According to The Nonprofit Times, giving to nonprofits declined by an estimated $499.33 billion in 2022, led by a significant decline in individual donors. Nonprofit organizations are grappling with these decreases and exploring alternative ways of saving money without resorting to staff layoffs. In this post, we’ll delve into practical cost-cutting strategies that can help organizations save money while simultaneously keeping their teams intact and staff morale high.
Preserving your most important resource – your team
In times of economic uncertainty, nonprofits must find innovative ways to reduce costs without compromising their core mission or their staff, in particular those with marginalized identities. Research (see this 2014 study and 2002 study) has shown that layoffs disproportionately impact BIPOC, women, LGBTQ+, folx with disabilities, and other underrepresented groups. Workforce cuts can undermine diversity, equity and inclusion (DEI) initiatives and potentially years of infrastructure built to support underrepresented staff. So although letting staff go may appear to be the most viable option, the negative impact on an organization’s culture, DEI efforts, productivity, and sustainability could ultimately outweigh any temporary financial benefits. By exploring and implementing other cost-cutting strategies, nonprofits can ensure they weather the fluctuations while keeping their staff supported, motivated and engaged.
In times of economic uncertainty, nonprofits must find innovative ways to reduce costs without compromising their core mission or their staff, in particular those with marginalized identities.
Assess, Assess, Assess
Before implementing any cost-cutting measures, assessing your organization’s current financial situation is crucial. Conduct a thorough review of expenses and an audit of current subscriptions and platforms. Take a closer look at each line item to identify opportunities for cutting costs without compromising operations or any potential areas for savings.
Explore Cost-Cutting Ideas
Discount opportunities: Seek and ask for discounts! Reach out to vendors, contractors, platforms and service providers to inquire about potential discounts or the possibility of negotiating a reduced rate for a nonprofit organization. Connect with nonprofit associations and networks that provide access to discounts to their members and offer other financial management resources.
Government programs: Research federal, state and local programs that offer cost-sharing opportunities or temporary relief from internal staff costs, such as shared work programs like this one in DC.
Pool resources: Strategically partner with other organizations and nonprofits to pool resources. Explore opportunities to collaborate with organizations and businesses that align with your mission to share resources, platforms and services, and minimize individual costs.
Engage volunteers, interns and board members: Leverage board and volunteer networks and consider taking on student interns to fill operational and programming gaps. This would help reduce costs and provide opportunities for new and aspiring professionals with valuable experiences, and also give board members a chance to become directly involved.
Streamline systems and reduce nonessential costs: Evaluate downsizing or eliminating physical office space and transiting into a completely remote organization. Reduce office expenses by cutting printing and direct mail fundraising. Try digital document management and energy-efficient appliances to save on utilities.
Last resort - temporary salary reductions for staff: Although not ideal, this could be a part of an organization’s budget mitigation plans. Salary reduction plans need to be approached equitably and sensitively, considering the needs of each team member that would be impacted. Consider those with lower salaries receiving a much lower percentage cut, if any, than the highest paid employees. Provide as much support as possible to employees during this time, offering financial counseling or other resources to aid employees in navigating any potential financial difficulties. We also only recommend this as a last resort when all other options for savings have been exhausted.
To thrive, nonprofits must balance the need to cut costs without losing talented and dedicated staff members. Achieving this balance requires that leaders routinely review financial performance, budget forecasts and income and
expenses to ensure all align with organizational priorities. While it would be really challenging to eliminate all unneeded expenditures, adopting a net-value approach can help assess expenses accurately, safeguard employees and preserve an organization's unique culture. In turn, this will help empower nonprofits to make a meaningful difference in their communities.
Do you have ideas of other ways nonprofits can save money during these times? We’d love to hear them! Join our new online community of nonprofit operations professionals, ElevateOps, a place to share knowledge and strategize with others on ways to approach the persistent challenges faced by nonprofit organizations.