COVID-19 lessons for not-for-profits

In an economic downturn such as the one that resulted from the coronavirus pandemic, not-for-profit organizations can feel pinched in two ways. People who have lost jobs or fear losing them may be less likely to donate to the NFPs at a time the services offered by the organizations are needed most.

Strategies and models must be changed to find new opportunities and deal with the challenges presented on multiple fronts. Amy West, CPA, CGMA, the CFO of AHRC in New York City, shares advice on how to adapt and find new paths during tough times. West also is a member of the AICPA Not-for-Profit Advisory Council. (Visit the AICPA Not-for-Profit Section to find more information and resources on not-for-profit governance and management topics.)

What you’ll learn from this episode:

• The opportunities available for not-for-profits in a COVID-19 environment.
• What these past seven months have taught West about leadership and communication.
• Advice for developing and engaging staff in a remote-work setting.
• How West and AHRC have reconsidered operating and fundraising models.

Play the episode below or read the edited transcript:

To comment on this podcast episode or to suggest an idea for another episode, contact Neil Amato, a JofA senior editor, at Neil.Amato@aicpa-cima.com.

Transcript:

Neil Amato: Amy, thank you for being on the podcast.

Amy West: Thank you so much for having me.

Amato: First, can you share a little bit more about what AHRC is and what it does?

West: Sure. AHRC is a not-for-profit organization, and we help people with developmental disabilities and their families. Our annual operating budget is approximately $300 million. We employ about 5,000 people and operate approximately 150 sites throughout the five boroughs of New York.

Amato: That’s a big operation.

West: Yes, it is.

Amato: Let’s first talk about how the pandemic can tend to squeeze not-for-profits on both ends. People have less money to give not-for-profits, and their services are needed now more than ever.

West: Absolutely true statement. You have individuals that are unemployed and really looking to take care of their families versus giving to not-for-profit organizations. Corporations whose number one priority is to keep their people safe and now a priority to get their businesses back up and running. Foundations, definitely a lot of foundation giving, but there’s a lot of competition. A lot of not-for-profits are going to the foundations for funding. Government the same — they’re clearly footing the bill for the pandemic, so we’re seeing constraints on governmental funding as well.

You’re absolutely right we still need to provide those critical services to the people that we support.

Amato: And in a COVID-disrupted environment there are the negatives of possibly having to furlough or layoff employees, plan for revenue declines, et cetera, but what are some of the opportunities for not-for-profits in this environment?

West: There are actually several. The one that we realized first is we’re able to really for the first time at AHRC we’re very much a 9-to-5 type of organization, come to work every day Monday through Friday. Of course, people that provide support, it’s a 24/7 operation. But we were actually able for the first time in our organization to introduce this whole notion of telecommuting and having alternative work schedules, which was really something that we know we want to sustain throughout.

I had mentioned that we operate approximately 150 sites throughout New York City, and the real question is the future operating model of AHRC, where clearly they don’t want to have these large congregate settings where people go to program. Is there the opportunity to reduce our real property footprint? So that’s definitely an opportunity.

One of the things that this whole experience has definitely highlighted is our manual processes and certain processes, accounts payable, payroll that we can automate. It’s also highlighted some processes that we don’t need to do at all, and we should definitely stop doing them.

Technology certainly emphasized our need to have a real technology strategic plan especially as we equip people to be able to work remotely.

I think lastly, it’s really — well, a few things. It’s forced us to really focus on our balance sheet, liquidity. Cash is king during any type of crisis and any kind of disruption such as this pandemic. I also think it has made us realize the importance of communication.

Amato: Good points all. On that communication front, in this remote or socially distant environment what have you learned? What has this environment taught you about leadership?

West: Yeah, it’s a great question. One, it took me a while to believe that I was actually an effective leader in a remote environment. But what I have realized is that everyone is different and people react – my staff, each one of them reacts differently to situations. So everyone is very unique in the way that they react and in the way they’re handling this situation. As such, I’ve realized the importance of communication. I’ve also realized how important it is and it’s not so much that I didn’t realize it before, but how much during these times the expression of appreciation it’s just so critical to being a good leader; just by saying “thank you” during these times.

Amato: When meeting with direct reports or other colleagues, have you changed up the frequency of meetings or changed the format? Obviously, you’ve had to change the format some, but what, what has changed on that front?

West: Sure. Well, with colleagues on the onset of the pandemic a group of us called the COVID response team. So that’s a group made up of department heads and senior leadership. We started to meet actually on a daily basis and we would talk about such things as the finances, but you know how we’re protecting the people that we support, how do we communicate to our staff? So there was this whole agenda of how we should respond as an organization to the pandemic.

We started meeting daily as I said. We considered meeting over the weekends; that was not necessary. Then I would say about three months in, we started meeting three times a week, and now we’re meeting basically one time a week, and part of that agenda is also how do we bring people back to work.

Our board — incredibly supportive. On the onset of the pandemic [it] met once a week. Then we went to about once every other week, and now we’re pretty much back on our normal board schedule of meeting four to five times a year.

The finance committee — finance is incredibly important during these times. We started meeting monthly versus quarterly, which is the norm.

Then with respect to my direct reports, I didn’t really change the frequency. Clearly the mode of communication changed. We did Zoom meetings and conference calls. I wanted to make it very clear that email is not the only mode of communication in this environment and email has definitely gotten out of control, but you really want to hear your staff, you want to hear how they’re reacting. There’s a small group of us that are in the office and have been in the office throughout, and clearly we socially distance, but it was actually very helpful to have in-person meetings. You know, Zoom is great, but it’s really hard to see people’s body language and really pick up on how they’re reacting.

Amato: Sure. I mean meeting from the shoulder up, it’s just, you know, it’s just totally different.

West: Absolutely.

Amato: What are the ways that you’ve employed or things you’ve heard about that not-for-profits can get creative in fostering professional development for your staff?

West: Sure. I think learning from certain conferences that I’ve been attending virtually. You know to keep them as interactive as possible is very important, keeping people engaged in this virtual environment. So the conferences that kind of have encouraged chatting during the conference or the polling questions tend to get people really engaged.

So we’ve kind of adopted some of that in our meetings and our training. We’re required once a year to have annual training that’s mandated by New York State. It can be torturous because it really is a compliance training, very important. But we were actually able through this virtual environment — Zoom was the platform — but everyone also was using their cellphones answering questions, and we had kind of competitions throughout the training sessions, so it really pulled in the participants and made it a very interactive experience.

So I think that’s kind of key. It’s very hard in my mind to stay on a Zoom meeting for — I think about an hour is about the most that folks can really do, so to have any kind of a meeting, training, or professional development I think it really needs to be interactive.

Amato: One thing that just hit me — a note for the listeners that we’re recording on October 1st, we’re recording on Zoom, and I can see the company logo behind Amy. So I’ll ask, how does one get to work and is the mode of getting to work different than it was say in February?

West: Well, I am very fortunate in that I get to actually walk to work. So my commute is about seven minutes with my sneakers on. But that has been a tremendous challenge throughout in New York. People fearful for getting on subways because any way you can social distance, the subway is a very difficult thing to social distance and clearly that’s something that they are stressing that helps to mitigate the spread of the virus.

We have allowed people to telecommute. We have also allowed people to alter their schedules, so where it used to be 9 to 5, it may be 7 to 3. But the mode of transportation is something that has been a major challenge. People that have cars we have certainly allowed them to drive in and at the beginning of the pandemic reimburse them for their expenses. We do have designated parking spots. But transportation is and still remains a major challenge in getting people feeling very comfortable to do their daily commute.

Amato: How has COVID-19 brought about change in what is part of your employee benefits program? I think you mentioned parking reimbursements, so maybe that’s a nice time to segue into that.

West: Sure. Well, there are two major things, and I have mentioned the ability to telecommute and the ability to have alternative schedules. We’ve often offered our staff compressed schedules, so you work nine days instead of 10, eight days instead of 10, just with the extended hours. Our staff are working four days remotely and coming into the office one day if they can.

It was really very much a traditional mindset where our administrative staff were working 9 to 5, Monday through Friday, and now we have staff coming in on Saturdays. There’s the need for staff to take care of their families, et cetera. So that has been a major change in our benefit offerings at AHRC.

The other one that’s kind of interesting and this is true for both our staff and the people that we support is telehealth and just the ability to encourage staff if they’re not feeling well, rather than going out and going to see their doctor, there now is the technology available to most where you can log in and talk to your doctor online. We have also found that to be very helpful and successful with the people that we support during these times.

Amato: Has COVID-19 changed, if any, the way your organization thinks about its own investment portfolio?

West: That’s a very interesting question. We have pretty much a plain vanilla investment portfolio, which lends itself, though, to liquidity. I think that organizations during this time absolutely need to keep their eyes on liquidity, critical during any kind of disruption. So I think that that’s imperative that you’re able to not have your investment portfolio locked up into long durations. So as they say, “Cash is king.”

The other thing that organizations have been keeping their eye on is their whole operating reserves and when to use those. Those organizations that clearly have a rainy-day fund are faring better than those that don’t during these times.

Amato: Regarding raising money or operating or staffing models, obviously something has had to change, but how specifically has the pandemic changed the way not-for-profits and you specifically think about those things: fundraising, staffing?

West: Right. Well, I mean fundraising — one of our most successful events is in June and we have a golf outing. While golf was clearly one of the first sports that came back, we were unable to have our golf outing. So we’ve been really taking a virtual approach to our fundraising strategy. We have a stand-alone foundation, and most of their events have shifted to virtual and being very creative.

With respect to our funding, as our core business we are a fee-for-service model, which means when the government mandates our programs to close, we have to find very creative ways to offer those programs. We have found through creativity offering services and programs to the people we support on a virtual platform, but it has been challenging.

With respect to operating models, I had mentioned that we operate 150 sites and we don’t expect that, for example, our day programs where people are attending program and there are 200 people in one setting that we support. So our day programs are now smaller in size, so that’s a major change. We are now in a mode of where we are offering virtual programming to our students, as well as in-person learning.

So those are the major ways that our operating model has changed. And of course our staffing patterns adjust accordingly to the changes in our operating models.

Amato: Right, good point. Besides what have to be declines in budgeted travel expenses, how else are not-for-profits cutting costs these days?

West: Well, clearly discretionary spending is nonallowable, taking a very careful look at our consulting costs. I mean, are we doing projects that we don’t really need to do at this time? We have restricted hiring. We have hiring freezes, and the only positions that we’re allowed to fill at this point are those essential positions, those that are absolutely critical to conducting our business.

Capital expenses — we’ve limited those to life-safety expenditures. So those are really kind of the major ways that we’ve looked at our expenses and also managing our accounts payable very tightly, being very aggressive about going after our receivables and really kind of negotiating with some of our vendors with respect to our payment terms. So we’re not suggesting that we’re not going to pay our bills, but maybe they can give us more favorable payment terms.

Amato: So we’ve covered a lot, but is there anything that you’d like to add about how you’ve managed this environment that I haven’t asked you today?

West: No, I think it’s really just having a very strong foundation to begin with; being prepared for any kind of crisis is really critical. Being able to pivot. Having people that understand our business and really being able to take a step back and be very creative with providing the services. Agility is key and just keeping a very positive attitude.

And I think this is a little bit different than some of the other crises that we’ve lived through, 9/11, Hurricane Sandy, because it’s ongoing, but so it’s kind of a marathon and not a sprint as they say, but really staying focused and positive. I truly believe we’ll get through it and really, per one of your questions, really focusing on all the things that we’ve learned from the pandemic is also very important.

Amato: Is it too early to focus on the things you’ve learned?

West: I don’t think so. I mean again two of the things we talked about is the telecommuting and I think our telecommuting policy, we’ve adopted a telecommuting policy, a formal one, and that’s here to stay. I think our real property footprint is also something that I think we will benefit from if we take a step back and start consolidating some of our properties.

Amato: Amy, thank you, this has been a great conversation. Appreciate your time.

West: Oh, thank you so much. Take care.