For many organizations, the loss of a major funder or customer can mean eliminating lines of business or winding down operations. However, sometimes, even in a total financial collapse, shutting down may not be an option. Organizational leadership may feel trapped between a loss of financial resources and obligation to continue operations.
Between 2015 and 2017, over 1000 Illinois contractors and non-profits faced this exact dilemma. When the Illinois state legislature failed to authorize stopgap funding during a multi-year budget crisis, “about one million Illinoisans lost access to vital services, including mental-health care and cancer screenings.” Vendors learned not only that payments would stop for work that was underway, but also that their organizations were “contractually obligated to deliver services without receiving payment for another year” and without guarantee of eventual payment.
As months passed without payment, a line emerged between vendors that were surviving and achieving their missions and those that were approaching collapse. Survival, we have learned, depended on engagement of stakeholders outside the executive leadership team. We can thank a team of three researchers for this insight: Dr. Kimberly Wiley, Dr. Elizabeth AM Searing, and Dr. Sarah Young. Their analysis revealed survival strategies that can help other firms emerge from a fiscal cliff.
Dr. Kimberly Wiley, Dr. Elizabeth AM Searing, and Dr. Sarah Young, conducted interviews with hundreds of firms that survived the Illinois budget crisis. Foremost, the team found that “mapping out their own organizational strengths and weaknesses, with special attention to the perceptions and insights of stakeholders outside of the management team” including “staff, service recipients, and members of the community.”
Among the organizations that survived, executive leadership initially lacked an accurate understanding of their organizational strengths and weaknesses on which to based their recovery plan. However, conversations during the crisis between executive leadership and stakeholders resulted in the discovery of previously underrecognized strengths and weaknesses that could then be leveraged (or avoided) in the months that followed. Subsequent strategies, according to Searing, Wiley, and Young, tended to cluster around five categories: finance, human resources, outreach, program and services, and management and leadership. But survival depended less on which strategy than on how leadership chose the strategy. Searing, Wiley, and Young found that “knowing what the staff, service recipients, and members of the community think are important if you expect to rely on them for crisis response or continuation of service.”
Today, federal contractors and grantees are also living through a period of constant fiscal uncertainty. Understanding how Illinois contractors and grantees survived their budget crisis provides a roadmap for other organizations in the private and public sector. When funding runs out but operations must continue, the conventional wisdom is to seek a financial solution: new funders, bankrupcy reorganization, or financial bail-out. But there are other options that can allow both the continuation of operations the restoration of solvency, and the preservation of value.
The author thanks Dr. Elizabeth A M Searing for introducing him to this important and overlooked episode in state level fiscal management. Her enthusiasm for and insight into the Illinois budget impasse of 2015-2017 were in valuable to the development of this article. The author recommends the following two articles as a starting point for readers who are interested in a deeper understanding of the context and lessons:
Searing, E. A. M., Wiley, K. K., & Young, S. L. (2021). Resiliency tactics during financial crisis: The nonprofit resiliency framework. Nonprofit Management and Leadership, 1–18. https://doi.org/10.1002/nml.21478
Wiley, Kimberly, Searing, Elizabeth, Young, Sarah (2020). Utility of the advocacy coalition framework in a regional budget crisis. Public Policy and Administration. https://www.researchgate.net/publication/339621623_Utility_of_the_advocacy_coalition_framework_in_a_regional_budget_crisis
