“The Four Horsemen of the Nonprofit Financial Apocalypse” – Cynthia Gibson, PhD, wrote an article for the most recent Nonprofit Quarterly (Spring 2010) that is both thought-provoking and unsettling. Gibson – President and CEO of The Nonprofit Finance Fund – begins the article by drawing an analogy between how nonprofit organizations are faring in this economic downturn and the H1N1 epidemic. Among the outcomes of this “economic flu” were the range of possibilities – long periods of disease, weakened overall capacity and fatalities. Among the “walking wounded,” however, were those who would seem to be immune from this economic flu – i.e., the ones who had been doing all the right things. She writes:
“These organizations had played by the nonprofit rules, were likely to have four- and five-star ratings, and boasted enviable business models that were carefully built according to so-called best practices in capitalization. They also owned their buildings, used long-term bond financing, and steadily built their endowments. Unrestricted net asset balances were handsome. Savvy, connected business folks peopled their board.”
Not surprisingly, the ultimate culprit in their vulnerability was (simply) “not enough revenue.” Both well-reputed and “less than stellar” organizations have been hit with decreasing revenues in recent years. But the Nonprofit Finance Fund found that even strong nonprofits became vulnerable. Gibson wonders “What went wrong”? She and her colleagues attribute their vulnerability to the four horsemen of the (nonprofit financial) apocalypse: Horseman 1: Too Much Real Estate. Horseman 2: Too Much Debt. Horseman 3: Negative Liquidity and “Under Water” Balance Sheets. Horseman 4: Torturous Labor Economics (in which organizations keep reducing “human capital” to the point where they lose impact and effectiveness). I found her discussion of this fourth factor to be particularly relevant because of the many organizations I know who met declining revenues in recent years by reducing staff and then “job loading” the positions that remained.
There’s too much good in this article to do it justice in this small space. It is well worth reading and would be great fodder for discussion at a Board meeting or Finance Committee Meeting. I’m happy to share a copy with you … just send us a request at info@lelandleadership.com. -Pam (June 2010)
The Audacity to Win by David Plouffe – You may already know that David Plouffe was Obama’s campaign manager for his historic White House run and this new book is Plouffe’s account of the campaign. I’m only halfway through it but am already able to recommend it. Some of you may feel it is too much detail but I find it to be a fascinating read and great tutorial on changing presidential campaign politics and strategies. Regardless of how you voted in the election, if you are interested in politics or the political dimensions of any strategic initiative, you’ll enjoy this book. Be forewarned – it’s a long book and may take time to fully savor. – Pam (February, 2010)
Guilty Pleasure – Okay – I’ll confess – I liked Pat Conroy’s newest book South of Broad before I read the first page. Not only have I been a fan of Conroy’s since reading The Lords of Discipline in 1980, I’m from South Carolina and I’ve spent lots of time in Charleston – even lived their briefly after college. My dad is a native son and Citadel graduate; my Nana would entertain me by speaking a bit of Gullah. And I’ve been to more Citadel football games than I can count … you get the picture. So I’ve been looking forward to Conroy’s latest book – knowing that I would be transported back to this very complicated, delicious and demanding city. And Conroy didn’t disappoint!! It is great story with lots of twists and surprises and some very interesting characters. And with Conroy’s writing, you can feel the breeze and the heat of the sun as you walk with him along the Battery. – Pam (February, 2010)