Managing Crisis

 

Overview

Welcome to the e-learning lesson on managing crisis. A key donor goes bankrupt. An office is flooded. An employee is caught embezzling. A program space is condemned. There are any number of events that can throw an organization into a state of crisis. For a nonprofit, which is often less resource-rich than its commercial counterparts, the results can be devastating. Preparing for crisis situations and responding appropriately to them to them can make the difference between closure and survival, or even flourishing. After all, crises can be fertile opportunities for learning and change, if an organization is equipped with the right tools to handle them.

There are two sides to managing any crisis: preparation and response.

Organizations that anticipate the possibility of disaster and plan ahead will be far better equipped to manage potentially catastrophic situations or avoid them altogether. In this training module, you will examine potential crises that an organization can be forced to deal with— first from the perspective of preparedness and second in terms of response. This training will begin with a general context and then move into five specific areas in which nonprofits can be particularly vulnerable.

Careful preparation will help cushion the blow of a crisis.

Taking the time to develop a comprehensive crisis management plan can make the difference between going under and getting back on track. While many of the steps towards preparedness included in a crisis management plan are useful for coping with disaster, others are good practices even under normal circumstances for promoting the overall health of your organization.

CHAPTER 1: Preparing for Crisis

The first step in developing a crisis management plan is brainstorming your strengths, weaknesses, opportunities, and threats - also known as a SWOT analysis. Once you have identified your organization's vulnerabilities, the next step is to form a crisis management team to think through how to mitigate plausible threats.

Conduct a SWOT analysis - the first step to preparing a general crisis response plan.

To make your organization as crisis-ready as possible, create a crisis response plan. The first step in developing this plan is to conduct a SWOT analysis.

Conducting a SWOT analysis is a good way to determine which possible crises are both plausible and would pose a serious threat. A SWOT analysis examines an organization's Strengths, Weaknesses, Opportunities, and Threats. This is best done with a group of key employees, volunteers, or supporters of your organization. Special attention should be paid to the weaknesses and threats you identify. Examine those threats and weaknesses to identify which crises are most likely to confront your organization. Is your office located in a flood zone? Is the current economic or political climate unstable? Do your activities open your organization up to litigation or negative media attention?  Is it plausible that your organization may experience a major, disruptive change such as the departure of the executive director or the end of funding for a major initiative?

Once a list of plausible crises is assembled, the group should then brainstorm what would happen to the organization were the crisis to take place. What would be the cost in terms of money, assets, reputation, or the well-being of staff, clients, and volunteers? How could these effects be minimized or mitigated? Asking these questions will start the process of formulating a crisis response plan.

The U.S. Small Business Administration's Introduction to Strategic Planning contains a chapter on conducting a SWOT Analysis. Click the link above link to learn more about conducting a SWOT Analysis.

Form a crisis management team as a core part of your crisis response plan.

This team should number five to seven people, comprising board members, staff, volunteers, or friends. The plan should detail what responsibilities each member of the team would handle in the event of a crisis.   The following roles should be included in the plan:

The internal communications manager should ensure that an updated contact list is copied and stored somewhere off-site. Uploading it to a website can be a useful option, though a physical copy should also be made available. The plan should clearly state who will be responsible for accessing this list and what methods they will use to see that necessary information is delivered.

Assemble the crisis management team and put the plan into action.

Depending on the exact nature of the crisis, the crisis management team should determine how much detail is appropriate for different stakeholder groups to know, from board members to staff, volunteers, media, clients, or funders. The team should determine what methods of communication will be used for each group, whether a personal phone call or a notice on the organization's website. If bad news needs to be delivered to any of these parties, it is best done all at once, rather than doled out over time. The team should also anticipate that, in any crisis, there is likely to be a proliferation of rumors and exaggerations. Steps should be taken to correct these as quickly and effectively as possible.

It is important to remind staff that all media inquiries should be routed to the official spokesperson. Emphasize this by informing them that there could be serious consequences for failing to adhere to the policy. When dealing with the media, the spokesperson should always be honest and proactive. It is helpful for the spokesperson to make a summary of the known facts of the situation on a regular basis and continue to update media contacts as it evolves.

It is vitally important that leaders and decision makers remain as calm as possible.

One of the most challenging aspects of any stressful situation is handling one's own emotions, which can include fear of disaster, avoidance, over-optimism, or defeat. Even in a time-crunch,  it is vitally important that leaders take moments to self-reflect.  Key questions to ask onself during these times include:

An important priority, especially in situations where a crisis is likely to extend over a long period of time, is for leaders to take care of themselves. Since key decision makers are the ones in the position of greatest responsibility, they are often carrying more than their share of stress. They should sleep regularly, eat a balanced diet, take breaks, and make time for exercise.

With a good system for communicating with key players in place, and with leaders allowing themselves time to reflect and care for their physical and emotional health, an organization will be well-placed to respond effectively to even the most unexpected and disruptive situations. The exact nature of those responses will obviously be dictated by the type of crisis the nonprofit is confronting, but certain key considerations should always remain at the heart of the decision-making process.

Your response process should not end once normal operations have resumed.

It is very important that, once the dust has settled, an effort is made to review the crisis event and see what can be learned from it. Taking time for this will help ensure that your organization is even more prepared for the next crisis, if one should occur.
Gather together key players or, in smaller nonprofits, your entire staff. In an open, judgment-free setting, ask the following questions:

Another important step at the end of any crisis is to make an effort to give all those involved a sense of closure. In smaller organizations, the executive director or manager could go to each employee or department and discuss with them what occurred. They should provide an honest picture of what happened, thank everyone for their efforts, and outline plans for moving forward. In some cases, an appropriate gathering to mark the end of the crisis and re-energize people about the next phase could be beneficial.

Finally, the organization should make sure to compile a complete record of what happened. If a similar event occurs in the future, this information will be an invaluable resource.

CHAPTER 2: Economic Downturn

A large-scale economic downturn can be devastating to the nonprofit sector. As salaries and corporate profits decrease, so can donations. Endowments can be greatly reduced, and cash-strapped governments can drastically tighten purse strings. To compound matters, economic downturns can also mean a great increase in demand for services. Preparing for ebbs and flows of the economy is essential.

Take the precautionary steps to insure your financial stability.

There are a variety of steps a nonprofit can take to improve financial stability and improve chances of weathering a tough economy:

It may be useful for an organization to consult with a financial advisor who specializes in working with nonprofits. Nonprofit Finance Fund, for example, offers consulting services, workshops, and clinics that can help an organization make sure it is managing its finances in a sound, stable way.

Prepare for a loss of revenue and/or spike in demand for services.

Consider partnering with a complementary organization to share space or other resources. If your nonprofit offers services that are particularly applicable to times of economic depression, be more aggressive in approaching government sources for funds. It may also be possible to renegotiate debt or leases for better terms. In times of economic hardship, low tenancy rates and a depressed real estate market may make it possible for some donors to give free space to nonprofits, which can lead to a significant cut in expenses.

Above all, a nonprofit is most likely to survive such a crisis by being proactive. Budgets should be written with both best- and worst-case scenarios in mind, and revenue projections should be made regularly. It is important to develop a response plan to a worst-case-scenario revenue shortfall ahead of time. Organizations should also make a particular effort to thank donors and reach out to them personally.

Avoid common financial pitfalls that put the organization at risk during economic downturns.

The best way for a nonprofit to prepare for the possibility of a recession is to make sure that the organization is financially healthy from the start. There are a number of practices that many nonprofits make use of which can actually weaken their overall fiscal health, including:

In addition to these practices, nonprofits are handicapped by a lack of flexibility when it comes to their workforce. Where for-profit businesses can often downsize during hard times to cut costs, this isn’t always an option for nonprofits. A hospital, for example, can rarely afford to cut nurses, nor can an orchestra trim back on violin players.

When responding to a recession it is important to maintain your nonprofit's mission.

When the downturn hits, even with the best preperations, the organization will need to take additional steps to respond.  The good news is that recessions provide a great opportunity to re-focus and realign to ensure that the activities of the organization are strongly connected to its mission. These times are ripe for an analysis of the efficiency and effectiveness of an organization's operational structure. 

Ideally, the response to an economic downturn happens as early as possible, picking up on early warning signs.    At this time, the crisis management team should assemble and examine the overall financial health of the nonprofit. To do this, first examine each of the organization's revenue sources and evaluate whether  any of them are likely to be cut off or reduced because of the crisis. This examination should include government grants or contracts, foundation and corporate giving, individual donations, and attendance at special events. Revenue projections for all these sources should be carefully reevaluated to see if expenses will need to be cut.

The team should also take into account that, in times of recession, payments will most likely be later than normal and bills will be demanded more quickly. Plans for expansion or large investments such as the construction of a new facility should also be carefully reconsidered.

To prepare for the possibility of cuts, the team should take a careful look at programming:

Asking these questions, should it become necessary, will help make these tough decisions clearer.

CHAPTER 3: Loss of a Major Funding Source

No matter how much effort a nonprofit makes to diversify revenue sources, a single funding source is often disproportionately important. If that revenue source is lost, the impact on the organization could be catastrophic. This chapter presents possible responses to this type of crisis.

Weather the loss of a funding source.

The steps to prevent being unprepared when a major funding source vanishes are similar to those of surviving an economic downturn. Organizations should diversify revenue sources and establish a cash reserve to cushion the blow. Leaders should also make every effort to stay informed about the stability of their primary funding source and proactively take measures to retain the source.

Specific elements of the crisis management plan for weathering the loss of a funding source include:

The crisis recovery team should dedicate time to identifying potential revenue sources.

If the unpleasant reality of losing a primary funding source occurs, the organization should activate this recovery team to significantly increase the level of effort going toward fundraising and revenue development. Members of the team should be prepared to spend seven to ten hours per month strategizing and fundraising in addition to their usual responsibilities.

The team should begin by assembling a list of potential revenue sources. The list should be made as diverse as possible, and it should combine larger sources that may take a longer amount of time to pay off with smaller sources that can be realized more immediately. A few ideas for potential sources are:

After identifying potential revenue sources conduct a cost benefit analysis.

Once the recovery team has assembled a list of potential revenue sources, it should evaluate each using the following criteria:

With this information, identify activities that will yield the most revenue with the amount of time and resources the organization can afford to deveote.

When making cuts, leaders of nonprofits can think creatively and take care of people as much as possible.

First and foremost organizations are made of people, and in the case of nonprofits, these people are typically very dedicated and usually not very highly compensated.   When cost-cutting is necessary, it is important to reassure staff of their security where possible, and to maintain transparency when this is not possible.  Some strategies include:

CHAPTER 4: Loss of or Damage to Physical Assets

An organization is vulnerable to more than just loss of revenue. Office space can be damaged due to a storm or fire. Equipment can be stolen. Key program spaces can become foreclosed or prohibitively expensive. Even if these assets are amply insured, making claims can lead to increased premiums and may take considerable time to settle. Protecting physical assets and determining how services can be continued or quickly resumed if they are lost or damaged is therefore a vital part of any crisis management plan.

There are several elements of the crisis management plan related to protecting physical assets.

As an organization you must try to prevent the loss of key physical assets and to work to recover from the loss of these assets. To do this, the crisis management team should take the following steps:

The loss or damage of a physical asset requires immediate response.

It is far more likely that your organization will face fraud or theft than a natural disaster – so it's perhaps more critical to take steps to minimize the risk of fraud and theft.  Consider the following steps:

No matter how well you have prepared for the possibility, coping with the loss or damage of a major physical asset such as office space or computer systems will require quick, focused, swift action to minimize impact. 

Be prepared to do the following:

If your office space is unavailable, consult your list of recovery sites.

In a situation where an organization's office or program space becomes unavailable, the organization should consult its list of potential recovery sites and establish which one is the most appropriate. In the case of a large-scale disaster, not all sites will be available. The crisis team should examine factors such as accessibility to clients, available space, cost, and time involved in making arrangements to use the location. Consider whether you will be able to return to your previous office or program space and how long it might take to do so. Which of your recovery locations would be available for that much time?

After a recovery location has been selected:

When the loss of office space is due to a large-scale natural disaster, a few additional steps will need to be taken:

CHAPTER 5: Loss of Human Assets

In the nonprofit world, the most valuable assets any organization has are often its people. The loss of a key employee, particularly one in a position of leadership such as a manager or executive director, can be just as devastating as a flooded office or a canceled grant. Even under the best circumstances, losing an important leader throws an organization into a period of instability that may make it difficult to function normally.

Focus on retaining employees by paying careful attention to organizational culture.

Minimizing the impact of losing key human resources starts with taking steps to ensure that they are not lost. Consider the following strategies:

Retaining executive directors and other high-level leaders presents a different set of challenges. The average tenure of nonprofit executive directors is surprisingly short. Inspiring leaders are often core to the ability of the organization to fundraise and attract top talent and organizations that have had this kind of leader can face crisis when this type of leader leaves.  In retaining high-level directors and managers, consider the following:

Minimize the effects of a lost employee by having a succession plan.

The loss of someone who plays such a key role can make it very difficult for an organization to maintain even basic operations, never mind muster the resources and clear thinking needed to plan for an orderly succession. An organized transition can sustain morale and ensure the continuity of services. 

To ensure an organized transition, even in the case of an abrupt departure, ensure a succession plan is part of your crisis management plan. A succession plan is a set of activities, policies and instructions for making the search for replacement leaders as smooth as possible. The plan should include:

Take time to find the right replacement for key leadership positions.

It can be easy to worry about how the significant responsibilities that person has shouldered will be handled until a good replacement can be found. It is important, however, that the replacement search be orderly and not rushed. To ensure a careful, deliberate process, include the following elements in your response:

CHAPTER 6: Employee Lawsuit

The largest share of claims filed against nonprofit organizations is related to employee matters—up to 60–70%, according to Coregis and the Nonprofits' Insurance Alliance of California. While a lawsuit from a current or former employee may not seem as destructive as an earthquake or a flood, its effects on a nonprofit can be just as terrible. Lawsuits are costly. They dampen morale and they damage reputations. Mitigating risk of lawsuits preserves your organizations ability to function, raise funds, and provide services.

Establishing a healthy organizational culture is the best defense against discrimination.

The most important step in preparing a defense against or preventing a lawsuit is for an organization to do everything it can to see that its employees are not discriminated against or harassed in the first place. Consider these essential steps in hiring and managing difficult employees in the workplace.
In hiring:

In managing difficult employees:

Though the majority of employment-related lawsuits involve terminations, lawsuits about harassment are also common.   In legal terms, an organization involved in such a lawsuit will need to show that they took “substantial steps to prevent or mitigate such harassment” and that “the employee unreasonably failed to avail him or herself of these measures.”

Your organization should establish firm policies against harassment.

The beginning of any effort to prevent harassment should begin with establishing policies which make it clear that harassment will not be tolerated. Employees should be informed of what constitutes harassment and told that disciplinary actions may be taken if harassment is found to have occurred. The policies should be written down and included in a staff handbook and/or posted in a highly visible location such as a break room. In addition, the policies should be discussed at training sessions and staff meetings on a regular basis. The policies should also include a confidential, private, and accessible complaint procedure of which all employees are regularly made aware. Additionally, the policies should include language ensuring that any accusation of harassment be reported to the executive director or another top manager who will be held responsible by the board for thoroughly investigating the report.

In a case where it is determined that harassment has taken place, the organization can take the following steps.

For the harasser:

For the harassed:

Taking these steps will minimize the likelihood that a claim will be filed and may serve as the basis for a defense. But most importantly, these steps will help create a safe and comfortable workplace.

When in litigation, limit discussion about the case.

Getting sued is an upsetting experience. A very human and understandable reaction is to talk to staff or volunteers in the office about the situation. However, leaders should avoid doing this. It is not uncommon for employees or volunteers to inadvertently or otherwise end up giving information that can later hurt the organization in court. Discussion and gossip about the situation should be strongly discouraged.

When an organization receives notice that a claim has been filed against them, they should immediately inform their attorney and begin preparing a defense. In the crisis communication plan, a clear, concise statement should be developed to be used in the event of a lawsuit. Consult an attorney to help craft this statement. Ensure the statement clearly states that matters pertaining to the lawsut cannot be discussed while the case is under litigation. The staff and volunteers should be told clearly to direct any media inquiries to the official spokesperson.

Your organization will want to inform key stakeholders of the events.

Before deciding who to tell, and how much to tell them, talk to your attorney and get his or her advice. People who may need to be informed could include the board, staff, key volunteers, and donors. Volunteers and donors will most likely need to be informed if any publicity could potentially arise from the lawsuit. It is better for these individuals to hear of the situation from an official source in your organization than through a news report. A statement to these stakeholders should express concern and compassion for anyone who has been injured, without admitting liability, and it should reaffirm a commitment to the organization's mission.

If the person who has filed the lawsuit is someone with whom your nonprofit hopes to continue to have a relationship, do not take punitive actions against them. For example, if you are being sued by a client who regularly uses your services, continue to provide those services. If the plaintiff is a current employee, make every effort not to treat them adversely. Burning bridges will not help your case, and will only create more negative feelings.

Summary

Crises can happen at any time, and there is no end to the potential disasters facing nonprofits. Though there are tips and methods that you can apply if things go wrong to help improve your organization's chances of survival, the most effective steps are the ones taken before times get tough. Taking the time to develop a comprehensive crisis management plan can be the difference between going under and getting back on track. Thank you for taking the time to learn more about managing crisis.

Preparing for crisis can help improve the overall health of your organization.

Developing a crisis management plan will help you take the necessary steps towards preparedness. While many of the steps included in the crisis management plan are useful for coping with disaster, others are good practices even under normal circumstances for promoting the overall health of your organization. Being fiscally responsible, establishing strong communication policies, protecting employees and volunteers, and creating an efficient managerial structure are all excellent policies, even when sailing smooth waters.

Use these additional resources to help you manage a crisis within your organization.

Nonprofit Finance Fund
The Nonprofit Finance Fund provides advice and consulting on financial management for nonprofit organizations.

Nonprofit Risk Management Center
The Nonprofit Risk Management Center is a nonprofit organization that offers other nonprofits online risk management resources in the areas of volunteer risk management, financial risk management, employment practices, and youth protection.

Alliance for Nonprofit Management. “Risk Management.”
The Alliance for Nonprofit Management is a professional association focused on improving the capacity of Nonprofits. Their “Risk Management” section provides a great resource for managing crisis in your organization.