Laying Off Charity's Rain Makers

Related materials

Tips: Trimming Fund-Raising Costs: Tips From Experts

Article: Fund-Raising Teams Rethink Roles Amid Economic Pressure to Justify Jobs

Article tools

Printer friendly	E-mail article	Subscribe

Discuss any Chronicle article in our forums

Laying off fund raisers is usually one of the last steps nonprofit groups take in an economic crisis.

But as the longest and deepest recession in decades persists, even fund raisers are among the people getting pink slips.

At colleges, hospitals, and other large nonprofit groups, chief development officers are increasingly looking to pare expenses through layoffs and other approaches, such as salary and hiring freezes, furloughs, and staff reorganizations.

Most charities still strive to protect the jobs of fund raisers by cutting efforts that don't involve direct solicitations or reducing spending on fund-raising newsletters or other items that are least likely to affect revenue, says Donald M. Fellows, chief executive of Marts & Lundy, a Lyndhurst, N.J., fund-raising consulting company.

Still, with staff salaries and benefits making up more than two-thirds of most organizations' budgets, "you can't go too far without looking at it," he says. Increasingly, he says, his clients are seeking ways to trim 5 to 10 percent of their development budgets, often on top of smaller reductions made a year ago.

"Last year it was easy to figure it out," says Mr. Fellows. "Now there are no more easy places to cut."

Fund raisers are learning that lesson as they realize just how deeply they have to reduce costs.

When the stock market tumbled last fall, officials at the University of Connecticut's foundation knew endowment losses would lead to spending cuts.

In November, says Lisa Baronio, the foundation's vice president for development, she slashed travel and professional development, postponed computer purchases, and reduced the number and cost of events planned for both staff and donors.

But, she says, the economy had turned so quickly that it became clear more-drastic cuts were needed. One month later, the foundation reduced its staff size by 12 percent, eliminating seven vacant positions — four of them for fund raisers — and through layoffs of seven clerical workers.

"If you can plan in advance to reduce by 10 percent, you were probably overstaffed," she says.

No doubt, she says, the reductions at UConn will affect productivity, but she says her organization's effort to look at every function and examine the work flow of the department will minimize any damage from the layoffs. What's more, she says, she hopes that making a single round of early and deep cuts will prevent further cutbacks.

Fund-raising consultants uniformly warn charities to avoid making cuts in the development office, even if other departments are asked to reduce the number of employees.

"Across-the-board cuts are typically not very strategic," says John J. Glier, chief executive of Grenzebach Glier and Associates, a fund-raising consulting firm in Chicago. "You're pruning with an ax and not a scalpel."

Instead, he says, groups should make a close examination of fund-raising programs and keep in mind that cuts that "look logical on the surface" may have undesired consequences.

For example, he says, when weighing an annual-fund staff position against a major-gift officer, groups might be tempted to cut from the annual fund, which is often more labor intensive and therefore more expensive than other fund-raising efforts. But, he says, such cuts could stunt future growth by eroding the pool of donors who might eventually make substantial gifts.

While there's no easy way to figure out where to cut, say experts, it is important to have a system to measure productivity, both in making the case to trustees to retain and hire fund raisers, and in determining the department's optimal size and structure.

For instance, says Mr. Glier, a study his firm did for several colleges found that the amount each was spending to process donations ranged from $3.50 to $14.50 per gift. Being able to make quantitative comparisons, says Mr. Glier, helped the colleges identify ways to streamline spending.

Because nonprofit groups want to do all they can to keep fund raisers out soliciting money, they often contemplate furloughs or other ways to save money before adopting layoffs.

When a 25-percent decline in its endowment left a large hole in the University of Washington's $30-million annual development budget, officials there first considered furloughs.

But Connie Kravas, vice president for university advancement, says she soon realized that the amount of time employees would have to take off to shave 20 percent from the budget would hamstring fund-raising operations.

Instead, she says, every unit within the development department was asked to draw up proposals for trimming their budgets by 10 percent, 15 percent, and 20 percent.

Those proposals helped shape a decision to lay off some fund raisers, as well as to scrap plans to expand its international fund-raising efforts, eliminate printed publications, and reduce the number and cost of events to honor donors. It's difficult to predict how deeply the cuts will affect the university's future fund raising, says Ms. Kravas. "Ultimately we're going to pay the price for this if we don't ramp up again quickly."

Some fund raisers say cost-cutting can be a hidden opportunity to increase the efficiency of fund-raising programs or make tough decisions to cut less productive programs or people.

"Everybody has a few sacred cows — programs that may have outlived their usefulness or didn't turn out to be quite as strong as they would like but there are all kinds of pressures to do them," says Bruce Flessner, a fund-raising consultant at Bentz Whaley Flessner, in Minneapolis. "This is a good time to go out and shoot a couple sacred cows."

Changing the type of fund raising that organizations conduct has also helped development offices cut costs.

The St. Joseph Health System, in Orange, Calif., recently put an annual black-tie gala on indefinite hiatus, in large part because the event is a major time commitment for staff members.

"Somehow I don't think we'll be doing it again," says Frank R. Hall, the health system's vice president of resource development. At the same time, says Mr. Hall, some of the system's 10 hospital foundations have delayed filling vacant positions and shifted staff members into unfilled positions in other areas, including from organizing special events to seeking big gifts.

At the Morton Plant Mease Foundation, in Clearwater, Fla., which raises between $10-million and $12 million a year for a four-hospital health system, an attempt to rein in costs also prompted a shift in fund-raising strategy, says Holly Duncan, the foundation's chief executive.

Instead of organizing dinners for potential donors at restaurants and private clubs, the hospital foundation now asks its board members and corporate sponsors to hold events at their homes or offices.

And, says Ms. Duncan, it has expanded efforts to get donors to spend a day at one of the hospitals as a low-cost way to involve supporters, and has increased the number of facility tours they offer from three times a year to several times a month.

Ms. Duncan also looked for areas where she could consolidate staff roles and in December eliminated three of the foundation's 21 full-time positions. Two development directors, one in planned giving, and one in research on potential donors, and a third staff member who coordinated annual giving and communications were let go.

While many of the duties associated with those roles were redistributed among colleagues, Ms. Duncan says she is also seeking to involve more volunteers in fund raising.

The staff cuts, along with other measures such as eliminating travel to conferences and incentive bonuses, saved $400,000.

As managers make cuts, they should explain how those decisions were made and to shrink fund-raising expectations to fit the smaller staff, says Michele Schiele, vice president for development at the University of Chicago Medical Center.

When the medical center reduced its development budget by 13 percent in February as part of institutionwide cuts, Ms. Schiele took pains to tell employees that the cutbacks — which included leaving four positions unfilled and postponing plans to expand the group's online communications and fund raising — would only affect areas of planned growth that wouldn't begin to bear fruit for another two to three years.

She also lowered the group's 2009 fund-raising goal from the $100-million of previous years to $70-million to prevent staff morale from sagging under unrealistic expectations. "It's a very competitive environment for top talent," she says. "I wanted to make sure everyone on the team felt comfortable so they weren't thinking, Do I need to go somewhere else?"

Ms. Schiele also started biweekly brown-bag lunch meetings to allow staff members to ask about the center's plans and progress. "It's not a democracy where everyone can vote on what to cut," she says. "But certainly everyone should have an understanding of why you made the decision, and the impact you think it will have."