Part one of a two-part series. It's a tough world out there. Just in time for Halloween, administration officials are pointing to wisps supposedly indicating recovery, tantalizingly beyond reach. Meanwhile, Westinghouse and Martin Marietta are laying off workers, IBM is in the midst of a major downsizing, Du Pont is cutting 4,000 jobs and more than a billion dollars in expenses . . . and on and on.
Well, if you think it's tough out there for the private sector, take a quick look at the non-profit world.
They've been feeling the pinch for more than a decade. Since the Reagan years, the non-profit world -- those underpaid and over-worked people delivering critical services that improve our lives -- have seen cuts totaling more than $40 billion in direct federal aid and billions more in indirect aid.
On top of that, social needs have intensified -- to a level never felt by American society. With AIDS, crack babies, drug abuse and homelessness added to the litany of more traditional social ills, non-profits are stressed to their limits.
All this would be fine if there was enough funding for our social needs. That has never been the case. And in today's economy, it is far from reality. There is so much competition for limited funds, non-profits have had to cut back on vital services.
Layoffs and downsizings, historically rare among non-profits, are becoming common. And while corporate layoffs are painful for affected workers, in the non-profit world layoffs are a one-two punch. The employee feels the first painful jab. But the family on the street, no longer able to receive needed services, gets the knockout punch.
"We were having serious financial problems [early this year]," David Simms, executive director of The Red Cross of Maryland, recalls. "We were losing more than a million dollars a month."
After putting in place several cost-cutting measures in May, he had to make the most difficult of all decisions: cutting personnel. "More than 50% of our costs are personnel-related," Mr. Simms says. "We had no choice."
Taken as a whole, no industry group is more people-oriented than the non-profit sector. And laying people off is more difficult in the non-profit world, due to the lack of management training and the intense dedication to others that draws people to the field.
How, then, should non-profit executives handle downsizings? What lessons can we learn from non-profits that have been through this painful process?
"Every downsizing situation is unique," says Kevin Shields, principal and founder of Haymarket Consulting Group, a Boston company that counsels for-profit and non-profit companies on downsizing programs. "There are issues of company security to consider, possible misinterpretations by employees or miscommunications by management. These have to be taken into consideration."
Mr. Shields' comment is accurate. Still, there are some generic points that non-profit managers should take into account when reducing personnel costs.
Look at Non-Layoff Options First. Cutting personnel is highly disruptive to a non-profit's operations. Therefore, other options should be considered first.
Has spending been trimmed? Has all new hiring been frozen? Is an early retirement option possible? Can some employees opt for a reduced workweek? Can a partnership be formed with other non-profits to reduce purchasing costs, share space, or combine administrative functions such as accounting and invoicing?
Keep Employees Informed. "We kept our staff informed of our losses," according to the Red Cross' Mr. Simms. "We didn't try to hide the problems. We circulated memos on some of the options we were considering."
Most non-profit employees prefer knowing what management is facing and may offer suggestions that don't occur to a small, isolated executive staff. Two-way communication is too often missing in downsizings.
Objective Criteria. The non-profit's board and management must establish a set of objective criteria that will form the basis of employee downsizing. These criteria should be defensible and may include such parameters as seniority, job classes or programs.
However, prior to implementing the cuts, the final and cumulative personnel implications should be carefully examined to be sure that one group isn't suffering disproportionately, such as blacks or women.
If termination decisions will be made on performance, and executives find that exceptionally hard to implement, the organization needs to learn from that experience. Has the employee evaluation system been lax? Are evaluation criteria nebulous?
In times like these, downsizings may be the only option available. In next week's column we'll see what experts and managers who have been through the downsizing process have to say about handling face-to-face meetings with employees who have been cut.
Les Picker, a consultant in the field of philanthropy, works wit charitable organizations and for-profit companies.