Friday, October 10, 2008

24 Factors In Developing an Exit Strategy for Nonprofit and Nongovernmental Organization (A Business Plan in Reverse)

Have you, the leaders, board and staff discussed an exit strategy for your nonprofit or nongovernmental organization? Are you working on a plan of exit or for at least significant change? I have been through it and these are some lessons I learned.

Here are four reasons why you should today begin outlining and writing an exit strategy:
  1. Never in my life have I seen so many consultants and trainers and universities/colleges writing and offering classes about how to raise money in hard times. There are books coming hot off the presses about fundraising when money is in short supply. I receive 4-8 e-mails a day about one or more of them offering the inside information about getting grants and fundraising right here and now. That is a growth from about 1-2 every couple of weeks. Something important must be going on. Given all that, what I am saying is this is a sign of your need for an exit strategy. Can they all be correct?
  2. I am quite familiar with what is happening in the U.S. and the stock market and socializing big business. But this is going on all over the globe. I read today that charities in Iceland are facing very dire straits. So the article shows three charities in Iceland are having some problems. That won’t happen to us - humbug. Then read the third reason you need a written exit strategy now. Link below.
  3. This is from the October 6, 2008 Oregonian newspaper: “Rough economic times have temporarily closed a Portland-area charity that helped more than 1,500 cancer patients a year. Cancer Care Resources offered free services from counseling to legal and fitness advice. To put more money toward its work, the charity kept slim reserves, enough to cover about three months' operations, said Sue Frymark, executive director. Those factors usually left the charity low on cash by summer, before its autumn Bid for the Cause fundraiser. This summer, the economy scared off enough donors to erase the slim margin. "Some of the same sponsors could not (give) as much or at all," Frymark said. "We didn't want to accumulate debt, so we suspended operations."” Link below.
  4. In Chicago the sheriff has stopped ordering his deputies from evicting tenants from foreclosed properties who pay their rent and have done nothing wrong. When an attorney sought a contempt order on the sheriff, the court upheld the sheriff’s just actions. The sheriff and the judge deserve our praise. Link below.
Without any of the above, you already knew you should be doing something…big. Perhaps you did not think about planning and outlining and writing a strategy for exiting.

Here are my 24 factors to be considered in an exit plan:
  1. The chief executive officer, finance person, or a board member or two will resign. What is the plan for succession?
  2. Do you know when to let go?
  3. If your NPO or NGO has multiple offices how can you consolidate or close one or more?
  4. How will you include the clients/customers/patients, community, constituents and stakeholders involved in that decision? How will you decide on that consolidation?
  5. Whether you have a union(s) or not, how will you plan for layoffs? What factors, values and standards will you use for layoffs?
  6. What are the reserves you have and how (soon) will they be used?
  7. How will you maintain quality service or maintain the mission as you plan? How will you retain the values and the passion of the organization?
  8. Should you close the office for a day for real exit planning talk?
  9. How can you maintain innovation, creativity, advocacy and deep community involvement?
  10. How will you deal with fear, tension and rumors in the office(s)? How do you communicate the truth about what is happening and will happen to the staff, board, volunteers and the community? Are there some things that will need timing to be disclosed?
  11. How will you maintain the technology you own or have ordered?
  12. What have you prepaid that can be recouped?
  13. How will the administrative tasks from bookkeeping, bill paying and IRS and state reporting to contract compliance be kept at a high level?
  14. How will the program’s cultural competency and language needs affect decisions?
  15. What is the plan to respond to queries from the press and media or a nasty blog by a staff member?
  16. What skills, jobs and talents are really necessary to continue operation under your mission? If someone with those skills and talents leaves voluntarily, will you and how will you fill that position?
  17. How will you prioritize what you will continue to do and what you will stop doing? How do grants and their ending date impact that decision?
  18. How will you maintain a close relationship with donors and funders to believe in you and what you are doing?
  19. Are there alternative streams of revenue possible such as charging a sliding fee scale or per use fee? Have you consistently charged third party entities for the service provided, such as in health agencies, insurance, Medicare and Medicaid?
  20. Will a funder or two help in a process to close down if that is the decision?
  21. Can you merge with another similar organization? Can you share offices and equipment if not merging?
  22. If or when the economy returns to a sensible period and funding is restored, how would you plan around the mission differently or would you do it the same again?
  23. Who among you and the board will stick it out as volunteers to maintain a presence in the service community and seek funding for a renewed start up six to twelve months from now?
  24. If closure and dissolution are the ultimate decision, how do you do that under state and federal IRS laws and regulations? Who knows how to do that and will do that?
This is only a starting list. You may have already thought of other questions for your exit strategy. Please let me know what they are.
IRS Facts about Terminating or Merging Your Exempt Organization Publication 4779 -
From the Third Sector, 10 October 208: Charities stand to lose millions in Iceland banks crisis - Three charities fear they have lost reserves totalling £25m in the wake of the banking collapse in Iceland.
Cancer charity sees funds dry up, suspends operations by Andy Dworkin, The Oregonian, October 6, 2008
Sheriff in Chicago Ends Evictions in Foreclosures, The New York Times, October 8, 2008.
Managing Nonprofits Under Financial Stress,
Is the Sky Falling?
Welcome to TransitionGuides - Dedicated to sustaining and strengthening nonprofits through better managed leadership transitions and related organizational development.

Building Strong Organizations Through Sustainability and Succession Planning

What Nonprofits Need to Know About the Zone of Insolvency - Are You Sitting on the Board of a Nearly Insolvent Nonprofit?

Basic Guidelines for Successful Planning Process
Nine Steps to Prevent Merger Failure
Thinking the Unthinkable: Maybe We Should Shut Down Board Cafe • By Jan Masaoka • September 14, 2008

Closing Down the Right Way, Board Cafe • By Jan Masaoka • December 14, 2008
If you know of other factors for an exit plan or additional resources for this topic, please let me know through the comments below. Thank you.


Gonzalo A. Peña said...

What a great article! many of us think about the charge starting ventures to tackle issues, but few of us think about the retreat. Thank you for writing it and filling us with knowledge through your blog.



Amy Kincaid said...

Timely for us. We're working with a client on closing the organization -- for good reasons and honorably. We're working from a framework/perspective of serving kind of like hospice--in the sense that this is imporatnt work to stand with and offer experienced tips and guidance at an organization's end of life. Your willingness to raise the issue of end-of-organizational-life planning is important. Nonprofit consultant and author Andy Robinson is someone who has given this some thought, too. Very valuable, practical set of issues for leaders to consider.

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