Nonprofit Crisis Risk and Vulnerability

Nonprofits are constantly undergoing change due to a variety of circumstances, which can either bring about growth or spiral an organization into a nonprofit crisis mode.

This vulnerability is partially attributable to the fact that nonprofits are continuously managing and navigating risky situations. Unlike other risk-averse industries, they provide services to the most vulnerable populations under unpredictable circumstances. They must continuously adapt and restructure their organizations to conform to numerous external political, economic, and social factors over which they have limited or no control over. Furthermore, they are constrained in their ability to generate revenue due to a limited pool of funding sources and to the legal constraints that they must operate under given their tax-exempt status. Thus, their programs must remain sustainable long-term without generating profit while remaining fiscally solvent. 

What Is a Nonprofit Crisis and Who Is Vulnerable?

A nonprofit crisis is a situation that threatens the sustainability of the organization and compromises its ability to carry out its mission. However, not every uncomfortable or challenging circumstance that a nonprofit will experience constitutes a crisis. That is why it is important for an organization to create and utilize measures and definitions beforehand to assess whether a circumstance is a real or a perceived crisis.

Unfortunately, board members who work in the private sector or staff members who are risk-averse are often unfamiliar with the routine external threats nonprofits face. Upon encountering the unpredictable external threats that nonprofits routinely face, they panic and attribute the circumstances to mismanagement. The reality, though, is that nonprofit management is very challenging and requires a great deal of creativity given the counterintuitive restraints that are placed on them. Thus, all organizations in the third sector are vulnerable to experiencing a nonprofit crisis at one point or another. 
 
Vulnerability to risk is present irrespective of whether an organization has been preemptive in the creation of a robust nonprofit infrastructure or if there have been limited investments in building the capacity of the organization and the staff. The strategy used to navigate out of a nonprofit crisis situation and ensure the sustainability of an organization long-term, though, is more likely to be effective when the organization has already built a strong foundation and infrastructure. 

Events That Increase Nonprofit Crisis Risk:

Although nonprofits are accustomed to working in unpredictable environments that require nimble, creative, and rapid solutions, the following circumstances can propel an organization into a nonprofit crisis:

• A change in funding climate;
• A leadership change;
• Legally mandated changes in compliance and programmatic requirements that are not funded;
• Reduced interest in mission and utilization;
• Competition for limited pools of funding and clients;
• Unethical acts by the staff, the administration, board, or executive; and
• Malfeasance.

These external threats listed above do not always result in crises, but when they do, the organizational leaders should have clear criteria for distinguishing between normal challenges and a nonprofit crisis. They must then act quickly with a robust and well-thought-out plan.

Action Steps During a Period of Crisis:

1. Maintain a calm and level head.

This will help staff members to focus on problem-solving instead of panicking. When staff members see their leaders panic, they are also likely to follow suit and a proactive solution-focused planning process will be severely compromised. 

2. Generate plans with a timeline that can help staff build on wins. 

Staff members can easily lose sight of the big picture during a crisis situation. Obstacles and challenges can easily be internalized as catastrophic events that cannot be overcome. A solutions-focused action plan with a timeline that is regularly revisited to assess the progression of the crisis management plan, is reassuring to staff, board members, funders, and other stakeholders. It is important for them to maintain their confidence in the process by seeing that the plan is on track. Tabulating the accomplishments and milestones is also empowering for staff because it makes them feel like they are not aimlessly struggling to keep a sinking ship afloat. 

3. Regularly schedule check-ins with your plan to assess the efficacy of your strategy, update your strategy, and incorporate contingency plans as needed.

In a period of crisis, navigating out of the worst-case scenario can involve a lot of trial and error. This process is normal and should not be taken as anything other than a step closer to a solution. These updates will reassure staff members that the leadership is actually leading the organization to safety. 

4. Develop a communication plan with clear messaging and communication systems.

Develop a communications plan and make sure messaging is consistent, truthful, accurate, and timely. Staff should also be trained on what to do in the event an external stakeholder or a member of the media asks them questions about the nonprofit crisis the organization is facing. If there is a spokesperson that has been selected (which is an effective approach to quelling rumors and misinformation), then staff should be trained on how to make the connection with the spokesperson and the language to use with different stakeholders.

5. Operate with transparency. 

In moments of crisis, it is essential to provide as much information as possible and appropriate to staff, board members, funders, and any external stakeholders, such as regulatory entities. It is important to inform them about what is happening, why it is happening, and what the solutions are. Otherwise, people will create their own negative narratives about what has happened and who has culpability. This can have real-world consequences for a nonprofit’s reputation. The most dangerous consequence is that the confidence that funders and staff have in the ability of the organization to continue existing is diminished. If staff perceive that they are on a sinking ship, they will leave the organization. If funders perceive they are giving money to a lost cause, they will stop giving. 

6. Create clear expectations with specific roles.

It is very important for people to understand how they fit into a crisis management plan and what lanes they are responsible for managing. Otherwise, the plan that is developed can easily devolve into chaos. 

7. Document… Document… Document.

Although it is time-consuming, it is important to document your activities. This includes: maintaining a record of remedies, providing evidence you are retraining staff, reporting on how you are ensuring accountability, providing evidence you are changing practices to prevent transgressions such as malfeasance, and creating an overall account of how the problem was discovered, corrected, and how practices changed. This will also serve as a protection mechanism for everyone involved in the event of a legal challenge or auditors (programmatic or fiscal) come in to assess the situation. 

8. Make sure you follow all laws, and that your actions are by the book.

This is the time to ensure the organization is following procedures and everyone is adhering to the ethical and legal standards set forth by your organization and regulatory agencies. This will protect the staff, the administrators, the executive, and the board. 

8. Revisit the crisis once it is solved, and update your policies, procedures, staff training, and budgets accordingly.

Once a crisis comes to an end, it is critical to assess what went well and what did not. Then, incorporate those lessons into the crisis management plan that will be developed by the organization.

Be Preemptive About Nonprofit Crisis Management: 

An organization that faces a nonprofit crisis is less vulnerable to becoming destabilized in a period of nonprofit crisis with an adequate organizational infrastructure, systems, and sufficient unrestricted funds. In fact, organizations can experience positive growth at the conclusion of a nonprofit crisis when there are already existing systems that automate good practices, provide adequate resources and training for the work that is required, and there is a proactive culture that rallies around the mission. 

In other words: 

Ethics + Planning + Infrastructure = Sustainability

In addition, an organization should always have a nonprofit crisis management plan that is regularly revisited and updated.

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