Recently the Oxford Social Impact Network organised an event with Michael Säger, malady who talked about his experience helping social organisations in distress. The following post was written by Nicki Ashcroft, Development & NGO Chair of the Social Impact Network. Enjoy!
What does an SBS graduate do when the social organization he just joined doesn’t have the cash to make payroll next month? Michael Säger (SBS 2005) responded to the challenge by taking a long hard look at the strategy and financial management systems in place. After two years of his careful leadership, Diakonisches Werk Reinickendorf (DWR) has improved its position considerably. However, 2013 will be a challenging year for Michael.
On Thursday, February 14th, the Social Impact Network hosted Michael for an in depth discussion on this case and the broader question of how to turn around a social organization in distress, while preserving both the social value and the financial bottom line. While Michael could outline the steps that he has taken and the strategy he is pursuing, the problems are not yet resolved, making this discussion especially relevant. DWR manages several social programs in northern Germany, including a community center, child care, and a variety of services for the elderly. In the past five years, their costs have risen considerably while their revenue has stayed flat.
Michael took the group through the same exercise he did when he accepted the position as secretary (managing director) and showed how he assessed the strengths and weaknesses of the organization. He found the following:
Real estate assets: DWR had the right of use of several buildings, but was not accounting for the costs of upkeep. Unused space represented a huge opportunity cost and, because they didn’t own the buildings, the group could not sell them. Michael’s solution was to begin accounting for costs and depreciation and to rent out the space to groups that are in line with their mission.
Cash assets: As with many organizations, revenue came in periodically while costs were incurred constantly. Irregular payments from funders caused considerable distress, despite the fact that the schedule was known in advance. Michael has instituted better cash management processes in order to smooth the inevitable fluctuations.
Stakeholders: DWR was run by a few paid staff members and a large group of volunteers. It also relied on contributions from the local government and members. In addition, it was officially run by a volunteer board which met 4-5 times per year. Michael chose to greatly increase communication with all of these groups to keep them fully informed of both the current state of distress and the plans in place to move forward. His commitment to transparency is already showing results.
The discussion ended with a simple road map that Michael and DWR are currently following – find the core business, earn trust from stakeholders and find unrestricted sources of funding. This roadmap and the process that Michael followed to reach his decisions could be adapted to other social organizations in distress, and the group found the lessons both practical and useful.