INDUSTRY INSIGHTS | SUMMER 2010 EFFECT

Recessions—Birthplace of Innovation?

by Bill LeClaire

My father was in his early 20s during the Great Depression. Over the years, he’d share stories with me about the way things were before, during, and after this time period. Some of these have come back to me as we’ve been wading through the recent economic recession.

With a smile, Dad would tell me about the carefree days of the ’20s. His little town was booming with a bank, creamery, hotel, lumber company, and other businesses. Jobs were plentiful, a busy railroad stopped in town, and the people in these stories seemed to lack nothing. Whether these were nostalgic memories of his teen years or actual reality, I cannot be sure; however, it does seem likely that people were “enjoying the good life” and ignoring warning signs of what was to come. Farmers kept planting the same crops in the same fields, looking for ever increasing yields thanks to technology like new farm implements. Businesses operated in the same manner year after year. Eventually, a lack of change and innovation caused these comfortable systems to fail, and the good times ended.

It occurs to me that history has once again repeated itself. I recently took an informal survey of friends and business associates in which more than half the respondents said the latest recession was inevitable and possibly even a good thing. Of course, those who lost their jobs may not feel the same way. Nevertheless, we knew about the problems, yet we ignored them and just kept doing business and living our lives as usual. But if we all felt that way, why didn’t we make changes to our practices? Were we too busy enjoying the good life, like they were in the Roaring ’20s?

A time to reexamine

Most of the leaders of the nonprofit entities I work with find themselves with a different reality today than what they knew just two years ago. The events of the recession have affected how they operate, who they work with, and what they are able to accomplish. For years, we’ve had discussions of improving efficiencies—doing more with less. Nothing gets this accomplished quicker than the threat to business survival.

Hardships can expose weaknesses. For example, operating losses may highlight poor expense control. Part of my job as an auditor and consultant is to point out opportunities for improvement, and often times, I’ll work with a client to develop a corrective action plan to make changes. This process, although effective, waits for an issue to be identified before reacting to it. It seems that in the areas of efficiencies, many had previously been satisfied to just take the “low hanging fruit” and settle for the marginal improvement. Is your organization one of those? Are you planting the same crops in the same fields year after year? If so, you need to prepare for a dust storm.

Try something new

Since the economic downturn began, I have witnessed some impressive, innovative practices among my clients. For these organizations, doing things the way they’ve always been done is no longer an acceptable plan. It’s common to hear about “operational excellence” and similar buzzwords as businesses strive to survive by making drastic changes. Consider these ideas and approaches some nonprofits are trying.

Finance and operations:

• Budget without reliance on investment income and plan for 50 percent cuts in grant awards.
• Hold meetings via teleconference instead of renting space for group events or to save on travel time and costs.
• Expand your operating hours to fit a more flexible workforce and better serve your market.
• Offer pricing based on perceived value of services received rather than cost to perform.
• Create revenue opportunities from vocational programs by designing the training as a saleable service or as part of a manufacturing/distribution process.

Collaboration:

• Partner with another organization to share space, staff, or technology.
• Seek out competitors or others that offer a similar service and work cooperatively in delivering those services. For most nonprofits, meeting their mission goals is more important than who does it or how it is done.
• Expand programs without expanding facilities by partnering with communities or other organizations.
• Keep in touch with your progress by reinstituting a suggestion box.

People:

• Expand use of volunteers.
• Consider having individuals job share a position.
• Offer sabbaticals and other unpaid time off options to employees.

Many things have emerged as a result of the recession. On the negative side are the economic challenges of decreasing revenues coupled with increasing demand for services. However, I have found that in many cases people are nicer, more willing to share, appreciative of what they have, and more patient. In addition, I’ve seen much innovation being born out of necessity. Perhaps this could be the start of a generation that some in the future may look back on as the good ol’ days.