COVID-19 has disrupted our programming, disrupted our fundraising plan, and in many cases increased the need for our services. Leaders have been asked to step up in every way imaginable.  Now with the new fiscal year starting for many nonprofits, there remain many financial unknowns. In last week's episode, Ellen Sturgis, Principal of Night Heron Consulting, joined us to discuss the financial impact of COVID. Ellen is  a financial consultant and interim CFO who has been working with nonprofit leaders during this unprecedented time. Ellen shared her observations and insights. In this episode we learned to:
  • Adjust our planning for what we still don't know
  • Align our budget with our mission and values, and
  • Plan to meet our mission in a new world
Did you know that you can make 3-month and 6-month budgets when planning a year ahead is too far? Check out the full interview below.
Join the conversation live on Facebook at: https://www.facebook.com/groups/DataInformedPrograms/ Transcript Pieta Blakely: Good morning. Welcome again to coffee time with Masterminds. And thank you for joining us today. As always, we're inviting you to grab a cup of coffee and join us for a half hour conversation about issues that are urgent to the leaders of mission-based organizations. Please let us know that you're here. Tell us your name and where you're joining us from in the comments. We have viewers from all around the world and we love to know where you're coming from. Since we began, Cynthia, Rebecca and I have been sharing our insights and knowledge with leaders of mission-based organizations on issues related to fund development, leadership, data management fundraising. One area that leaders are dealing with these days is financial planning. How do we plan given so much uncertainty? So, understanding how important this topic is we have brought in a guest who's been working with nonprofit leaders in this time. Are you preparing your 2021 budget right now or wondering if you need to amend your 2020 budget? Well, Ellen Sturgis is here to help. Ellen is the principal of Night Heron Consulting and she'll be sharing what leaders should know and do given these situations. My name is Pieta Blakely. I'm the founder and principal of Blakeley Consulting and I help mission-based organizations measure and maximize their impact. I'm joined today by Rebecca. Good morning, Rebecca. Rebecca Tuttle: Good morning, Pieta. How are you? Pieta Blakely: Good. Thank you. Rebecca Tuttle: I'm Rebecca Tuttle. I'm the founder and creator of Grant Write Now and Grant Writing for Good. We help schools, nonprofits, organizations, and businesses find, write, and secure grant funding, and we teach you how to do it. Pieta Blakely: And we're joined by Cynthia. Good morning, Cynthia. Cynthia Rojas: Hi. Hi, Pieta. Hi, Rebecca. Rebecca Tuttle: Hi. Cynthia Rojas: Hi everyone. I'm Cynthia Rojas and I am the founder and principal of To Your Growth!, which is a management consulting firm that specializes in organizational development, change management, and leadership development. Yay, it's Friday. Rebecca Tuttle: Happy Friday. Pieta Blakely: Good morning, Ellen. Ellen Sturgis: Hi, good morning everybody. Thanks for having me. Cynthia Rojas: Hi, Ellen. Pieta Blakely: Thank you for joining us. Rebecca Tuttle: Hi. Pieta Blakely: Ellen has over 30 years of experience with nonprofit organizations in finance and operations in a variety of sectors. She is currently an independent consultant and she offers interim CFO services as well as expertise in redesigning financial and operational systems. Today, she's going to help us make sense of what the unknown future could look like. Thanks for joining us. Ellen Sturgis: Glad to be here. Pieta Blakely: So Ellen, tell us, what are you seeing? What is going on right now? Ellen Sturgis: Well, it's been an interesting obviously five months or so for all of us. I think it started out, people were in panic. They were like, "Is this is going to be a few months? What are we going to do until it's over?" We were delaying fundraisers until the fall. And I think what I'm seeing is people starting to take in, like yeah, this is a long-term change. We're going to have to think about long-term impact on our programs, on our fundraising, on how acute this is on a daily basis. And that's where the real challenges, but it's also, I feel like it's a more positive way to look at it. I've seen some organizations do incredible adaptability, I guess I would say, where they're seeing quickly that they can still stay true, but do it in a more virtual setting. And that's exciting. Pieta Blakely: That's an interesting adaptation that we've been seeing, how people maintain their mission while they're divorced from their physical space. Ellen Sturgis: Right. One of my clients is a summer camp and that was that. There was no real way they could do anything. Another program that's more of an afterschool program, they immediately said, "Well, we're not just about teaching science. We're actually about supporting the girls that are in our programs that are coming from pretty disadvantaged homes and don't have resources and don't have support." And so they started really turning quickly to a way... How do we support our girls? Having weekly meetings with them, doing a sort of online sort of virtual science club, some really creative ways, but it helped them expand almost what their mission was to see that the core was really about supporting these girls, thinking big regardless of whether it was science or whatever. Pieta Blakely: I'd say a theme that has come up so many times on this show is that idea of getting back to basics and understanding our core missions. Cynthia Rojas: I have a question, Ellen, a couple of episodes ago, we had a gentleman on who talked about the differences between innovation and adaptation. You mentioned that you're seeing a lot of nonprofits adapt. Are seeing innovation? Ellen Sturgis: It's an interesting... Where's the line between those two things? I think I'm seeing both. I think adapting still feels a little short-term almost. When you started seeing, is there another way that we can meet our mission that doesn't require being face-to-face? I think that that's more of a longer term change and I've definitely seen that as well. The more we get into this, the more we're going to see that innovation, because if they don't innovate, they probably aren't going to be around a year from now. Adapting is not necessarily going to be enough because who knows how long was lasts? And I think we all hope it will go back into it person-to-person things, but reality is... Rebecca Tuttle: Part of that innovation, Ellen, is sometimes associated with a cost as I'm sure you can attest to. I wonder if, because we are transitioning some of our organizations remote and the physical space might be too large to come back, do you recommend that organizations maybe you look at the size of their physical location to use those resources that they would be paying for that large space to maybe put towards some of that innovation? Ellen Sturgis: Well, I think the challenge is that some of those agreements for that space are not short term. They have multi-year leases or where they might even own their space. So I don't know that I would recommend yet giving up a hundred percent of what that physical space is. But I think we're already seeing, I've seen it in my clients, that they're not spending as much as they used to spend on the physical space. You don't buy office supplies, you don't buy even food or whatever for the office. It's not big money necessarily, but I think there's a number of things that we're going to be spending less on that can really be sort of adapted towards more of this kind of, what's the best way to use for a virtual meeting? Better cameras, better zoom, quality, whatever it is. And I think there's a lot of creativity to move those funds around. I just I'm not sure that the physical space issues are going to make that much of a difference for now. I think it's going to be hard to get out of those short term. Rebecca Tuttle: That's interesting. Cynthia Rojas: I'm seeing a lot of organizations coming together in terms of space, almost like a coworking shared space. So that's how they're downsizing, which I think is a great idea. Ellen Sturgis: Yeah, maybe I'm biased. With mission-based organizations it's so much about people. And so I think the biggest challenge, and this is sort of not on the finance side, but it's, how do we keep that team, even just among the staff, how do we develop staff teamwork when we're not together as much or ever physically? And so that's why maybe I'm a little hesitant to give up office space and just think about ways that we can make that happen virtually so that we still keep our sense of team because [crosstalk 00:08:38]. Pieta Blakely: That's why we have a guest coming up in the next couple of weeks who's going to be talking about teamwork and getting stuff done. Ellen Sturgis: And it goes back to the discussion you all had around self-care and the [inaudible 00:08:53] care. We need to make sure that we don't forget that the ways nonprofits function is because of people, whether it's the staff or our clients or our participants. Cynthia Rojas: Yeah. So I have another question. So we know that leaders today are being pulled and they're being asked to do a lot of things, things that might be new to them. If you're lucky you have a CFO and or a strong CFO, but some don't. And so what are some things that leaders who don't have someone like you should be thinking about in terms of longterm projections given that that there are many unknowns, including a big unknown of state funding and probably federal funding? What should they be thinking about? Ellen Sturgis: Well, the first thing I like to remind people is that budgeting is a tool. It's not the be all and end all. We should thinking about what our mission is, what our programs are, what are we going to accomplish before we start even looking at numbers? I know that numbers intimidate people, right? They don't want to be talking about numbers necessarily, especially when they're not the CFO and they're not the person watching the numbers. I think that's the first thing. But I think what's really important right now is because we are sort of overwhelmed with the unknowns. We don't know how long this is going to last. We don't know what the future brings in terms of the budgeting, whether it's grants from foundations or the state or the federal money. So I think breaking down our future, saying you don't have to do a year's budget right now, especially if you just started your new fiscal year and you're sort of looking at a budget you might've passed in May. And like you're like, "Yeah, this isn't going to work anymore." Or maybe it passed before that. But I'd say, what do you see for your programs in the next six months? And look at, there's things that we know are core to what we do that we have to do whether we're in person or not. And so those are the things, you start splitting up your budget to the most critical drivers, I guess would be the best word to say. What you absolutely need to keep doing? What are the things that maybe just go on hold for some period of time? And I guess my key recommendation is don't get freaked out by not knowing what a year from now is going to look like. If you do it by a quarter, then do it by a quarter. If you can do six months, do six months, but look at your numbers and your organization based on the key things that you know you really want to keep going and start from there. And then, maybe there's things you just have to put on hold that you had planned in your budget, whether it was [inaudible 00:11:39] or six months ago that just aren't realistic right now because it has to be in person or you would require a whole bunch more to work and more staffing up that is just not realistic right now. I think we have to give ourselves a break and say, "This isn't normal times. Nobody's done this before." And then, when you're talking to funders, state and federal the faces might be harder to find, but I think particularly with foundations, keeping them in the loop and letting them know, "The grant that we got for X program might not happen until January. Are you okay with that? Can we use the money for something else?" Keeping in touch with those funders because we're all in the same boat. The funders are going to wonder where their funding is going to come from. So I think we just have to all give ourselves some breathing room and start breaking things down more. Cynthia Rojas: That's that's a good idea. I didn't realize that nonprofits could do a six month budget if it's so much unknown. I didn't even think of that, so thank you for that. Thank you. Rebecca Tuttle: We had spoken earlier in a few episodes, it was actually thinking one of our earliest episodes, about the flexibility with budgets and funders during COVID. Some funders will allow you to take your whole grant budget that they awarded you and use it toward emergency COVID relief and set aside the program that your budget was supporting through that grant that was awarded before the pandemic. So I really like what you're saying, Ellen, about reminding people to keep in communication with your funders and also to treat your budget with respect and have the people who know how to write them and monitor them involved in the process, but also keep it flexible. Ellen Sturgis: Yeah. It is just a tool. You don't have to stick to your budget just because you have a budget. It was to help you move forward the organization and the goal is still moving forward the organization. So if the numbers have to be switched around, they have to be switched around. And people who've worked with me would say, "But Ellen, you're always saying don't change your budget." Well, this isn't a good year, so it's okay to change your budget. [crosstalk 00:14:03]. Pieta Blakely: Somebody once said to me that the budget is where the organization operationalizes its values. Ellen Sturgis: It's a perfect way to put it. Pieta Blakely: And so I think what Ellen is saying, which is such a great takeaway is what is your most important value right now? Maybe that's the only program you're going to budget for, both in terms of money and staff resources and time and all those other things. Ellen Sturgis: Right. Yeah. Very similar to what you just said is if you've got a plan for your organization but it doesn't show up in funding in your budget, then you're not going to get there. So when you have your plan and then you figure out what resources do you need? Because it's all the budget is, is putting resources towards meeting your mission. Cynthia Rojas: I love that. I love that idea. This is awesome. Ellen Sturgis: People, they get intimidated by finances, by budgeting and that's when it's like, take it back own it. This is just a tool I'm going to use to make my organization move forward. Cynthia Rojas: Well, you keep using the word tool and you're probably doing that intentionally. I've never thought of it that way and you're right. It is a tool and should not own you and intimidate you as a leader. It should serve as a guide map toward what becomes important and what you need to focus on. So I like that reframing. It's a tool, but some organizations are 24 days into their new budget. And some, if they're operating in a calendar year, are probably thinking about next year's budget. And so I think one of the questions we also had was, if you have a budget and it's getting off the rails, do you change a budget? Do you adapt it? What do you do with a budget that is no longer relevant let's say two, three months in because there's so much unknown? Ellen Sturgis: Right. Well, and as I said, I'm usually the first one to say, "Nope, you can adjust the budget. You can adjust your plan for the year, but you don't play with the actual numbers." But this year, I would say, whether you're into it just a month or six months into it, I think at this point if the organization, the key staff and the key leadership of the board, get together and say, "What we want to accomplish in the next six months, in the next year, based on what we know today?" I'm dealing with college students who are like, "How can I make a decision? I don't know what it's going to look like in three months." Well, you know what, you've got to make a decision based on the information we have today. So, it seems like most of my clients are looking at this point, [inaudible 00:17:06] the fall is sort of a wash. We're going to assume this is going at least until the first of the year. So same with [inaudible 00:17:12], same with program. Well then, you think about what are your key drivers? What are the key things you want to accomplish over the next six months? It might you need to sort of step back and work with specialists to like, how can we meet our mission in a new world? And that might mean you're not doing active programming with your clients, but you're doing things internally. So then you need to budget for that. You need to figure out, do we have the funds to support bringing in a couple of consultants to help us think through a new way of doing our mission or meeting our mission? But I think you pick that period. And I think it takes just the key leadership to talk it out, to think what's the worst can happen? Sort of the way in the past, we might have three versions of a budget, best case, worst case, and somewhere in the middle. Well, right now it's sort of like maybe those three things are we reopen in January, we reopen next June worst case, and then something in the middle. So I think it's just about breaking it down. We got to stop. Just the same, all the themes around taking care of ourselves, but we got to be real. This is the information we have today and we don't want to leave our clients hanging. So by September, we're going to be ready to do X, Y, and Z. I'm watching the food pantries in my community and other areas saying, "Okay, well, how do you do a food pantry when you're not supposed to touch anybody or talk to anybody?" And they figured it out and that's because the fundamental is we need to get food to these people. And I think it's the same way for all of us, no matter what our mission is, we need say, "What's the key thing we need to get done and how quickly can we do it?" And then move into those different phases. Cynthia Rojas: Another thing that Rebecca keeps reminding us is that your funders are your partners and they want to help. Foundations have been amazing in stepping up and providing funding. Rebecca, I don't know if you want to add to that, but I'd be interested to hear how [inaudible 00:19:18] those relationships during this time. Rebecca, that's your mantra. Rebecca Tuttle: Sure. It's important to note here that while budgets, for most grant writers, is the most intimidating section of the proposal aside from probably the evaluation piece, which, Pieta, would you, would you say that's a fair...? Pieta Blakely: Yeah, absolutely. Rebecca Tuttle: It's important to note that there is flexibility in creating and designing the budget, but once you submit it, it's pretty much final. However, we're in the midst of a pandemic. So the funders are going to anticipate some flexibility or modifications to that budget. I think it's really important to note that there's two different budgets that we submit to funders. One is what Ellen's talking about, which is your overall organization's budget. And that's the one you have the most flexibility with internally. And then you have your project or your program budget, that really is the one that the funder is funding. And you have flexibility for that budget based on your communication with the funder. And if something's going wrong, if you had to shift gears, it's so important that you talk to funders along the way and when that happens, instead of waiting until the end of your project and saying, "Oh, well, we changed things" or "this didn't work out." You have to have that ongoing communication. But what I always tell my students and clients is, before you pick up the phone and talk to the funder about the struggle or the difference in the budget, have a plan, say, "This is what's going on, this is how we shifted, and this is what we propose to modify our budget going forward." And they'll probably give you permission to do so if it's within reason. Cynthia Rojas: Yeah. We have a question before we continue that I think it's a good question. Oh, you blocked out half of us. Sorry, Ellen. Pieta Blakely: It's a long question so it's covering your face, Ellen but it's a very good one. Rebecca Tuttle: As one of the crisis directors in New York, this is from May, May joins us each week. So hi, May, how are you? She's saying she needs to constantly train her crisis teams and principals on trauma procedures and protocols for the reopening in September. Because of the uncertainty of what's happening and what will happen in September, their budget director is constantly giving her pushback. How can she start the conversation that training is just as important as other factors, for example, instruction which is one of the factors that the department of education focuses on? And it looks like her question might be two parts, but I don't see the second part. Oh, wait a second. Here it is. Good. Thanks. Ellen Sturgis: Well, I think it goes to that core of okay, what's your first step? You've got a goal of starting up in September and the key function or the key service you're providing is that support and you have to have your staff trained in order to reopen. So to me, that's a core part of your business or of the work you're doing so therefore it has to be priority in the budget. There might be other things that you're not going to need. You're doing remote support, whatever. There's other things that might be able to be put on hold for a few more months, but you can't be reopen in September if your folks aren't trained. So I would just say to the budget director, "No, this is core to what we're doing. It's not fluff." And if her concern is that it's not part of that state funding well then, as Rebecca says, call the state funder and say, "Just want to make sure that when you talk about instruction, you're talking about training my staff because this is new stuff they have to manage they need to be ready." Cynthia Rojas: And I wonder also, and this is interesting, Ellen and I were talking about this right before we came on the show, about the tension that is often experienced between CFOs and CEOs. So leaders are about big picture, organization development, growth, and then the CFO has access to the numbers and so thanks to reality of the situation. And that creates a tension sometimes. And I wonder, so May could go to her budget director and say training is important, but there are probably other directors saying the same thing about other things. And so what I wonder is can she give examples to why it's important. So if her team does not get trained in X, Y, Z, this is the impact that that will have. And then start to develop that argument from a data perspective, a fact-based perspective, to help the budget director see why they have a point because I think the budget directors are getting stuff thrown at them. Everybody needs more resources because this is so new to us. Why? The why?And the what if. What if we don't fund this? Might be a good way to start the conversation. Ellen Sturgis: Right and I think that tension clearly is going to be there. That's what budget people are supposed to be going and saying, "We don't have the resources. You're putting too much here or there." That's why in the beginning of this process of rethinking your budget, whether it's because it's six months old or a month old, really thinking through the scenario options and breaking down that calendar and saying, "In the next three months, we need to X, Y, and Z." And it's the leadership, whether it's the executive director or leaders from the board, there's some core people that have to be involved in that discussion. It could be the senior leadership team, including the budget director, but talking through what do we absolutely need to get back in the program ASAP? And I think having everybody thinking through that and making those that timeline, that'll help everybody to understand where the resources need to go at different times. And clearly, back to the funding you might already have, it's like well that wasn't the plan, we had other things. We had gotten grants to do X, Y, and Z. And again, as Rebecca was saying, if you need to adapt that, it really has been remarkable, at least in our area, just how many times I've heard from clients that the foundations are really being incredibly supportive and flexible on where the funding is going. Even to the extent of these fundraisers that everybody was planning galas and the funders what the promotion was going to look like because everyone was going to be in person and they're getting a bag with their logo on it or whatever and now it's like, yeah, that's really different. That's a whole other issue but starting there. Rebecca Tuttle: May says, "social emotional learning is always left for last and that's one of the biggest frustrations of her job." I have a question for Pieta. Pieta, evaluation is huge in non-profit work. Can you tell us a little, just because I'm really curious, how do you recommend or how do folks go about modifying evaluation when they're making these budget cuts or budget changes that we're talking about? Pieta Blakely: So I think my response is going to be a little bit like Ellen's. There's so much uncertainty that maybe year-long plans are irrelevant and maybe what you thought your program was going to look like is irrelevant. And it's about widdling back to your most basic and fundamental values. So what I would recommend to people is what does it really look like to show up for the community that you serve right now? What does that mean for your organization to be showing up and bringing value in your community? And how do you measure that? And you may very well be letting yourself off the hook for your longterm outcomes and some elements of your program that were an add-on and you're just going to be meeting basic needs right now. That's completely okay. You are probably going to be modifying how you measure things. So surveys that you might have distributed on paper are not going to happen on paper this year. And it legitimately might not be worth your time to come up with an additional or a different way to do some of these measures if that's not the most important thing you can be doing right now. Just like we've talked about before, go back to your funders and say, "There's been a change. Here's what's going on." And maybe, "This means that we've changed how our program is designed and this is how we're going to be measuring that now. How does that fit in with your overall vision as a funder?" Cynthia Rojas: That's awesome but if that still remains important and you've also been advocating, I forget what you call it, but to journal. Pieta Blakely: Oh, yes. Learning journals, yeah. Cynthia Rojas: Learning journals, learning journals. Pieta Blakely: And I think there's a corollary in the financial world. So here's what we planned. This is why your budget has an actual column right next to it. Here's what happened. Here's why that happened. So, same thing for your organizational changes. Here's what used to happen. Here's the resource that was unavailable, like our classroom or the need that was more urgent, like distributing Chromebooks or teaching people how to use the technology that their child had brought home from school. And just adapting your plan around that and then documenting, what was the rationale for the change that we made? Is this an adaptation to something that was missing or an innovation based on a new opportunity in the field? And then how are we going to test it to understand that this is effective? Because some of these innovations may be things that we're going to keep. Cynthia Rojas: We're almost running out of time and if you guys don't mind, there was a question that I have, a burning question. I'm always, always thinking about staff. And staff are so dysregulated. One, because they've been impacted personally, their kids, if they have children, have been impacted through school. They now have to bring the work to their home. And they don't know what's happening at the organizational level. How transparent should leaders be with the financial state of an organization with staff who are already dealing with their own stuff and they're all in dysregulation because of all of the changes? Do you have an answer, Ellen? Do you have an idea? Ellen Sturgis: Well, I would say, in general, I'm always a more open than not philosophy on finance. I think we need to demystify it for more people because we need buy-in from everybody. But that said, you don't go into great detail, but it doesn't take expertise to realize that, given right now, everything's a question. Fundraising is a question, future funding from grants are a question, and I think being honest with your staff and giving them the good news as well as the question marks, saying, "We just talked to X, Y, and Z foundation. They're letting us loosen the reigns on the money that they gave us this spring to make sure that we can keep going generally. They're unrestricted money." So you give them the good news, but you also just be upfront and just saying, "We're trying to figure out how we're going to be able to keep us moving forward in the next year. Welcome your thoughts" and keep the conversation going because it is a scary time for everybody on so many levels, but jobs are critical to us and we nonprofit mission workers feel really strongly about the places we work for. So even though it might not be on the ladder of hierarchy, obviously your kids and your family are probably most critical, but they need to know that you're thinking about the problems and you're not going to act like everything's fine because we know it's not fine. And I think being transparent to a point. The details do not have to be in everybody's head, but I think keeping your staff abreast in the big ones and definitely sharing some good news as well as some of the concerns that are out there. Cynthia Rojas: I think the good news is what's key. Ellen Sturgis: Good news is key. Cynthia Rojas: Yeah. Rebecca Tuttle: Cynthia, you have a comment here. Cynthia Rojas: Mason. Great question, Cynthia but fear keeps them from being transparent, at least in her office. Pieta Blakely: I feel like that can magnify the fear and uncertainty because people will fill in stories when there's [crosstalk 00:33:09]. Ellen Sturgis: Exactly. We know that there's all this unknown so if the ED or the CEO isn't talking about it, we are going to make up our stories and we're going to assume it's even worse than we probably are. So I think you don't do it every day, you do a weekly check-in, whatever. But I think that's true no matter what the situation, pre-COVID post-COVID. I think we should be helping our staff understand some of the bigger picture finances in general. Pieta Blakely: Thanks, Ellen. This has been incredibly helpful. Ellen Sturgis: Great. Thank you so much for having me. It was really fun, Pieta Blakely: Have a great weekend, everybody. Rebecca Tuttle: All right. Take care everyone. Bye. [crosstalk 00:33:53].