BDO KNOWLEDGE Webinar Series ‒ Implementation Issues Related to ASU 2016-14 Financial Statements of Not-for-Profit EntitiesPage 1

http://nonprofitblog.bdo.com

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BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.

Avoiding the Iceberg and Maintaining Organizational Health

October 5, 2017

BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.

http://nonprofitblog.bdo.com/

@BDONonprofit

Avoiding the ICEBERG!

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Presenter

Paul Jan Zdunek, MBA

Managing Director, Nonprofit and Education Advisory Services, BDO

15+ Years Nonprofit & Corporate Turnaround Experience

Chief Restructuring Officer, Business Transformation Advisor, and Interim Executive

Conflict & Crisis Management, Financial and Organizational Restructuring, Cost Reduction and Rightsizing of Organizations, Strategic Business and Sales Planning, Leadership Development, and Stakeholder Management

Conductor to Chief Executive Officer: ‘connecting the dots (data)’

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Session Overview

How Healthy is Your Organization?

What Are the Signs of a Looming Crisis?

What Can You Do Instead?

Real Life Case Studies

Q&A

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Shareholders

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Only 10% of an ICEBERG can be seen above the surface…

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ORDER will eventually lead to…

…CHAOS…if not constantly monitored

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Company Clock

HEALTHY

CROSSROADS

CONFLICT

CRISIS

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Usual Victims Crisis

MONEY

GOALS

FOCUS

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Usual Suspects Crisis

CASH FLOW

CONFLICT

LEADERSHIP VACUUM

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Human Challenges = 85%

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Determining Whether Your Organization is Healthy or Needs Stabilization

Is the Organization Fiscally Strong?

Is the Organization well-run with Good Management?

Does the Organization have strong Governance and Oversight?

Is the Organization capable of Responding to Change?

Does the Organization have a history of periodically Recreating Itself?

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In a HEALTHY state?

At a CROSSROADS?

In the middle of CONFLICT?

Deep in CRISIS?

Where Is YOUR Organization on the Company Clock?

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Company Clock

HEALTHY

YES!!! to All Questions

Fiscally Strong

Good Management

Strong Governance & Oversight

Responds to Change

Recreates Itself

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Company Clock

CROSSROADS – Common Symptoms

Leadership Denial They have nothing to do with the problem…

“Yes, but…”

Leadership Fear Acknowledging problem might result in loss of

prestige or position

Leadership Ignorance Information systems do not alert them to a

problem until it’s too late or at all

Leadership Absence Leaves running of the business to others –

hands off the steering wheel

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Membership Service OrganizationCrossroads

SYNOPSIS

The oldest and most prestigious nonprofit organization in its region, this 87 year-old Membership Service Organization was stuck in a failing financial growth model. The incoming President of the Board of Directors determined that a new plan was necessary to revitalize the organization.

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Membership Service OrganizationCrossroads

PROBLEMS

The Membership Service Organization had been facing a completely disengaged Board of Directors, flat sales, and declining philanthropic revenue for the last five years which threatened the organization’s future viability. Conflicts regarding the future direction and strategies to improve it were developing between newer and long-term Board Members. Collectively, they lacked the skills and experience to develop a new plan.

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Membership Service OrganizationCrossroads

SOLUTIONS

BDO facilitated its Reboot RetreatTM to build a roadmap that defined and aligned the organization’s goals and strategies through a detailed and organized effort that analyzed, debated and reframed the fundamental issues that were driving the organization’s failures. Through a 360o Socratic approach, the organization’s Leadership was able to identify issues and come to unanimous agreement.

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Membership Service OrganizationCrossroads

SOLUTIONS

Through the Reboot RetreatTM process, the Leadership realized there were four foundational drivers for success at this time in the organization’s life cycle:

Quality of Product

Delivery of Product

Policy Development including SOPs

Philanthropic Development

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Membership Service OrganizationCrossroads

RESULTS

The Board of Directors and Executive Leadership are completely aligned with their new goals and strategic action steps

Changes to improving the quality and delivery of product as well as philanthropic development:

Increased revenues by 65% Dramatically improved the quality of the experience for members

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Company Clock

CONFLICT – Common Symptoms

Lack of Financial Knowledge P&L and Balance Sheet tell a story Losing Money…Cash Flow

Taking Personnel For Granted Needs of Employees important to address: stress –

working environment

Leadership Isolation Not interested in hearing negative information -

won’t acknowledge the facts even though “Rome is Burning”

Problems between Management and Board of Directors

Lack of Planning No plan to deal with contingencies – when

problems occur, not enough time or resources to deal with them

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Arts Center Conflict

SYNOPSIS

A nationally recognized, award-winning Arts Center, which lost its key leadership and its ability to sustain itself, was at risk and required professional interim CRO (Chief Restructuring Officer) leadership to stabilize and revitalize the organization

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Arts Center Conflict

PROBLEMS

The organization lacked a clear vision, plans and strategies resulting in flat revenues for over five years. The Board was frustrated with Management’s performance and was extremely concerned about the organization’s future. Additionally, the Board urgently needed to find expert interim leadership in the transition to permanent leadership.

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Arts Center Conflict

SOLUTIONS

Interim leadership – CRO conducted a full organizational assessment: reviewing governing documents, financials, mission statement & core values, staffing structure, board governance and fiduciary engagement, as well as branding, sales and differentiators. This assessment generated breakthrough ideas to increase revenues, improve operational and financial performance, identify changes to Board governance, and develop strategies to attract new leadership.

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Arts Center Conflict

SOLUTIONS

Restructured the staffing matrix, rewriting all job descriptions and resetting compensation levels

Designed the Arts Center’s first-ever Fundraising & Cultivation Roadmap

Created the Arts Center’s first-ever Sales & Marketing Roadmap

Led and managed a time-sensitive Executive Search process

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Arts Center Conflict

RESULTS

Employee performance and morale improved exponentially

55% increased revenues within the first year

New Chief Executive hired in 8 weeks

Organization viable now and able to return to its core mission

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Company Clock

CRISIS – Common Symptoms

Immediate Needs Cash Bank/Lender Default Time Resources Personnel

Time is Running Out Must move at a pace 30x faster

than in the HEALTHY zone

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International Boutique Hotel Crisis

SYNOPSIS

An International Boutique Hotel opened its first location in the US. Hailed to be the solution for Asian tourists visiting the US as well as well-traveled guests looking for something out of the ordinary, the hotel was in jeopardy of closing within three months of its grand opening. Crisishad ensued.

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International Boutique Hotel Crisis

PROBLEMS

The Hotel was losing 10% of its annual operating budget each month

It was unable to achieve the necessary 80% occupancy levels

There were major conflicts and a loss of confidence between Ownership and Executive Management

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International Boutique Hotel Crisis

SOLUTIONS

Provided interim management leadership

Replaced Executive Management Team

Designed Global Sales & Marketing Plan

Forged a strong relationship with Ownership and New Executive Management built on competence and trust

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International Boutique Hotel Crisis

RESULTS

Achieved profitability in 90 days

Occupancy went from 17% to 80% in one year

Operating budget doubled in first year with a net profit

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In a HEALTHY state?

At a CROSSROADS?

In the middle of CONFLICT?

Deep in CRISIS?

Where Is YOUR Organization on the Company Clock?

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Avoiding the ICEBERG – Key Components

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Key Components to Avoiding the Iceberg

DATA: Company’s historical and current financial and operating metrics used to assess performance

PLANNING: Alignment with future goals, strategies and initiatives. Leadership’s use of planning tools to: forecast and monitor performance, manage cash flow, analyze outcomes – and adjust!

GROWTH: Company’s readiness for short-term and long-term growth in revenues

SUSTAINABILITY: Company’s stability and sophistication with respect to board leadership, executive management, operations, organization, systems and technology, sales, market differentiators

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Key Components to Avoiding the Iceberg

COMPETITIVE POSITION: Company’s differentiators and competitive advantages, such as its distinctive offerings, intellectual property, branding, strategic relationships, pricing, location, customer base, etc.

PERFORMANCE IMPROVEMENTS: Company’s initiatives and vision to improve sales, profitability, cash flow, customer base, etc.

RISK MITIGATION: Company’s awareness of key potential risks, such as internal controls, insurance, litigation, union disputes, customer demographics, program relevance, etc.

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Key Findings

8 out of 10 Organizations in the United States Fail

The 20% that exhibits long-term Health concentrates on three interactive DRIVERS that are examined and updated continuously – while the other 80% does not

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Key Findings

DRIVER No. 1 – DATA-DRIVEN DECISION MAKING Financials – Actual to Goal Sales Reports – Compare to Past Performance Stakeholder Feedback – What Do They Want

DRIVER No. 2 – PLANNING Strategic Meetings & Retreats – Take the Time to Plan Worst-Case Scenario Planning

DRIVER No. 3 - MONITORING Manage to Data-Driven Strategies and Goals Hold People Accountable for their areas of Responsibility & Authority Addressing Areas of Deficiency or Abundance - Adjust

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Organizations + People COMPLEX

Solutions Approach HOLISTIC

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Company Clock HEALTHY – Holistic Components for Success

Fiscally Strong

Good Management

Strong Governance & Oversight

Responds to Change

Recreates Itself

AND…

Mission & Core Values - Alignment

Case for Support – Compelling

Differentiation – Why Your Organization vs.?

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DON’T LET LACK OF…

MONEY

TIME

STAFFING

ETC

… BE AN EXCUSE

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DON’T WAIT UNTIL YOU ARE FACING ACRISIS TO MAKE CHANGES

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MISSION-DRIVEN + DATA-DRIVEN

DECISIONS = MAXIMUM RESULTS

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Thank You!

Questions?

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Paul Jan Zdunek, MBA

Managing DirectorNonprofit & Education Advisory Services

pzdunek@bdo.comO: (310) 598-4630

C: (626) 623-9471

www.BDO.com