Nonprofits weathering economic storm, recession: NPT survey shows steady workforce.

Nonprofits are certainly not immune to the effects of a sagging economy, namely, layoffs. But, a recent national survey by The NonProfit Times revealed some promising news for nonprofit employees: Most organizations surveyed have not yet had a layoff due to the economy.

More than 92 percent of respondents said they have not had a layoff since Jan. 1, and almost 80 percent said they have not had a workforce reduction during the past 12 months. Of those that have had a workforce reduction, more than 50 percent have occurred in organizations with an estimated annual gross income of $1 million to $9.9 million.

The sample was of 142 randomly-selected organizations across the country and taken before the September 11 attacks. The results were compiled by the Center for Public Service at Seton Hall University in South Orange, N. J.

Other results of the survey include:

* For those who do have severance policies in place, 68 percent said that the policy applies to involuntary separations (138 respondents cited layoffs as the reason for involuntary separations), compared to 32 percent for voluntary separations;

* Some 59 percent of respondents said they do not provide a set amount of notice to employees identified for non-cause termination. Of those that do, 60.8 percent give two weeks notice and almost 27.5 percent give four weeks;

* Slightly more than 61 percent of respondents pay severance benefits in one lump sum, compared to 34.3 percent that pay Out over periods of time;

* 55 percent of respondents notify employees of layoff by supervisor; 31 percent by an officer of the organization; and 14 percent by a human resources staff member;

* Just more than 75 percent of respondents said that their organization does not make payments in lieu of notice, versus 24.8 percent that do;

* 90 percent of respondents said that their organization does not provide outplacement services, but 47.9 percent said that laid-off employees are allowed to use organizational resources to look for a new position (i.e. computer, Internet access, copier, fax machine or telephone);

* Almost 85 percent said laid-off employees are not required to sign a no-fault, no-sue nondisclosure agreement to access severance policies, and 96.7 percent said that laid-off employees are not required to sign non-compete agreements.

These numbers may reflect a decrease in hiring rather than an increase in laying off. According to Mark Merriman, owner/manager of Management Recruiters of Colorado Springs, Colo., a franchise office of Management Recruiters International (MRI), there has been a downturn in hiring.

"In tougher times, when the market is a little tighter, they may wait before filling a position. They will do everything in their power to make sure they make the right hire," he said.

Making the right hire is critical during a slow economy when the threat of layoffs loom. Nonprofits, especially with limited budgets, need to hire carefully to avoid what could be a costly mistake.

Catherine Palmquist, executive director of the YWCA of Chester County, Pa., with an estimated annual gross income is just $250,000, said the key to weathering slow economic times is hiring carefully and having multiple funding sources.

"When I pick people, I'm pretty careful about who I pick," Palmquist said. "I really put a lot into the personal interview. I don't just look for fancy credentials."

When layoffs do occur, severance policies may help ease the burden for both the employer and the employee. But, according to the survey, 64.3 percent of respondents said they do not have a severance policy for non-contract personnel. Those that do have a policy are mostly social/welfare organizations (44 percent) and have an estimated annual gross income of $1 million to $9.9 million (57.1 percent). Just more than 70 percent of those that do, said it is published (versus on a case-by-case basis), and 70 percent say it applies to all employees.

In addition, almost 52 percent of respondents said that terminated employees are eligible for non-COBRA insurance for one month, and 23.7 percent said they give two weeks of severance pay.

Almost 34 percent said that the number of weeks of pay included in the severance package depends on two issues: length of service and position within the organization. These numbers would indicate that respondents still see the need for some kind of severance, whether the policy is published or not.

"I think they (severance policies) can really help an organization in the long run by avoiding potential problems downstream," said Tom Taylor, director of operations/finance of Make-A-Wish Foundation of Michigan, an organization that grants wishes to children with life-threatening illnesses. "If an employee can leave with a smile on his or her face, we can avoid more costly problems down the road. People will talk good about your organization."

Eilene H. Rosenblum, executive director of Young Audiences of Virginia, Inc., an organization that enhances the quality of students' education by incorporating arts education into the core curriculum, agreed that severance policies make good sense.

"I think it's always helpful when you protect your working staff," she said. "You really want everyone to be comfortable and happy so they can do the best job they can. So, when they leave we try and help them in becoming equally well-situated. Sometimes something comes to an end. The position may have been a luxury, for example, and you have to make decisions for the welfare and mission of the organization."

Despite survey results that show that a majority of the respondents do not have a severance policy, Merriman said that, in general, nonprofits do offer them.

Are they golden parachutes where people can go and retire off them? Not usually, he said. "Instead, they're something that help an employee make a transition. ... There's something else out there for you; here's a package that will help your transition into your new position."

Although the survey indicates that most who responded are not yet laying off, the economy has hurt non-profits in other areas, namely budgeting. According to Rosenblum, non-profits suffer when people don't have the money to give.

"The economy has definitely affected what we do. Our budget is made up of 50 percent of earned income from sites where performances take place (schools, libraries, youth organizations), and the other 50 percent comes from contributed income from corporations, foundations, individuals, civic organizations, and municipal and state granting organizations, she said.

"When people have more disposable income, they tend to be more charitable. People may be very interested in the mission of the organization, but when their own situation tightens, they may have to rethink the philanthropic organizations that they are supporting," said Rosenblum. "That doesn't mean the need is less and that doesn't even mean people think the need is less. It's just that they are unable to do what they have done in the past."

Taylor has also seen signs of slowing growth within his foundation.

"We've been fortunate in that we haven't seen the reduction in revenue that other nonprofits have, but our growth is a lot slower, he said. "This is my fourth year here, and we've had at least double-digit growth until this year. This year there's been about 5 percent growth in revenue. We've added five positions in the last year, but we haven't added any positions this year, which is another sign of slowing growth. We haven't had any layoffs, and we haven't had to turn any wishes down. We've been able to meet the demand that's out there."

Nonprofits are doing what they can to survive these slow economic times, and what they can do depends on the size of the organization and its budget. In addition to funding issues, nonprofits have also had to compete with for-profits for employees. According to Palmquist, that's the biggest way the slowing economy has impacted her organization.

"The one big challenge I have is finding people to hire," she said. "It took us a whole year to find an assistant for one of our programs. Granted, our salaries are not the same as those in the for-profits. Corporations are trying to hire people and they're paying these bizarre salaries, which we can't compete with."

Another challenge is keeping up with rising operating costs, including health care. Taylor said his foundation pays 100 percent of health care costs for both employees and their families.

"Our fiscal year started Sept. 1, and we know this is going to be a more challenging year than we've ever had," he said.

"Health care costs are becoming an ever-increasing portion of our personnel costs. We don't expect any layoffs, but we certainly are going to have to have a very successful year to reach our goals. It's going to be challenging," said Taylor.

In the meantime, the survey shows nonprofits are holding their own. And, the economy always recovers.

"In my 18 years in this business," said Merriman, "I know that the economy is a pendulum that swings back and forth, and we'll weather any storms that come along."

Gina Bernacchi is a reporter for the Denver News Bureau.

RELATED ARTICLE: Does your organization have a severance policy for non-contract personnel?

Yes 35.7%

No 64.3%

Total 100.0%

Are laid off employees allowed to use your resources to look for a new position such as copier, fax machine, telephone, computer, Internet access

Yes 47.9%

No 52.1%

Total 100.0%

Are laid off employees required to sign a no fault, no sue nondisclosure agreement to access severance benefits?

Yes 15.5%

No 84.5%

Total 100.0%