Surviving the Fiscal Cliff

The fiscal cliff is here to stay in one form or another. Regardless of delays or compromises concerning federal tax increases or spending cuts, the perception that we are entering into a “less giving” environment is real. This perception is already affecting donor and nonprofit behavior. The question that emerges from this fiscal and psychological crisis is: Where do you want to end up—on the top or the bottom of the cliff?

There is only one thing that nonprofits need to do to end up standing on top of the fiscal cliff. They need to evaluate—but I don’t mean just any kind of evaluation. They need to engage in empowerment evaluation.

Empowerment evaluation

Empowerment evaluation is a form of self-assessment. It is designed to help people build their capacity to monitor and assess their own performance. It is different from many conventional forms of evaluation, because it places both community members and nonprofit staff in charge instead of an outside expert.   A “critical friend” works with program staff members and clients as a guide. These individuals are trained evaluators who believe in the purpose of the program, but are even more critical of program operations than an external evaluator, because they want the program to work. They help to keep things on track, and they ensure rigor and accuracy.

By taking charge of their own evaluations, people develop ownership over and responsibility for their efforts. Empowerment is not a neutral scientific experiment where the program succeeds or fails and everyone walks away, leaving the client to fend for themselves.

Empowerment evaluation uses feedback loops to help inform decision-making and produce desired outcomes. It turns nonprofits into learning organizations. This enables them to continue to grow, innovate, and survive the continual economic and environmental challenges around them.

What nonprofits need to evaluate

Nonprofits need to apply empowerment evaluation to assess three things:

1. Their business model, from a bottom-line perspective
2. The need for and quality of their services
3. The stage of development of their services, from a larger organizational lifecycle perspective

Importantly, nonprofits need to invite their clients or customers and community members to the table to evaluate these things with them. This is unheard of for many organizations. Where is the objectivity if you evaluate yourself? Why should we let clients see our dirty linen? The answer is: Who knows the organization best? Who has the most at stake concerning its survival? Who benefits most from a well-functioning and productive nonprofit? Bottom line: Who is in the best position to evaluate it?

Business model

Most nonprofits will say they are continually assessing their business model. My experience over the last couple of decades is that the business model is taken for granted. People do what they did last year, and everyone keeps chasing the dollar.

More to the point, rarely are clients and community members invited to participate in fiscal discussions of this nature. But when they are invited, they produce meaningful contributions and gain a respect for what the organization is grappling with, often on a shoestring budget. The conversation alters their expectations in the future and makes them more realistic. It also makes the survival of the organization a shared experience.

The analysis, nevertheless, must be conducted from a bottom-line perspective. How much money is coming in, and how much is going out? Is it a sound and sustainable fiscal model? If not, what must change? This is where community buy-in is critical, and empowerment evaluation’s inclusive nature facilitates buy-in to problem solving (especially concerning unpopular decisions such as changes or elimination of specific service delivery programs).

Need for and quality of services

Many nonprofits conduct a survey, sometimes a focus group, concerning the need for and quality of their services. However, it is typically framed from the nonprofit’s perspective and has little to do with the client’s experience. In addition, little is usually done with the data.

With an empowerment evaluation, clients and community members can define their perception of an organization’s services and help determine the value of those services to the community.

This team approach to assessing nonprofit services:

1. Saves time by short circuiting the process and going directly to the staff member and client or community member
2. Helps identify the most relevant services (from a staff member and customer perspective)
3. Pinpoints problems with service delivery
4. Produces recommendations (grounded in both the staff member and client or customer’s perspective) concerning what needs to be done to improve the quality of those services.
5. Build’s community loyalty and a sense of ownership concerning proposed solutions

Stage of development

All nonprofits have various stages of development in their organizational lifecycle. Some of their service delivery programs are like start-ups; they require additional attention and resources, but represent an investment in future revenue streams. Other service delivery programs have been cash cows for years but are coming to the end of their revenue producing cycle due to lower demand or less funding to support them. Who is in a better position to assess these stages of development (from a lifecycle perspective) than the people providing and receiving those services? Once again, an inclusive approach to self-assessment is likely to identify meaningful changes in need or value using this lifecycle perspective.

Survive and prosper, or disappear

The fiscal cliff is real. For those who plan on surviving and prospering, there is only one answer: evaluation. Those who evaluate inclusively will be in a position to justify current funding, make successful requests for additional support, and remain credible with donors, staff members, and clients alike. Nonprofits that assess alone will fall alone. They will be standing at the bottom of the fiscal cliff. Those who embrace their community will ultimately remain standing with their communities—on the top of the fiscal cliff. The view for those who embrace these diverse voices will be the envy of the larger community around them.

Read more stories by David Fetterman.