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Humane downsizing

publication date: Dec 11, 2013
author/source: Bill Kennedy

One month into a new year, an organization was in decline.  The Executive Director was retiring.  The Treasurer was gone.  The client needed a functioning accounting system, but it needed a balanced budget even more. Bill Kennedy photo

Payroll is almost always the largest expense in nonprofit organizations.  You can’t accomplish a significant downsizing without letting people go.  This situation was particularly stressful because of the age of the staff and the depth of the problem.  The organization was educating and advocating in an area of public policy that was no longer popular.  The membership was shrinking and the resource materials were collecting dust on the shelves.

But you don’t save money in the first year of a downsizing.  Severance payments typically overshadow the payroll savings, particularly when the people being let go have been with the organization for a long time, in this case over 25 years.  I could not see how to both balance the budget and keep the organization going.

Then the Board hired a new ED and that changed everything.

He did something that I have never seen anyone else do, before or since.  He found jobs for the two senior staff members who were about to be let go.  I’m sure it wasn’t easy and he had to agree to top up one’s salary for the 3 years until he reached retirement age, but he created a win/win/win.  The staff member was saved the stress of a job search.  The organization stayed true to its principles.  And we were able to balance the budget.

Changing political winds

Another organization was caught by a change in government policy.  All of a sudden, funding for a long-standing, successful program was cut. And the cut came months after the renewal would normally have been approved.  The sudden loss of this revenue, a major part of the organization’s budget, struck like a heart attack.

In a situation like this, people often huddle behind closed doors deciding what to do.  But in this case, the ED gathered everyone together to work out the plan collaboratively.  They agreed on what to defer and what to cut.  They hashed out how to re-deploy volunteers.  Everyone became a fundraiser, particularly the ED.  There were difficult negotiations with the union and some staff were laid off, but within two years, the organization had replaced the government funding and was carrying on.   

And people ask me why I like working in the nonprofit sector!

Bill Kennedy is a Toronto based Chartered Accountant with Energized Accounting, focusing on financial and reporting systems in the charitable sector. He blogs at Find out more at; follow Bill @Energized.

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