Letting Go (The Chronicle of Philanthropy Special Report, February 12, 2009)

The Chronicle of Philanthropy
Special Report
From the issue dated February 12, 2009

Letting Go

Layoffs at nonprofit groups are spreading — with many more expected in coming months

Sherilyn Adams, executive director of Larkin Street Youth Services, began bracing for an $800,000 hole in her charity’s budget last summer.

She started by making small incisions, such as reducing travel and training costs. Then last month, after discussions with board and staff members, the San Francisco group cut the salaries of top employees and eliminated 11 positions, three of them through layoffs.

“We’re doing everything we can to protect against program closures,” says Ms. Adams.

Layoffs are beginning to batter the charity world, as more and more organizations can no longer compensate for declining revenues simply by freezing hiring or pay. But the job losses are still less significant than in the corporate world, in part because few nonprofit leaders are willing to take the sort of pre-emptive strike to projected budget shortfalls common among business executives.

“We don’t have the same business mentality, and we are slower,” says Nancy Hall, senior adviser at the Maryland Association of Nonprofit Organizations. “Nonprofits want to try everything to avoid cutting staff.”

But many organizations are finding themselves without alternatives. While layoffs seem to be spreading most rapidly among smaller charities, not even the largest institutions are proving immune. Of the 25 American nonprofit groups that raised the most money in 2007, six have eliminated jobs, according to a Chronicle tally. Another four organizations that have not cut jobs on the national level have local chapters that have had to resort to layoffs. (One organization on the top-25 list, the Nature Conservancy, declined to comment).

AmeriCares has reduced its work force by 10 percent. Boys and Girls Clubs of America has cut 3 percent of its positions, and some local chapters are also shedding jobs. The United Jewish Communities National Office eliminated 39 full-time positions and one part-time post last year, or 15 percent of its staff, as a result of both the economy and a longer-term plan to decrease the group’s size.

State by State

The number of charity employees seeking work is starting to pile up in states across the country.

Of the 44 percent of nonprofit groups in Michigan that said their cash flow has been imperiled by the economy, 57 percent have cut jobs, according to the Michigan Nonprofit Association and the Johnson Center at Grand Valley State University.

In Maryland, 14 percent of charities surveyed by the state nonprofit association have laid off employees and another 12 percent expect to do so.

In Los Angeles, 21.6 percent of charities plan to lay off employees, according to a survey by the Center for Nonprofit Management, which supports charitable groups in Southern California.

Around the country, jobless claims are now at 4.8 million, the most on record. That means that demand for services has grown at many organizations, even as they are being forced to shed workers themselves.

People in the nonprofit world anticipate many more layoffs this year and next. Some charities that rely on multiyear grants are still relatively secure and may not be forced to take the ax to their organizations until later this year or next.

“We are not expecting to see a major fallout for another six or nine months,” says Elizabeth Banwell, director of external affairs at the Maine Association of Nonprofits. Her group is planning to hold a two-day clinic this spring to help pinched charities take smart approaches to trimming their staffs and other expenses. While few tasks are more painful than laying off good employees, some experts worry that organizations may not move fast enough to weather the recession.

“Charities tend to wait too long to make cuts and wait too long to take advantage of the economic recovery,” says Kim Wright-Violich, president of Schwab Charitable, a San Francisco organization that runs a donor-advised fund and provides other assistance to philanthropists. “If you are a small service-delivery organization, you want to get ahead of the downturn, which means you should probably already have made cuts, and then you should be watching very carefully for the recovery.”

‘Scale Down’

For now, most nonprofit leaders’ biggest concern is the people who depend on their help. If they are forced to lay off workers, they are trying to do so in a way that will not jeopardize their services.

Some charities are making small cuts across their organizations while others are eliminating specific programs.

Ms. Adams of Larkin Street Youth Services, which provides housing, job assistance, and other services to homeless youths, says she looked at where government was withdrawing support from the charity and trimmed jobs in those programs.

Among the areas where jobs were eliminated: HIV prevention and outreach. She also combined two positions in the development office.

“The idea is to scale down those services that we can easily scale back up,” she says.

Aaron Simonton, executive director of the Monroe Center for Healthy Aging, in Michigan, says he also looked at what programs he could offer on a reduced basis. For example, he transformed an assistance program for elderly people into an appointment-only system, which, along with other changes, allowed him to cut four jobs.

Other organizations are axing entire programs to focus their resources on other areas.

At Catholic Charities of East Tennessee, the Rev. Ragan Schriver, the group’s executive director, decided early last year to cancel an emergency-shelter program after state funds dwindled. Father Schriver says he examined the charity’s mission statement for direction.

“For any organization, that should be your deciding point, the mission statement, and ours talked about meeting unmet needs,” he says. “And we thought, There are shelters in a nearby city.”

Regina Birdsell, president of the Center for Nonprofit Management, in Los Angeles, says that cash-strapped charities ought to be looking for programs they may have developed in flush times that no longer make sense in this recession. She says in recent years there have been cases of “mission creep, where organizations have followed the funding, but that becomes more expensive in this economy.”

Larger charities are also examining their missions when deciding where to make cuts.

The National Christian Foundation, a donor-advised fund in Georgia, reduced its roughly 80-person staff by just under 10 percent in December. Steve Chapman, vice president for communications, says the cuts did not focus on any one department or type of job but were determined instead by which positions could be eliminated while still effectively serving donors.

Boys & Girls Clubs of America, too, combined some positions and laid off other staff members based on an assessment of which positions were less critical to serving children in need.

Donor Needs

At the same time, few charities are making deep cuts in their fund-raising departments. Some experts say the dire economic situation may have given nonprofit groups even more reason to hold onto fund raisers.

“Donors are going to be more cautious about what they support, and they’re going to want more assurance about effectiveness,” says Sharon Knight, interim president of the Colorado Nonprofit Association. “You have to either maintain your staff or beef it up to do that.”

While layoffs are spreading, even more common are freezes on hiring, reductions in benefits, salary cuts, and furloughs.

Thirty percent of charities that responded to a survey by the Maryland Association of Nonprofit Organizations have already frozen hiring, and 43 percent have cut travel costs.

Carole Alexander, executive director of House of Ruth Maryland, says that she and her group’s board members decided at the end of last month to require staff members to take unpaid days off. The goal was to avoid laying off employees and to preserve the charity’s services. The organization will probably close all but its emergency assistance and shelter for one week this year.

“I wouldn’t say I’m hopeful, but I’m determined that we will find the money to sustain this agency,” Ms. Alexander says. “Demand has increased between 20 and 30 percent, and I think it’s unconscionable to reduce our staff in a way that will further disable us.”

Indeed, many employers are trying everything they can to avoid giving out pink slips, which can be devastating not only to those who receive them but also to those still employed.

James A. Phills Jr., director of Stanford University’s Center for Social Innovation, says that charity leaders can minimize the impact of layoffs on employee morale by being open and clear about their actions.

“How you handle layoffs has a tremendous impact on the productivity, resiliency, and capability of the people who are left,” he says. “If the people who are left see those cuts as fair and not political, and made with transparency, then it’s not as bad as a situation where there is a lot of negative emotion.”

Mr. Phills also says that groups should avoid multiple rounds of layoffs, which can further weaken employee productivity.

Laura Begley, who was recently laid off from a nonprofit human-services association in the Midwest, agrees. She says she appreciated the organization’s ability to articulate why her job was among those cut, as well as the help from an outplacement firm that she received.

“What was most important to me was that the vice president made it clear it wasn’t performance-based,” says Ms. Begley, 26, who worked in program support and marketing.

But charities may still see pushback in response to layoffs, and not only from within their organizations.

When the University of Pennsylvania Museum of Archaeology and Anthropology announced last fall that it would eliminate 18 research positions, 3,500 people, including many professors at other institutions, signed a petition criticizing the move. The museum said the changes were due to a reorganization as well as budget concerns, and that some of those losing their jobs might be moved to different positions in the museum.

Weighing Options

Meanwhile, charity workers at institutions of all sizes fear the worst is yet to come.

Many nonprofit leaders worry they will have to start cutting soon but are, for now at least, still reluctant to take steps that could reduce assistance to the people who depend on them.

Stephen A. Miller, executive director of the Boys & Girls Clubs of Cecil County, in Maryland, is debating whether to charge families more for a summer camp his charity operates or to shut it down. That would mean laying off some workers.

Mr. Miller says he relies on those employees throughout the year.

If he did close the camp, he imagines, his employees would move elsewhere and he wouldn’t be able to find experienced people to replace them in the fall.

“We’ll probably make a decision at the end of March,” he says. “We’re in limbo.”

RECENT JOB CUTS AT CHARITIES AND FOUNDATIONS: A SAMPLING

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