Authored by RSM US LLP
What areas should nonprofits examine to enhance their ability to adapt to change?
Two years before the COVID-19 pandemic, RSM US LLP helped a midsized nonprofit become more agile by optimizing and consolidating its technology and streamlining operations, which ultimately helped lessen the blow of the health crisis.
The nonprofit faced several operational challenges related to its technology, which led to a poor experience for users. For example, the organization used multiple customer relationship management systems, with data also spread out across Excel spreadsheets. Erroneous emails were often sent, asking members and board members alike to renew their memberships.
The nonprofit wanted to fix the mess, so RSM helped the organization consolidate its data into a single system. This allowed the organization to have better management of its membership. The faulty emails quickly stopped, and the organization saw positive returns from its efforts.
Then came the outbreak of the novel coronavirus. The organization, scheduled to host its annual event, was in a much better position to pivot its approach, based on newly imposed restrictions. The nonprofit swiftly alerted its 75,000 attendees that it was moving to a virtual environment. The organization staged a virtual event, facilitated successful sessions and ended up receiving outstanding feedback from its members.
This nonprofit was fortunate in its timing, but other organizations suffered greatly during the pandemic. COVID-19 has been a major, disruptive event, one that should serve as a wake-up call to nonprofits: It’s time to become agile.
For improved agility, focus on these five areas:
1. Budgeting and forecasting
The first step toward agility is budgeting for risk. Indeed, the worst-case scenarios—like pandemics—chew through budgets.
Too many strategic plans don’t consider risk. Nonprofits need to be prepared for the unknown and have a model in place.
Once organizations forecast their risks—brainstorming sessions can be helpful, with multiple people considering risks and opportunities—they should quantify the potential budgetary impact of each risk.
For example, how much would another pandemic cost? Or an economic downturn? A natural disaster? These are painful questions, but nonprofits must address them.
2. Reserves planning
Once organizations know their risks, they should build their reserves. The organizations that planned for a pandemic-sized disruption, for example, had deep reserves. Most organizations aim to hold 75% to 100% of their annual expenses in reserve, but carrying even more will offer greater support when tough times arrive.
In addition to risks, an organization can plan the reserves it needs by examining its environment, asking questions about what external factors could affect the organization and whether the organization would be able tighten its belt in lean times. During the planning process, executives should be as objective as possible, researching what similar organizations have planned for their reserves. There are likely hints for how to best handle reserve management in the stories of other organizations.
Amid the pandemic, organizations that built their reserves weren’t nearly as worried that they’d be dealt a financially fatal blow. Those that didn’t build their reserves did a lot of scrambling.
3. Technology and data
Having technology in place to have a good data stream is essential to agility, whether during a pandemic recovery or during normal times. Often a positive outcome or driver for new technology efforts, improving data is also the starting point for more effective execution.
Better data to make good decisions is a constantly moving target. What is going to happen this summer is very different from what’s going to happen in the fall, which is going to be completely different from next summer. The No. 1 way to be accurate—to stay on top of things that are changing faster than they’ve ever changed before—is to use data to make decisions.
Because the pandemic recovery is an unprecedented event, a good data stream will help organizations make informed decisions. Nonprofits will need access to organizational data, such as donations and memberships, but also public information on the economy and the financial markets.
Surveys, statistics and financial metrics will become vital. And the more granularly that nonprofits collect that data, the more value is added to their analysis so that they can do better predictive analytics. Instead of looking backward, nonprofits want to be looking forward.
It’s especially important to have a “source of truth” for data to ensure that organizational data is accurate and that all staff are working from the same information. Having a single source of truth means having a consolidated repository of key information rather than trying to maintain it on multiple systems or, worse yet, Excel files.
Outsourcing work—especially in IT management, finance and accounting—can be a great way for nonprofits to save time and money, while providing security and consistency. Outsourcing can help build sustainable technology and business processes while avoiding unexpected challenges related to turnover and recruiting. It can also provide flexibility to scale staff as organizational needs change.
Additionally, outsourcing can provide employees with more time to focus on the nonprofit’s mission by sending easily automated work to outside resources. For nonprofits, outsourcing can be a key differentiator, setting them apart from competitors.
And while setting up an outsourcing solution may appear arduous, it has never been easier. Nonprofits can hire a consultant to help integrate outsourcing solutions, which could allow nonprofits to save money, work more efficiently and have timely data.
5. Virtual and other delivery models for programs and fundraising
Virtual events don’t feel quite the same as in-person events, but they have helped many nonprofits survive.
Many nonprofits, even the technological laggards, have caught up on technology during the pandemic. A big reason is that cutting-edge technology has become more inexpensive and easily accessible. Now, unlike five or 10 years ago, there are push-button solutions that allow nonprofits to communicate with far-flung employees and members, and include environments for virtual conferences, meetings and fundraisers.
Organizations with good data streams will navigate this new hybrid virtual and in-person world the best. Comparing numbers between in-person, virtual and mixed events will become essential for success.
If an organization uses data to determine that a virtual event doesn’t add value, then it can just go back to in-person events. And delivery models might not be one-size-fits-all. There are many organizations, particularly networking organizations, where physical presence is highly preferred. Then there are others, which are just strictly charitable, that don’t need to actually have that annual picnic—they may still get everybody’s $100 donation if they just send an email.
Agility is key to long-term survival
If the pandemic has shown us anything, it’s that nonprofit leaders need to be prepared for almost anything, and that agility is key to long-term survival. Organizations that can quickly switch directions, adopt new standards and accommodate changes in demand will be in the best position to respond to the next disruption. Those who fail to make the right investments in their processes and technologies to be more agile will only fall farther behind.
This article was originally published in April 2021 and has been updated.
This article was written by Christopher McCarthy, Charlie Tate and originally appeared on 2022-06-07.
2022 RSM US LLP. All rights reserved.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Thomas Howell Ferguson P.A. CPAs is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.
For more information on how the Thomas Howell Ferguson P.A. CPAs can assist you, please contact us.