The Hard Decision - When Should a Charity Close its Doors?
Whew - that's a hard call, when should a charity close its doors for good?
As a board member of several organizations I am thankful that I have not been faced with the decision of a permanent closure. I have been asked to vote on going into hibernation, I have also had to vote on accepting a donation that had several strings attached and those were tough calls. So when I heard about Alberta Sexual Health Access voting to close its doors it got me thinking about what this means in the larger sense.
What should charities evaluate when they are looking at a strategic closure or a merger? What role can their donors play in facilitating this?
In a recent TEDxCalgary presentation I challenged the audience to think of the communities that they are building. Here's my thinking - charities exist because there are donors who support them. Duplication in the sector exists because as long as you can demonstrate charitable activities and can do the paperwork you can get a charitable number (of course I am oversimplifying, but you get the picture). Donors donate primarily out of an emotional response to request for support. Market place trends, like customer satisfaction and supply/demand do not keep the charitable sector in check because the primary revenue stream is donor (read - emotional) driven.
So while the economic trends might show that the next while will force charities to bootstrap their financing. How many will opt to strategically close? Strategic closure implies:
- That the programs and services currently being offered can be merged to an already existing and sustainable organization
- That the mission of the organization has been predominently met and so drawing on donor dollars does not make sense (in fact it could have negative reprucussions throughout the sector)
- The Board is informed of the marketplace and knows who else is offering similar services and how those service offerings rank against their agency's offerings
- That the void created by the closure can be managed within the community (clients can access services elsewhere and the closing organization can facilitate the transfer of those clients to the new agency)
- Donors have been informed all the way along so that the programs that are being transferred elsewhere can be moved without losing the funding currently provided
- Donors have articulated to the closing agency how they want their annual donation or monthly donation handled
- Legacy donors or their lawyers have been informed of the organization's closure