again appear to be those that have the human, financial and leadership resources to change from a survival-mode culture to a culture that engages adaptation as a means of finding a new way of being. This is why turnarounds are so difficult.

So what to do? There is much that can be done, and we will look at one option in this post. (Others will follow in other posts.)

One of the common symptoms of survival mode (even if it is not spoken of as such) is a refusal or incapacity of making difficult decisions. This often manifests as institutional paralysis or firing from the hip. The prescription is not to make big, complex, difficult decisions right away, if at all possible. The ideal approach allows the organization to practice decision-making in smaller, but still strategic ways, while developing measurements for success and failure in those decisions. As the organization becomes more accustomed to making decisions, a leader can increase the difficulty and complexity level, using the capacity for conflict resolution and measurement of success gained at the easier and less complex levels to grow the organization toward the capacity to make the bigger decisions.

In future posts we will examine other tools your organization can use to move from surviving to thriving. The 6 essential questions for strategic planning resource below can get you started today!

 

 

Read More ›

Topics: organizational development consulting, Matthew Thomas, Design Group International, adaptive leadership

Organizational Development: Using Trends to Build Budgets

Posted by Matthew Thomas

As I mentioned in a previous article, it is important to build budgets based on trends that last longer than just one fiscal year. As I mentioned there, using 3- to 5-year trends for both income and expenses will help create reasonable estimates for the next fiscal year. Using these trends disciplines an organization not to over- or under-state any new initiatives that may begin in the upcoming fiscal year.

Financial Management: Using Trend DataWhen examining trends, it is important to look at the various sectors (or streams) of income, as well as the sectors of expenses: staff, facilities, programs/product lines, etc. Each of these may be moving in different directions, but this gets muddy when only looking at the macro trends of the bottom line. It is likely that each one of these pieces will have a trend distinct from the others – which, when combined, will provide the information necessary for strong budgeting.

Standard business spreadsheet software (I am most familiar with the Microsoft suite) has the capacity to create statistically-accurate trends from raw numbers. It is then possible to use these trend lines to forecast how those trends play out over the period of time the budget addresses. Organizations are often surprised where a slow, but steady increase or decrease takes them in a relatively short period of time. A trend-based budget is a great starting point for planning: whether winding down old initiatives, services, or products, or starting something entirely new.

Design Group International provides budget creation support as one of the financial roles we have mapped out for organizations of various sizes. Have you gotten your financial role map yet?

f17e74d6-95e6-4c0c-9aa3-464b6ab22e61
Read More ›

Topics: nonprofit leadership, organizational development consulting, Matthew Thomas, budget, stewardism, Design Group International

Organizational Development: Beware the Micro-Trends

Posted by Matthew Thomas

f17e74d6-95e6-4c0c-9aa3-464b6ab22e61

Beware the Micro-Trends

Many organizations use the early fall to begin their budget process for the next year, with fiscal new beginnings in January. One of the biggest challenges to healthy budgeting is often built in to the way most organizations (and their accounting software) report the amounts in each line item on the budget.

matthew thomas, budgeting micro-trendsMost accounting software will compare this year to the previous year, natively. The problem is that most organizations need to look at longer-term trends. What is more useful is a rolling 12-month actual line item measurement. Comparing this number to previous years removes seasonal cycles of income and expenses.

Beyond the rolling 12-month line item measurement, most organizations should look at 3, 5, 7 and/or 10 year trends in both revenue and expenses. Even if a single year looks really good or really bad in that time frame, it is more likely that the overall trend will continue unless significant changes occur in the organization’s purpose, approach, products or services.

Therefore, it is good to be wary of micro-trends: the bumps, whether up or down, in a particular budget item, in a given 8-, 9-, or 12-month period. If examinations of the trends show a radical shift in a particular line, dig a little deeper: and it may still be best to take the low estimate of income and the high estimate of expenses until the overall trends adjust.

-Matthew Thomas

design group international, matthew thomas

Read More ›

Topics: nonprofit leadership, organizational development consulting, stewardism, Design Group International

Clarity for Restricted Funds

Posted by Matthew Thomas

4-financial-confusions-the-free-e-book

Clarity for Restricted Funds

“We’re not sure if we can use that money for that.” This is a very common phrase spoken by non-profit and faith-based sector constituents, staff and board members. Many times, money is donated to organizations to support their purpose that ends up unused. Why? Often, it is because the restrictions on its use are unclear.

In order to keep from feeling this pinch, here are a few things to keep in mind:donor clarity, matthew thomas

  • Get it in writing. Preferably from the donor. Board minutes are the next best thing.
  • Review restrictions annually at budget time to make sure the funds are being used to their maximum reasonable potential.
  • Create a gift receipt and use policy. Inform donors on how you handle restricted funds. Clarity goes both ways.
  • Make sure that new board members fully understand the restrictions as written, not as legends have developed around them. Much of the lack of clarity comes from how boards have handled funds over time, rather from the restrictions themselves. (“Those are untouchable!” or “I believe the Donor would have us do only this.”)

This will help you maintain clarity for funds under your care.

-Matthew Thomas

Matthew Thomas, Design Group International

Read More ›

Topics: nonprofit leadership, organizational development consulting, Matthew Thomas, clarity for restricted funds, Clarity of Restricted Funds, donor clarity, stewardism, Design Group International

Organizational Development: When Cutting Expenses isn't the Solution

Posted by Matthew Thomas

7b749daa-9b4c-4572-a5e6-cadab73e8260

When Cutting Expenses Isn’t the Solution

Deficits: at a certain point, cutting expenses isn’t the solution. Cutting expenses to meet income while maintaining the same organizational structure and model for staffing, programs and buildings will cause the organizational mission to be compromised after a certain amount of cuts. Moreover, the organizational stress of “death by a thousand cuts” will strain all aspects of organizational life, as people begin to ask, “Who is next?” It just ends up smelling of death.

matthew thomas, cost-cutting, design group internationalSo what to do? Wise, fiscally prudent leaders know that deficits can’t last forever. In organizations with net worth rather than net debt, the strategic use of assets will create the space to make the changes necessary to get finances back on track.

That strategic asset use could include:

  • A Donor Capacity and/or Constituency Assessment to see what additional funds may be available to the organization. If you don’t know to ask, it’s less likely you will receive. It just may require you to ask people you never thought to ask in ways you never thought to ask for things you never thought to ask for.
  • Development of a new organizational model with different governance, staffing, and program structures and different facility needs.
  • Developing and nurturing partnerships with like-minded organizations for shared work in common causes.
  • Developing a for-profit wing of the organization that takes the organization’s expertise and passion and uses it to fund the organization through the sale of products and services.

All of these approaches are adaptive in nature and require innovative thinking – but base results in how an organization can begin to thrive and grow rather than preserve what it has.

-Matthew Thomas

matthew thomas, design group international

Read More ›

Topics: process design, process consulting, nonprofit leadership, organizational development consulting, Matthew Thomas, Design Group International

Turning the Organizational Retirement Mindset on its Head

Posted by Matthew Thomas

it-begins-with-design

Turning the Organizational Retirement Mindset on Its Head

In a previous article, I wrote about the Organizational Retirement Mindset and defined it as organizations that spend assets (and not just income off of assets) to maintain current programs due to revenue deficits. This reinforces the mindsets that an organization’s best days are behind it and that people’s involvement and commitment to the cause (as lived out and defined by the organization) is less than it was. In many cases, this further creates a passive martyr stance and organizational depression. In the end, the lack of vision and innovation that led to the decline in income and involvement reinforce themselves.

organizational retirement mindset, matthew thomasSo what to do?

Overcoming this mindset is difficult, but leaders can take hold of several handles to climb out of the trouble:

  1. Engage the adaptive change you are facing. An adaptive change is a change that does not require a technical solution (a fix), but requires the organization to adapt and evolve to survive, thrive and grow. If you have been doing the same things (or different verses of the same song) for a while and nothing really is getting measurably better, you are probably experiencing an adaptive problem that will require an adaptive change.
  2. There are no such things as fixed costs, just difficult decisions. Programs, staffing and buildings all change with time. Changing those things intentionally is always a painful process, not to be taken lightly. Nevertheless, sometimes those decisions are necessary to make the necessary changes.
  3. Use your assets for innovation rather than maintenance of current programs. Emergencies are one thing, but long-term fiscal declines are not really emergencies in the proper sense of the word. If you see assets are required to do what you’ve always been doing, try to engage them for innovation instead. Use the asset funds to develop new stakeholders, constituencies and approaches. Do this in a long-term budgeting cycle rather than just in one fiscal year – because typically it can’t happen in that short a period of time.

There are other things that can be done, but this can get you started.

-Matthew Thomas

matthew thomas, design group international

Read More ›

Topics: organizational development consulting, Matthew Thomas, organizational retirement mindset, stewardship education, Design Group International

The organizational retirement mindset and its implications

Posted by Matthew Thomas

textformat-leading2p-alignleft

The Organizational Retirement Mindset and Its Implications

Since 2008, many non-profit and faith-based sector organizations have run deficits that require them to spend down their reserve funds. Even before that, many endowed organizations depended largely on funds that were donated in a previous time by a previous generation. In both cases, along the way both types of organizations became dependent on spending assets to meet their obligations (not just the income off of their invested assets). Habitually spending down assets to maintain current programs and services creates or reinforces a “retirement mindset” in these organizations.

organizational retirement mindset, matthew thomasThe retirement mindset is that the organization has worked hard to get where it is today, with great effort, sacrifice and glory. Its peak earning years are behind it, and now it has to spend its assets to maintain its daily life – its programs and services. It knows that this situation cannot last forever, but often has sufficient funds that it can last long enough for the current board not to have to deal with it immediately. This creates crisis around budget-time, but then allows a relaxed fiscal attitude the rest of the year.

This retirement mindset is fine if the organization believes that its purpose is winding down and its goals are fulfilled, and the slow “fade to black” is the best for the organization’s purpose and organizing principles. However, most organizations don’t actually believe that, even though their behaviors will lead them directly to that point.

Spending assets in order to maintain current programs often locks organizations into the mindset that their glory days are behind them, nobody is listening to them and that nobody needs them like they once did – even though they still want to be relevant and feel they should be. And in their current state, that all may be true. Nevertheless, it also reinforces the lack of vision and innovation that led to what is most likely declining income as the primary cause of the fiscal crisis, and will not prolong institutional longevity more than a few years. Much of the time, then, the people involved will re-state their purpose as being the martyrs making their last stand for the cause that no one seems to care about anymore – when, in fact, it is their own responsibility to invite, persuade and inspire people to care.

Does your organization have a retirement mindset?

-Matthew Thomas

matthew thomas, design group international

Read More ›

Topics: organizational development consulting, Matthew Thomas, sustainable vision, organizational retirement mindset, Design Group International

Use of Restricted Income

Posted by Matthew Thomas

f17e74d6-95e6-4c0c-9aa3-464b6ab22e61

Use of Restricted Income

Many non-profit and faith-based sector organizations have revenue that comes from a variety of sources: some donated with no restrictions for its use, other revenue with restrictions for particular programs or initiatives. Most organizations do not take full fiscal advantage of their restricted funds within their restricted parameters.

restricted income, matthew thomasOrganizations should take note of what the restrictions are and what they are not: in many cases, restricted program funds are not item-specific (yes, sometimes they are, but not usually). In most cases, organizations neglect to calculate in the portion of facility costs (with accompanying custodial costs) and the use of paid staff for the program funded through restricted revenue. Unless otherwise prohibited by the restrictions, these things are typically fair game to be expenses charged against restricted revenue.

Why would an organization want to do this? Using restricted funds in this way frees up unrestricted revenues to be used in other ways to maintain or expand the reach of the organization. Moreover, establishing the building and staff costs of a program invites the organization to apply for larger and broader grants to fund the program down the road, since they aren’t just looking for the bare minimum items. This helps to keep the organization spry and innovative, and frees unrestricted revenues to fund initiatives not supported by restricted revenues or even start up new programs in the middle of a budget cycle as needs arise, since the funds are available.

-Matthew M. Thomas

Matthew Thomas

Read More ›

Topics: process consulting, organizational development consulting, Matthew Thomas, restricted income, sustainable vision, Design Group International