Sun-setting programs in a nonprofit organization is almost always more difficult than if the program was embedded within a for-profit company. In a for-profit company, it is about dollars and sense and it is an easier bottom-line decision. In a nonprofit, this decision becomes much harder given psychological biases. Even in for profit companies, these psychological biases exist. An article in McKinsey Quarterly speaks to this bias by saying:
“…a primary reason is the psychological biases that affect human decision making and lead executives astray when they confront an unsuccessful enterprise or initiative. Such biases routinely cause companies to ignore danger signs, to refrain from adjusting goals in the face of new information, and to throw good money after bad.”
In our nonprofit organizations, how do we effectively minimize these psychological biases and not ignore the true need of eliminating a program?
- Legacy Programs– Programs in nonprofit organizations are sometimes the brainchild of a volunteer leader or leaders at one point in time or another. Even though a program may be “losing money” routinely, there are leaders who pioneered the program that feel loyalty to it. This loyalty prevents rational thinking around the viability of a certain program. In order to begin the process of elimination, you need to work closely with the volunteers to identify this psychological bias and work to defuse it.
- ROI– Determine the programs return on investment both historically and future projections. Data is the “king or queen” of decision-making. It is hard to refute hard evidence that a program is in decline. Your data should show the revenue, expenses, net revenue, usage by the members and overall satisfaction rating of the program. Don’t forget to add in the time that staff spends and how that shows net income in a different light, as it may be a net loss.
- Single Topic Meeting– Once you understand who the key players are that may have a personal connection to the program and understood why they have the connection, it is time to schedule a single topic focused meeting to discuss the program and present the facts. We discourage this discussion at a Board meeting as it may get lost or you may have a Board that is just too tired to discuss a major issue. If you can schedule a short, single topic meeting, the result is always better and the decision is always crisper.
- Make a Decision– Now that you have your key players together, you have your data and a meeting scheduled, it is important to inform the group that a decision needs to be made to a) phase out, b) repurpose or c) make no change at all. There needs to be an end goal for the meeting and a decision to be made. This is the time to present the data and show the program’s performance while highlighting the Board’s fiduciary role in safeguarding the assets of the organization and making the right the decision on how those assets are prudently managed.
Taking the “emotion” out of decision-making and understanding the psychology of the decision is what is most important. Through the use of data and understanding the volunteer leaders’ position on a program is key to making an informed business decision. Ultimately, the Board has a fiduciary responsibility to do what is right for the organization and its members. Given this fiduciary role, the decision to “barbecue a sacred cow” should be very clear and focused on member value and stewardship alone.