Tackling a Looming Fiscal Cliff Head-On

When I stepped up in 2012 to lead Higher Achievement, a rigorous after school and summer program for middle-school students in disadvantaged communities, the organization was facing a fiscal cliff after a period of rapid growth and multi-city expansion. In 2011, we spent $2.9 million more than we raised, and although we avoided debt, we quickly depleted our cash reserve.

Unfortunately, problems like this are all too common among nonprofits when they push to scale—and it’s something that few organizations like to talk about.

By the end of 2013, we managed to raise $433,000 more than we spent and extend our operations to an additional five sites. Managing this turnaround wasn’t easy, but we took away from it a few important lessons that may help other organizations facing a similar situation. Here are a few:

Clarify and prioritize ruthlessly. Refine your team. Stay positive.

Using feedback from the team, we invested in developing the data-driven program quality, because it most directly impacted participants (our scholars). We stripped away everything else, including communications, advocacy, and new partnerships. We also doubled down on financial sustainability, and established new conservative revenue projections and cost-efficiency dashboards. “Quality and sustainability” became our mantra, and I was a broken record—on purpose.

To live this mantra, we needed the right team—and unfortunately, a much smaller one. Just five days after I became CEO, I had to lay off nine dedicated staff members—60 percent of my team—out of fiscal necessity. I then interviewed each board member to gauge their willingness to “lean in.” Some board members stepped up to new leadership, others stepped down, and I invited several passionate supporters to join. I also coached and promoted our talented deputy director to lead our local team in Washington, DC, which was my previous role.

Throughout this process, I was very aware that for our organization to survive this crisis, I needed to boost morale. I focused on building our strengths, supporting our inspiring scholars, and jointly crafting our long-term vision. So while staying grounded in the tough reality, I also did my best to celebrate our successes—big and small—and stay positive. We took time to do things like popping champagne when we got a big, new grant.

Establish a realistic funding model.

Growth capital can be risky, unless a realistic funding model undergirds it.  Otherwise, an organization that receives grants intended to seed growth will find itself stuck at the end of the grant period without the funds to sustain the expanded program. From 2007 to 2009, Higher Achievement raised $9.6 million in philanthropic growth capital—ten times the organization’s 2004 operating budget. We assumed that big grants would keep coming, but we got no additional dollars from late 2010 to early 2012. At the same time, the organization didn’t significantly scale back expenses, and raising dollars in each of our new cities was slower than expected. I worked closely with Dara Rose, our program officer at The Wallace Foundation, to develop a new, sustainable model. Higher Achievement now requires that schools pay for a portion of our program expenses; it also develops mutually beneficial corporate partnerships that include multi-year funding.

Stay nimble.

Organizations must be agile to stay relevant in a changing marketplace; they must also stay true to core competencies. Since our initial growth plan in 2007, the economy and education landscape had changed, and our financial assumptions no longer held. We had gold-standard proof that our program was one of the only out-of-school programs in the United States that was having a significant impact on student test scores. But we needed to challenge our assumptions and create new strategic plan (more below) that aligned our core competencies with the new economic and education environments.

Communicate frequently. Strive for transparency.

During crisis, it is tempting to just put your head down and just “get it done,” but nonprofit leaders have a public trust to uphold—at all times, and especially during crisis. Communication is essential. For me, this meant sending monthly updates to our DC advisory board, biweekly calls with our national board, monthly all-staff conference calls, and in-person meetings. Transparency—both honesty about the financial realities and heartfelt optimism about the future—also proved essential for building trust, and quelling fears of staff and funders.

Turn crisis into opportunity.

We cut costs to right the ship of Higher Achievement, but equally important was understanding where the ship was sailing. Three months after the layoffs and leadership change, we launched a strategic planning process with Community Wealth Partners. We listened closely as school partners and funders encouraged us to leverage our strong model and results to propel bigger change.

The process enabled staff and board leadership to unite, heal, and craft a bold new vision together. We realized that our goal was “By 2030, all students in Higher Achievement cities will graduate from high school, ready for college.” We also realized we couldn’t do it alone. This new goal pushes us to work differently and take a cross-sector approach; it also meets a market demand— as expanded learning partners for whole schools.

While moving into the black, Higher Achievement also managed to grow—from 11 to 16 sites in three years—in part due to a new performance management dashboard we developed with Censeo Consulting Group, which links program and financial outcomes to measure “cost per impact” instead of simply “cost per student,” and found that 94 percent of scholars graduate from high school on time—double the rate of their peers.

Turning around a nonprofit that stands on a fiscal cliff requires audacity, focus, careful listening, hard work, positivity, and solidarity among all its board members and staff. The good news is that it is not only possible, but that the process can lead to a fortified mission, and a fundamentally more resilient, sustainable force for good.

Read more stories by Lynsey Wood Jeffries.