In tough budget years, successful nonprofit increase their focus on the areas of biggest mission impact (and cut areas with less mission impact). Step 1: Good financial reports, because leaders need to understand all the revenue and expenses of every major activity (including indirect costs). Step 2: Measure the mission impact of each program. Which programs do more to advance the mission? Step 3: Reduce or cut programs that both lose money and have low mission impact. Potentially increase funding to any activities with both strong mission impact and profitability. Pro tip: Continue to make strategic investments in technology. Good tools can boost productivity and help maintain staff morale while reducing turnover.

When faced with budget cuts, it's crucial to prioritize program expenses based on their impact and financial sustainability. By evaluating each program's effectiveness and cost-efficiency, we can make strategic choices about which to discontinue, expand, or maintain/ nurture. While reducing operational costs is essential, we must also explore ways to increase our revenue. This may involve leveraging existing resources or seeking out new funding opportunities.

Within a program, the director of that program has five possible levers to change their budget. I suggest giving them that responsibility as part of their job. to meet the target set by senior management, they can add clients, reduce program supplies, reduce staff hours, reduce staff compensation, or reduce program consultants. The value of this approach is that most of these costs are variable (unless staff have contracts) and within the power of program directors to change. They are also closer and much more aware of ways to change program budgets than senior management.