The One Thing Not to Do When Facing a Funding Crisis

Over the years I’ve seen boards and leadership of organizations too often react wrongly when funding is tight. They either force across-the-board cuts or decide to take in house the work that has been under the purview of experts in the field.

Here’s the problem with both of those responses.

First, when facing financial shortfalls, not all the functions within an organization are created equal when your priority is to shore up funding.

I can remember early in my career when the organization for which I served as the head of fundraising was facing a financial crisis. The edict was handed down for there to be a 10% reduction in expense across the board. I complied, but also reduced the projected funding levels by nearly 30% (we were easily getting a 3:1 return on our fundraising efforts) as I knew we couldn’t hit our projected fundraising goals if we were to make this cut.

Needless to say, my revised budget caused a robust debate at the senior level. But in the end, the fundraising budget was not cut and we hit our projected goals… and then some.

It was a great lesson: You can’t cut your way to growth in fundraising.

When you are facing a financial downturn as an organization, it’s vital to ensure your funding engine has all the fuel it needs to bring in the needed income. To reduce that expense is to pretty much ensure your funding crisis will only continue.

The other response – of taking things in house – violates one of the oldest axioms in fundraising. This axiom is simple: Different input will create a different output.

Said another way, you can’t expect the same revenue to be generated by reverting to in-house management and staff, if the reason you hired outside professional help was to generate more income.

I learned of an organization recently who, facing a funding crisis, was forced to make a hard choice. Cut professional fundraising help they had hired to increase income (which was exactly what the outside counsel had produced) or reduce staff.

The natural response for most organizations is to try to preserve staff. But the assumption is the organization will be able to maintain this new level of funding without that expert help and will, therefore, emerge from their crisis.

Unfortunately, they chose to cut professional help and go it alone on fundraising. This is a massive risk. Should they end up back at the lower level of funding prior to hiring professional help, they risk jeopardizing programs AND, once again, face the prospect of needing to reduce staff.

At the end of the day…

  • You can’t cut your way to growth, and
  • You can’t expect the same output if you change the input

When facing a funding crisis, the worst thing an organization can do is to take measures that reduce its ability to raise the needed money. Instead, the one thing you should do is to wisely, courageously continue to invest your resources to generate the funding to get you out of your situation.