There are moments when budget cuts are warranted. When enrollment declines become sticky and stubborn, for example.
But, cutting expenses is rarely part of a longer-term strategy for institutional success. There are 3 practical reasons for this:
- Despite all best attempts, budget cuts will impact some aspect of the program or service that delights those you serve. Someone will feel the cuts and it won’t be positive.
- Budget cuts dampen team member enthusiasm to serve more and serve better. Reductions in resources impact people and their behavior.
- Non-profit budget cuts are rarely implemented strategically. Instead of protecting key revenue generating areas from budget reductions, leaders typically cut all areas of the enterprise equally. While decisions like these are made, “in the interest of fairness,” they do little to help the institution address the underlying funding issues.
Tightening the budgetary belt must happen sometimes. But how cuts are made and the narratives around those cuts become critically important for future success.
Effective leaders understand, “we can’t cut our way to success.”
But, they also understand that communicating how and why cuts are being made will make a significant difference in how quickly everyone gets back on that path to success.
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