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:
- Which programs are most critical to the organization's mission?
- Which programs are least mission-critical?
- Which programs are most expensive to operate? Could these operate more efficiently?
- Which programs are likely to see a greater demand during a recession?
- What programs are the organization's donors most likely to continue to support?
Asking these questions, should it become necessary, will help make these tough decisions clearer.