Source: RSM US LLP. PBMares is a member of RSM US Alliance.
INSIGHT ARTICLE |
Two years before the COVID-19 pandemic, Jeff Britton and a team from RSM helped a midsized nonprofit become more agile by optimizing and consolidating their technology and streamlining operations, which ultimately helped them lessen the blow of the health crisis.
Britton, a director of management consulting at RSM US LLP, said the nonprofit’s technology had been driving several operational challenges, which ultimately led to a degrading member experience. As an example, the organization was using multiple different customer relationship management systems, with data also spread out across Excel spreadsheets. Each week, erroneous emails were being sent, asking members and board members alike to renew their membership.
The nonprofit wanted to fix the mess, so it consolidated its data into a single system. This allowed the organization to have better management of its membership. Quickly, the erroneous emails stopped. The organization was already seeing positive returns from their 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 their approach based on newly-imposed restrictions and alert its 75,000 attendees that it was moving to a virtual environment. “They were able to do a virtual event, facilitate similar sessions and ended up receiving outstanding feedback from their members,” Britton said.
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.
Here are five ways that nonprofits can become more agile.
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,” said Charlie Tate, a partner at RSM US LLP. “You 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—Tate said that 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 reserves, but carrying more will offer greater support amid tough times.
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, Tate said that organizations that built their reserves weren’t nearly as worried that they’d be dealt a fatal blow financially. Those that didn’t build their reserves? “They did a lot of scrambling,” he said.
Christopher McCarthy, a principal of technology consulting at RSM US LLP, said that there’s only one answer for how nonprofit organizations can become more agile: Better data. Often a positive outcome or driver for new technology efforts, better data is also the starting point for more effective execution.
“As things open up, organizations will need better data to make good decisions,” McCarthy said. “And that will be 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 your decisions.”
Because this 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 will become vital, statistics will become vital, financial metrics will become vital,” McCarthy said. “And the more granularly we collect that data, the more value we add in our analysis so we can do better predictive analytics. Instead of looking backwards, we want to be looking forward.”
Britton and Tate agreed: Having the technology in place to have a good data stream is essential to agility, whether amid a pandemic recovery or during normal times.
It’s especially important, Britton said, to have a “source of truth” for data to ensure that organizational data is accurate and people 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 to save time and money, Tate said, while providing security and consistency. Outsourcing can help nonprofits 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 out easily automated work. For nonprofits, outsourcing can be a key differentiator, setting them apart from competitors. The value of outsourcing has never been greater; chief financial officers have noticed this for years. A 2018 RSM survey found that 69% of CFOs believe that an outsourced IT provider could do a better job than their internal team.
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
McCarthy attended many virtual events during the pandemic, often paying the same money as if he attended physically. The events didn’t feel quite the same, he said, but they helped many nonprofits survive.
Most nonprofits, even the technological laggards, have caught up on technology during the pandemic. A big reason, McCarthy said, 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.
McCarthy believes that virtual events will change the nonprofit world. “My personal, thumb-in-the-air opinion is that we’ll see a 30% reduction in physical meetings, including annual meetings,” he said. “They’ll return to in-person events, but you might see less attendance, because there will have to be virtual offerings as part of a physical meeting to increase the exposure of the content.”
Organizations with good data streams will navigate this new hybrid virtual and in-person world best, McCarthy said. Comparing numbers between in-person, virtual and mixed events will become essential for success.
“If we use data and we determine that a virtual event doesn’t add value, then we just go back to in-person,” McCarthy said. “And maybe it’s not 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, and I’ll bet that many don’t need to actually have that annual picnic—I bet they’re going to get everybody’s $100 if they just send an email.”
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 further behind.
Have questions about your specific situation? PBMares can help. Contact Bo Garner, CPA, MBA, Not-for-Profit Team Leader, for assistance.
This article was written by Jeff Britton, Charlie Tate, Christopher McCarthy and originally appeared on 2021-04-06.
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