Nonprofits around the region are scrambling to address budgetary gaps caused by changes in labor laws. As leaders scramble to find solutions, overlooked opportunities may exist to cut operating costs and grow revenues through smarter application of information technology.
On July 1st, the minimum wage in Maryland increased by nearly 6% while in DC it jumped by almost 10%. On June 27th, District took things a step further as the Mayor signed a bill to raise the city’s minimum wage to $15 an hour by 2020. Similar legislation is expected to pass soon in the City of Baltimore. These changes are being rapidly followed by another expensive policy change: New FLSA overtime rules will go into effect this December adding to the already heavy pressure on regional nonprofits’ budgets.
Unless nonprofit leaders find innovative ways to cover these substantial payroll cost increases, many will be forced to make tough decisions in the next few months. A recent article in the Baltimore Business Journal highlighted the potentially devastating effects that the wage increases could bring, with some fearing that organizations may be “forced to cut services, lay off workers or even shift locations”.
This is obviously a nightmare scenario for many organizations and unless we are prepared to see diminished roles for important nonprofits around the region, action must be taken now to ensure these institutions can continue to serve the community.
One of the ways proactive leaders can get ahead of this coming fiscal crunch is by ensuring their organizations are running at peak efficiency. For many that means a much closer look at their Information Technology portfolios including capabilities, budgets, and governance.
IT Capabilities
Information technology has grown tremendously powerful in the last few decades. Staff are walking around today with more computing power in their pockets than the systems that guided astronauts to the moon. Just because IT is powerful though, doesn’t mean it is being optimally deployed in an organization.
Nonprofits have traditionally lagged behind other industries in adopting new technologies. Many hold on to systems long past what most corporate organizations would consider to be the useful service life. This may have saved money by deferring replacement costs, but as these systems age, they bring other problems to light. Support costs often increase over time as it becomes more and more difficult to find qualified staff to maintain systems and applications. In addition, a lack of automation, an inability to integrate systems, and the emergency of inefficient processes that have grown up around out of date technology are all a drag on the efficiency of today’s nonprofits.
Beyond the hardware, software, and services being deployed, many organization aren’t able to maximize their existing IT investments due to gaps in their users’ knowledge. Targeted training focused on process improvement, better and more approachable documentation, and an ongoing effort to grow knowledge should be a part of any IT planning initiative.
IT Budgeting
When it comes to budgeting, IT is often seen as a cost center, meaning that its budget should be reduced during lean times. This thinking is shortsighted and outdated. Approaches like taking an “across the board cut” in organizations often misfire. After all, there are numerous examples where an increase in IT budgets drove substantial cost reductions elsewhere in the business. If deploying new IT capabilities can deliver efficiencies elsewhere, how does cutting the IT budget make sense?
Similarly, attempting to align IT budgets with benchmarks from across the industry often delivers less than stellar results. These numbers lack any sort of reflection to the organization’s structure, scale, capabilities, or mission. Attempting to budget based solely on these numbers is therefore meaningless.
IT Governance
One of the least understood components of information technology is IT Governance. Put simply, this is the method by which decisions about IT are made and executed. Decision rights for IT go beyond the IT department or the CIO, and involve a broad base of stakeholders. There are two very common governance structures that both have substantial drawbacks for organizations undergoing change.
The first is a decentralized, ad-hoc approach to IT. This is a weak form of governance where decisions are often made by individual users, managers, or departments. A lack of standardization and planning has predictable results. Systems and applications are often incompatible with one another and the costs to maintain the IT infrastructure is very high.
The second is more of a “dictatorship” model where a strong IT department dictates standards, deploys systems, and defines the future plans for the organization. The gap here is that while the trains may run on time, they don’t necessarily go where users need them to. The end users are often left wanting (sometimes they revolt) and IT can end up misaligned with the rest of the organization.
A better path is to strike a balance between these two approaches. Certain aspects of IT should be managed by the IT department, but with input from users, leadership, and even outside advisors. Other decisions should be left to others, with IT in a supporting role to enable their vision. Creating an effective governance structure allows organizations to maximize the utility of their IT investments and have control over its direction.
#TimeForAChange
As progressive reforms around compensation continue to sweep through the region, it is time for nonprofit leaders to prepare their organizations to meet the upcoming fiscal challenges. IT planning and strategy should be a key part of that conversation. If you’re ready to get started before things get rough, here’s a couple of options to consider:
- Move Infrastructure to the Cloud – This shifts your fixed costs to variable costs which can adjust to reflect the size and scope of your organization. Reduced complexity of in-house infrastructure also means you can potentially reduce your IT staffing needs. Significant discounts given to nonprofits by the major cloud players (Microsoft,Google, & Amazon) make this a very affordable proposition if you have the right team on your side to plan and manage the transition.
- Consider New Applications to Reduce Costs – IT is ubiquitous throughout your organization, but are you using it to cut back on costly administrative tasks? Reducing overhead around policies and procedures can free up senior staff to focus on the mission instead of shuffling papers around. Cutting training time means you can quickly train staff and reduce your onboarding costs. This is going to be particularly important for high turnover roles that will be increasingly expensive to fill. Having a solution that validates employee compliance and acknowledgment around policies can lower the risk of legal action. All of these can be addressed with one solution: Acadia Performance Platform.
- Revamp Your Web Presence – Does your website drive donors to you or is it a source of frustration? Are visitors able to understand your mission and help support your goals? Can your staff update and maintain it without having to jump through hoops? If your website doesn’t match the professionalism of your organization,redesigning it can help bring you more success.
Mark Stirling is the Director of SAI’s IT Strategy and Operations practice and has worked closely with nonprofit clients including the Maryland Zoo in Baltimore. You can find more of his posts and other insights from SAI on the Systems Alliance Blog.
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