The recent pause on federal grants by the Trump administration was a shock to the nonprofit sector. The incident put a spotlight on how important federal funding is to nonprofits, and how ill-equipped they can be to adjust. Many U.S. nonprofits receive government grants — some rely on these grants for the bulk of their revenue. This crisis arose quickly and it highlighted vulnerabilities that I’ve often seen in working with nonprofits. Here are some insights that I was reminded of.
Porpoising to Detect Early Warning Signs
When the freeze was announced, most organizations were blindsided. Had they been “porpoising” — looking for driving forces, deliberately seeking information at all levels, from all sources — they might have picked up early signals and been in a better position to react.
Converting Bad News into Action
Organizational leaders who responded effectively to the funding pause asked themselves some tough questions. “How long will our cash reserves last? Which of our programs are most dependent on federal funding? What alternative funding sources can we tap?” The crisis was an opportunity to address vulnerabilities before they became catastrophic.
Decision-Making Without Perfect Information
The pause demanded immediate decisions with incomplete information. Leaders often neglect to establish contingency plans. There will always be unexpected twists that can sabotage the best-laid plans, so having a Plan B at the ready is sound practice.
Actions by the new administration in Washington have highlighted the risks involved in allowing your nonprofit to become too vulnerable to sudden changes in government policy, or to any single source of funding or support. Alongside several other lessons, it shows just how important it is to maintain a rainy day fund for tough times.
Click here to learn more about how your court sense can help you uncover driving forces