October, 2007 -by Peter C. Brinckerhoff

This Month's topic: Crisis Management

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Websites of the Month

Here are my recommendations for websites of interest on this month's topic: Crisis Management

www.managementhelp.org/crisis/crisis.htm	Surprise, surprise, Carter McNamara gives us a great start on this subject at the Free Management Library.
Crisis and Business Continuity	A good set of resources for worst-case scenarios from the UK.
palimpsest.stanford.edu/byauth/sikich/allhz.html	A good article on Crisis Management and Planning.

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Crisis Management

I  know that for some readers, crises seems to show up daily. I well remember being a young ED, and having all, not 10%, not 80%, but all of my organization's funding zeroed out about 6 weeks after I was appointed....I lived in a day to day crisis for 12 months.
There are other kinds of crises as well, of course. You can have legal issues, a bad news report, someone in your organization who is arrested, someone who is served by your organization hurt; the list is endless. But the most common crisis nonprofits seem to deal with is that of managing a sudden financial crisis.

That's what this issue is about. I want to put the management space to use by providing you some suggestions from my 2004 book Nonprofit Stewardship. There's a chapter called "Stewardship in Good Times and Bad". Here are some ideas straight from that chapter:

"In this section, I want to give you some checklists of things to do and questions to ask when times suddenly get very bad. 

FOR EXAMPLE: Your key state funder or key foundation funder calls you three months before the end of the fiscal year. Their message: The grant that makes up 40% of your overall income and 100% of any net you may retain has been cut by 30% as of the beginning of the fiscal year, and worse, you have to cut 10% of the remaining three months of this year’s grant. If you thought life was stress-filled before, welcome to hypertension land.

In situations like this, we need to start with asking a few key questions.

    How bad is the shortfall, really? Is what we were just told by our funder fact, or rumor based on     rumor. Is it real and, if not, when will you know the real number? Is there any room for negation?

HANDS ON: Get a group together as a crisis management team. This team should be made up of board, staff, your banker, your auditor, and perhaps even a representative of the people you serve. Use them for strategizing and figuring out your reaction to your cutback.

What is the cause of the shortfall? Is the shortfall (as in the example above) a result of one funder’s change of priority, or is this a wider, systemic issue, such as an economic downturn?
Is the shortfall long-term or short-term? Related to the previous question, this is important: will we get through this in one fiscal year, or is this our new reality?
Are individual services at risk? Are the cuts deep enough so that you can’t do a particular service or set of services well and may have to cut them completely?
 Is organizational viability at risk? Key issue: is the cutback deep enough and important enough (in the example above it results in the loss of any profits) that we might not survive as an organization? Conversely, if the service(s) being cut is (are) central to the image of the organization, or the flow of services in the organization, viability might also be at risk.
Are legal responsibilities/contractual obligations at risk? Now is the time to read through your contracts. In some cases, you can’t just cut services pell-mell, but are required to keep services in place by contract. 

FOR EXAMPLE: You get a transportation contract that says you will provide routes in all parts of your community. You take a 20% hit in funder income and decide to cut 4 of your least used routes. The problem? Those are the only four routes that serve a particular socio-economic group in your community. You’ve just violated your contract.

HANDS ON: Get your crisis management team copies of all your contracts and letters of grant award. Have everyone read them and discuss your unavoidable obligations. If you find something that might eventually be controversial, mark it and save it for a possible review by your attorney.

Once you get through your starting questions, you need to look at a series of questions to focus your thoughts on both long term and short term reactions to the crisis. The most common response from managers is to deal with tactical, or short term actions. This is a mistake. You need to first look at strategic or long-term actions. Taking the long view first is a better stewardship response. You can use a stop, step back, and check the long view process to help avoid knee-jerking responses that use up a lot of energy but don’t really advance your cause.

You need to start with the long view. The following two lists are actions you should consider and questions you should ask as you work your way through your crisis. Strategic first, then tactical:

STRATEGIC

1. Review your mission and values statement —what does it say about priorities?
2. Review your strategic plan — what does it say about priority services?
3. Review your marketing plan -- what markets are most important?
4. Talk to peer organizations --- are there group responses to the cuts that are appropriate?
5. Talk to state trade associations --- what are other organizations doing?
6. Is there a need for long-term, strategic restructuring, such as merger or partnering?

TACTICAL

1. Run weekly cash flow projections – remember, cash is oxygen, and you are already in thin air.
2. Inform staff and board early and often – but only tell them what you know, now what you think may happen, or what you are considering, or what might/could/should/ought to happen. The rumor curve is deadly.
3. Review contractual obligations.
4. Check state labor laws, union contracts for layoff/cutback limitations.
5. Inform vendors of possible late bill payments.
6. Inform creditors. – this is simplified if your banker is on your crisis team.
7. Develop best case, middle case, worst case scenarios. Be conservative about all three.
8. If layoffs are necessary, do them carefully, in complete accord with state regulation, union contracts, and best HR practices. Remember, sooner is nearly always better with layoffs.
9. Communicate, communicate, and communicate: -- with staff, volunteers, service recipients, community members, funders, vendors, and creditors.
10. Prepare for media inquiry.

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If you found this hint helpful, there are lots more management, marketing, and technology ideas for you in the "Ideas" section at www.missionbased.com. Check them out--they're free.

And, remember to take a look at the Mission-Based Management Blog.

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My recommendations for texts and other readings on Crisis  Management.

Not to put too much self-promotion  here, but my book Nonprofit Stewardship does, in fact, have a chapter on this issue.

Damage Control: Why Everything You Know about Crisis Management Is Wrong, by Eric Dezenhall

School Crisis Management: A Hands-On Guide to Training Crisis Response Teams, by Kendall Johnson

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Crisis Management and  Technology
In a crisis situation, one key that I noted above is to communicate, communicate, communicate. Obviously, tech can help make your job a bit easier and less stressful if you use it well. Here are some ideas:

• Do your worst case, best case, middle case scenarios on a spreadsheet to allow for rapid updates. This can also double as a weekly cash flow projection.
• Put together email lists of people you need to stay in touch with (vendors, media, funders, etc.) so that, when appropriate, you can notify them simultaneously. NOTE: if your email software allows it, start a set of folders so that you can put the email regarding your shortfall, particularly outgoing emails, in one place. Then you can quickly see everything you sent to your board, or shipped out to your staff, etc.
• Add a section to your website explaining the crisis, and what you are doing. Add a FAQ (Frequently asked question) section, and consider doing specialized FAQ's for both staff and the people you serve. do  NOT let these substitute for meeting in person, but having some information online is usually a good idea, particularly if you are going to cut back one or more services, or lay off staff. NOTE: Double and triple check these website additions, and really think through how they look: the press may just read what's there without calling you, so make sure you can live seeing a cut and paste from your site in tomorrow's paper.

These small uses of technology can help you get the word out quickly, and also assist as you look at your options. Remember, they are tools, not solutions!

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If you found this hint helpful, there are lots more management, marketing, and technology ideas for you in the "Ideas" section at www.missionbased.com. Check them out--they're free.

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Below you'll see the date, location, and topics of public training I'm currently scheduled to do in the next few months. For more information on a particular speaking engagement, get in touch with the contact person listed in the right hand column, or email me.

For more information on my availability throughout the next 12-18 months, available topics, sample agendas, and fees go to www.missionbased.com/training.htm

10/03/07	Houston	Nonprofit Stewardship	Colorado Behavioral Council Mary Jo Lagesse mlagesse1234@msn.com
10/06/07	Breckenridge, CO	Generation Change and Nonprofits	United Way of the Texas Gulf Coast Beth Tobias btobias@uwtgc.org
10/09/07	Portland, OR	Generation Change and Nonprofits	TACS Jennifer  Ingham jb@tacs.org
10/13/07	San Francisco	Generation Change and Nonprofits	BoardSource Leadership Forum Barb Knoff Barb@mil3.net
10/19/07	Holyoke, MA	Generation Change and Nonprofits	Human Service Forum interim@humanserviceforum.org
11/1-2/07	Vienna, VA	CRP Recruitment and Retention	NISH Therese  Stein Tstein@nish.org
11/13/07	Columbus, OH	Mission-Based Management & Financial Empowerment	Ohio Council of Behavioral Health Care Providers Hubert Wirtz OCWirtz@aol.com

Crisis Management and Marketing

Marketing is crucial to good crisis management, but mostly BEFORE the event. What? I thought marketing could help me sell my solution! Sorry, that's public relations. Marketing is the art/science of finding out what people want and giving it to them in a way that they can use it. Thus, for marketing to help you in a crisis, you need to have done your homework before the event.

Look back at the Management Tip. Look under "Strategic". See the discussion of "Review your Strategic Plan". What's next? That's right, "Review your Marketing Plan".

Why would you want to do that? Because during your marketing planning you should have looked at your most important markets, what they wanted, and tried to match up those wants with the things your organization does best: your core competencies. Now, in your time of crisis, you need to focus on those markets and those competencies, making sure that if you have to cut, you don't cut those.

Also, good marketing planning will have included asking markets, through surveys or focus groups. That establishes a relationship that your public relationship efforts can now cash in on. 

Last, in a crisis, it's easy to fall back on bad habits. Bad habits such as "I know what these people really need, so I won't worry about what they want---we can't afford to give them that anyway. Bad idea. Just as you won't compromise on service quality, don't compromise on giving your valued customers good quality services in the way that they want them. They'll appreciate it, and help you through your crisis.

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If you found this hint helpful, there are lots more management, marketing, and technology ideas for you in the "Ideas" section at www.missionbased.com. Check them out--they're free.

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Future Topics for
The Mission-Based Management Newsletter....

November	Generation Change and Marketing
December	Signs of Organizational Trouble
January 2008	Reorganizing Your Board of Directors
February	New Communications Tools
March	Generation Change and Finance
April	Greening Your Nonprofit
Send me your topic suggestions at: peter@missionbased.com

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You asked, so here they are: Past Single-Topic Issues of the Mission-Based Management Newsletter...

	2004	2005	2006	2007
January	Business Development	Strategic Planning	Generation Change	Conflict of Interest
February	Fund Raising	Leadership	Accountability	Generation Change and Your Staff
March	Volunteers	Core Competencies	Ethics and Management	Admin Costs
April	Financial Management	Expanding to New Markets	Staff Satisfaction	New  Tech Ideas for Nonprofits
May	On-line Marketing	Endowments	When Boards Cross the Management/Policy Line	Generations Change and the People You Serve
June	Transparency	Tech and Mission	Staff Rewards	Mentoring
July	Nonprofit Start-up	Sustainability	Saying No to Community Needs	Better Cash Planning
August	Governance	Ethical Benefits	Board and Non-CEO Relations	Small Nonprofits
September	Political Activities	Entrepreneurship	Executive Transition	Generation Change and Technology
October	Attracting and Retaining Younger Staff, Board, and Volunteers	Internal Communications	Advocacy
November	Outcome Measurement	Board Recruitment	When Boards Fail
December	Lifelong Learning	Better Budgeting	Conflict of Interest