Q: The economic situation has hit us hard and our organisation may have to make redundancies. What should I do?
A: In Mandarin the word 'wei ji' for crisis combines the characters for danger and chance. From my own experience of facing financial difficulties, I remember a colleague telling me that I should look on it as an "opportunity".
That met with a wry smile, but the reality was it did prove a good opportunity to fundamentally review and improve operations.
The reality of funding streams in our sector makes financial difficulties a recurring problem, however good strategic planning is. A crisis can be extremely debilitating and affect morale. If not controlled, this can spread from staff to volunteers and supporters.
So the first lesson is to keep your nerve. It is also extraordinarily important for the leadership team to promote an air of confidence. This is difficult, but if the captain panics, the ship could sink even faster.
Staff costs are a major proportion of the budget. It is therefore inevitable you will have to look at redundancies, but I suggest this is a last resort. By cutting back on staffing, you could impair your ability to generate funding.
You should thoroughly review your existing income and spending patterns. It is vital that you look at income streams and possibilities for income generation and fundraising. You may want to take advice and explore new avenues and make full use of lateral thinking.
You also need to review the spending patterns and see whether there are ways in which you could cut spending before embarking on redundancy. Review the opportunities for outsourcing and affinity schemes that might save you money.
Don't just look at this from an accountant's standpoint. A useful tool for review is to undertake a 'contribution analysis'. For each activity, work out the cost of provision and the income generated (or lost). You can find that a small activity with limited resources actually generates a large income, while something you have always traditionally done is losing you money. This will help you review opportunity costs and benefits. Is a lot of staff time devoted to an area that is losing money?
And then finally you will have to consider staff cuts. But do ensure very full and open consultation. Just as it is worth involving your staff in thinking about income generation and cost savings, it is important you consult on redundancies. For advice, contact the ACAS National Helpline on 08457 474747 or visit www.acas.org.uk.
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