Given the economic downturn, it looks as if our fundraising will fall short. My board wants me to be proactive and start letting staff go. Our services are important to the community, so we want to survive. Are staff layoffs my most ethical option?
Perhaps. But a staff reduction is not the only, or necessarily, the first option to consider.
The organizational mission is the starting point. Given the nature of your services, and your community, will your importance to the community increase or decrease? Have you and your board done some strategic thinking about how programs will need to change? Have you updated your community asset map? (If fewer people are employed, there may be more time for volunteering, for example, or vacant buildings that could be put to new uses.) Is the mission still relevant or does it need updating? Almost certainly, your strategic priorities need to be reviewed. In other words, the board should be holding a lengthy strategic discussion and a reasonable board would not want you to act in advance of that discussion. I recommend you explain this to the board, indicating your willingness to reduce staff after a strategic review if that is the best option.
In those discussions, everyone should try to think broadly about community health and quality of life, as well as opportunities. Arts and culture may be more important than before, to keep up people’s spirits. Government stimulus funding may make monies available for major infrastructure enhancements and extensive retraining; your organization might be positioned to get those contracts. New family supports may be needed if one parent leaves the area to find work. High unemployment levels will increase the need for mental health services, and stress will cause physical health problems too.
After this strategic thinking, you may have different skill sets to consider, and perhaps new roles to fill (if monies permit). Choosing which positions to eliminate in advance of such a review would likely result in inappropriate choices.
Your next area for review is revenue. Apart from the potential new government contracts, you may find other new monies. When people are comfortably off, and so are most of their friends and family, donations may seem unimportant. Once they and others they know well are struggling, they may become more aware how much others are struggling. Many people who are comfortable are also, unfortunately, judgmental; they may become less inclined to blame people for needing help. If donors are more empathetic, your donations could go up. Remember that poor people, on average, will give a higher percentage of their income than rich ones! Review your fundraising programs to make sure you are taking such changes into account.
The third area to consider is staff engagement. Your staff members are key ambassadors for the organization, and also your best source of information on how to cut costs. If you let some go without investigating alternatives, others will be upset and less willing to speak up on behalf of the organization. The friends and family of the released staff may cease their support. Before you take such risks, see if the staff have revenue generation or cost-cutting ideas that let you maintain services within budget.
Also, see if some staff members actually want sabbaticals or a switch to part-time work. They may have felt too essential to leave, or thought their loyalty would be questioned. If the organization needs to cut payroll, they may volunteer. Or staff may even be willing to consider a percentage cut in pay so none of their colleagues need to be terminated, though unlike some corporations where this is happening, most of our nonprofit staff are already underpaid.
It is likely some of your board members come from the corporate sector, where some CEOs seem to be evaluated more on how many people they let go than on results for the organization. That approach often gives short-term gains at the expense of sustainability. Companies that instead engage their staff members in finding solutions, and show some loyalty, have better long-term results, on average.
However, some organizations let staff numbers get out of hand, and reductions are essential. Major companies that let that situation develop then acted too slowly are in deep trouble. Your organization may also have non-essential staff that you cannot afford in a downturn. So after – and only after – reviewing mission and strategies, revenue and cost containment, you may have to consider staff reductions.
But which ones? Companies that let three maintenance workers go in order to keep a manager may or may not be making a good choice; in many cases head office or white collar staff try to protect their own at the expense of services in the field. Bring it back to the mission – which employees have the most impact on mission achievement? Which are focused on low priority programs, or carrying out functions such as payroll that could be cheaper to outsource? Which employees have proven their ability to learn from training, change their roles, coach other staff, and achieve results that matter? Try to keep such staff regardless of their current role, and retrain them. Give the boot to those who refuse to adapt to change, or who are always complaining but never have solutions.
If you must downsize, be honest about the reasons and rationale behind the choices. Treat outgoing staff humanely, give whatever outplacement support you can, maintain benefits if possible, and keep the door open for their return. Get rid of negative policies such as refusing to give references. That policy is guaranteed to turn people against your organization, causing far more damage than the legal risks that may have prompted the policy. Consider supporting ways of keeping former employees in touch with each other and with the nonprofit.
For the remaining staff, PLEASE avoid the overused “do more with less” approach; they’ve been doing that for years. Acknowledge that some tasks must be dropped, and help people set priorities. It is quite unethical to just dump the extra work on them.
I was once in your situation. In that case (yours may differ), I realized layoffs would be the start of a downward spiral that would leave that organization back at a kitchen table, with no staff and without the ability to carry out its mission. I found new monies, and the organization grew (and continued to grow after I left – it had momentum in the right direction). In the short term, I saved money by using interns and students, and did not replace a staff member during her long-term disability leave. I also increased membership benefits and member numbers, bringing in dues money to replace reduced government funding.
Do not lightly put your organization into a downward spiral toward extinction. But do not avoid staff reductions when the most ethical action for your community is to reduce the workforce, at least in the short term.
Since 1992, Jane Garthson has dedicated her consulting and training business to creating better futures for our communities and organizations through values-based leadership. She is a respected international voice on governance, strategic thinking and ethics. Jane can be reached at jane@garthsonleadership.ca.
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