Viewpoints: Nonprofits must adapt, innovate and collaborate to move forward

Editor’s note: This is an open letter from Héctor Colón, president and chief executive officer of Lutheran Social Services of Wisconsin and Upper Michigan (LSS).

Dear Reader:

Amid the Coronavirus pandemic, the racial strife and the economic downturn, I hope you have a safe place to live, food in your stomach and access to doctors and other trusted resources to help with your physical and mental health.

Whether you have received support from Lutheran Social Services of Wisconsin and Upper Michigan (LSS) in the past or not, please know that we care about you. If you or someone you love is struggling, please reach out (www.lsswis.org). We are here for you.

Thank you to our health care professionals, first responders, civil servants, grocers and all of the front-line and behind-the-scenes workers who are helping our society carry on through these very difficult times. LSS is here for you, too.

Like other business and organizations, LSS faced significant challenges within one month of the global pandemic making an appearance in our communities, including diminished client referrals, restricted reimbursement for services, and heightened safety concerns. Most of our revenue comes from government grants with strict regulations written in to our contracts that have prevented LSS from developing any significant reserves over time.

Federal aid including forgivable loans has assisted many who have experienced similar challenges. Unfortunately, because of our size (over 500 FTEs) and other factors, LSS is not eligible for such loans – leaving us to face unprecedented obstacles that were not included in our original 2020 budget.

Our initial financial impact projections of the pandemic were a $750,000 per month loss in revenue and a $400,000 operating loss monthly. From an annual perspective, LSS was looking at ending the year with a $3.6 million loss.

We rallied and reacted quickly and decisively by reducing discretionary spending, renegotiating reimbursement rates, identifying new sources of revenue, and executives taking voluntary pay cuts. Also, the significant decrease in workload unfortunately required furloughs of program and administrative staff.

All of these initiatives have resulted in our projecting to meet and even exceed our year-end budget. However, the slightest change – like a rush on health care – could have a
substantial negative impact on the projections.

Adapt. Innovate. Collaborate.

Nonprofit organizations nationally comprise the third-largest employment industry, ranking behind retail and food. With the coronavirus pandemic, these equally “essential businesses” providing life-saving community-based programs are needed now more than ever.

Unfortunately, many of these mission-driven organizations are barely surviving and in
danger of leaving hundreds of thousands across the country without a lifeline.

Some experts suggest that nonprofits should acknowledge that they may have to
operate at a decreased size for the long-term.

For me, the crises we now face put into focus that instead of shrinking our impact, now
is the time for us to adapt, innovate and collaborate.

Adapt – Set a firm foundation that can bend with economic storms.

I began my tenure as LSS president and CEO less than three years before the coronavirus landed in the U.S. At that time, LSS had only met two budgets in 10 years resulting in $10 million in losses. My first initiative involved the development of a strategic plan with our staff, partners, clients, operating and foundation boards and donors.

My leadership team managed the entire strategic effort with servant-led hearts – expressing full transparency, articulating the “why” of difficult decisions, and courageously putting into place the metrics necessary to realize exceptional service delivery. We made significant cultural shifts including an enhanced vision, mission, values and brand and new measures for productivity and accountability.

All of our activities were focused on serving our communities in the best possible way, even if that meant it wasn’t with our current programs. This resulted in LSS divesting from $6 million in programs and adding over $6 million in revenue. We experienced a $67,000 gain in 2018 and a $2.25 million gain in 2019.

When COVID-19 made its unexpected arrival in our community, LSS had the foundation to adapt.

On March 4th, we initiated an LSS Response Team to clearly and promptly address questions and concerns posed by our colleagues, partners and donors.

The collaboration of this diverse group has allowed LSS to acknowledge our fears and be vulnerable, and to face these fears with an openness to growth. We have found a new dimension to our relationship with donors – offering resources that could help navigate their own job loss, heightened anxiety, food insecurity or housing issue. And we have reached into the communities where we serve – sharing LSS hero stories and our need for critical personal protective equipment (PPE).

The result has been overwhelming…furloughed colleagues asking to help through an unpaid internship or volunteering to make face masks for “frontline” staff. Donors rallying individual and crowd funding support through our newly created LSS Response Fund (www.lsswis.org/responsefund). Closed businesses and schools joining to donate hand sanitizer, disinfecting wipes and food for our homeless shelters and addiction recovery centers.

A thriving nonprofit in all times is not only necessary, but possible. These crises give us a chance to look at things differently…not only at what we need to do in a crisis…but what we are doing in this crisis that should be sustained for the long term.

Innovate – Incorporate flexible forward-thinking staffing models and technology

As of March 14th, the NPR/PBS Newshour Marist Poll reported that layoffs and reduced hours had already hit 18% of U.S. households causing many to work from home.

Telecommuting benefits both the employer and employee through lower operating costs, increased productivity, greater work/life balance and opportunities for cross-collaboration between programs.

Telecommuting, however, presents more challenges for the nonprofit sector. We are a people-centered business. Telecommuting at LSS requires a balance between in-person care and virtual check-ins. And there needs to be built-in flexibility for other forms of communication for clients that are homebound, living in rural areas or withdrawing due to persistent mental illness.

Telehealth is an electronic delivery of health-related services and information that provides client flexibility in scheduling virtual appointments around work or other family commitments. Telehealth has not been accessible to LSS in the past.

With new funding through the COVID-19 Telehealth Program and approval from our county partners, LSS quickly moved our organization from zero to 80% of our community-based staff now offering telehealth services to clients. This resulted in our ability to keep in touch with individuals who need us now more than ever. In addition, it helped to close a projected significant revenue gap.

Collaborate – Know your strengths and share them.

The novel coronavirus has certainly revealed how innovative partnerships can emerge in unexpected places. LSS has successfully grown to the size we are now – serving in 82% of the state with more than 800 employees – because of my predecessor’s great business sense around strategic alliances.

One example of how my team and I have carried on this legacy is through our work as employer of record for Racine County.

LSS has the knowledge, expertise, experience and infrastructure to serve as a contracted partner with counties and other nonprofits in several capacities including finance, IT and quality.

In 2018, we created a strategic alliance with Racine County by entering into a $4.1 million contract with them to serve as the employer of record for a portion of their health and human services department. In this role, we are responsible for all aspects of human capital and safety (e.g., recruitment, onboarding, compliance, performance management, etc.) for employees. We also provide full benefits through our organization along with leadership training, employee development and engagement.

Adapting LSS business practices to new methods and divesting from certain services, puts LSS in a highly favorable position today for new partnerships.

With greater focus on investment in areas of program strengths, LSS has an increased ability to serve more people, offer market-rate wages and benefits for our staff and position us for long-term viability, even in the midst of these tough times.

Diversifying revenue through mergers and acquisitions also eliminates the need for competition for dollars. The collective client care expertise of our partners will improve rates for service and negotiation of contracts for all nonprofits – not just LSS.

I understand that acquisitions feel different in the nonprofit sector. The tie that binds
nonprofit founders and their leadership teams to their organizations is the people they
want to serve – not the product they need to sell. That said, we cannot be afraid of
these conversations.

Let us not choose to “wait out” the crises still underfoot…holding our breath all the way
to Dec. 31 or beyond. Instead, let’s make the time to adapt, innovate and
collaborate across our specialties to dismantle barriers and strengthen mission and
impact for our clients, communities and ourselves for centuries to come.

We invite other nonprofit organizations in the region to join this necessary conversation
and share their strategies, tactics and innovations that will help each of us serve our
communities.

Together, we CAN do better because we MUST do better.

Héctor Colón is the president and chief executive officer of Lutheran Social Services of Wisconsin and Upper Michigan.

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