Lutheran Social Services of Wisconsin and Upper Michigan (LSS) went from a $2 million operating loss in 2017 to an operating gain of $67,000 and mission success under new leadership in 2018. It's journey to financial health and sustainability began by addressing their financial barriers head-on and learning critical lessons along the way.

Community-based human services organizations are at a crossroads. To flourish in times of significant financial challenges, as described in the report, A National Imperative: Joining Forces to Strengthen Human Services, organizations like LSS must move beyond business as usual. This sometimes means drawing the line and not being all things to all people or not overextending staff and resources at the risk of serving few at the expense of many.

LSS was faced with significant financial challenges in 2017 when it had an operating loss of $2 million. But through new leadership and their co-created, business-focused approach, LSS achieved a $67,000 operating gain in 2018, with a year to date 2019 positive budget of over $1.5 million.

Part of that new leadership is Héctor Colón, who has been president and CEO since 2017. With Colón’s direction, LSS is now bucking the status quo through a proactive strategy and business-focused approach. The organization is able to deliver on its mission with even greater impact and service to more individuals.

Before Colón joined LSS in 2017, the organization had not met its budget in the prior four years, with operating losses totaling $4.7 million. Only two budgets had been met since 2007. This is a grave matter for nonprofits. LSS was inundated with financial burdens and faced a myriad of challenges for years, such as cash flow, debt, significant write-offs, deferred maintenance, low compensation, and high staff turnover.

To pull LSS out from under its financial burden, new financial practices and leadership were critical. Colón began LSS’s overhaul by asking five questions of staff and board members, including: 

  • What are the biggest challenges the organization is facing?
  • Why is the organization facing these challenges?
  • What are the most promising opportunities for growth that we can leverage?
  • What needs to happen for the organization to leverage these opportunities?
  • If you were me, what would you focus your attention on?

He listened and developed a plan informed by the insights provided in the responses. Some steps included:

  • Co-creating and executing a new strategic plan that provides focus, structure, and accountability
  • New C-suite and contracted partners
  • Bringing in new board members (more than half)
  • Developing a new mission, vision, and values through a robust, inclusive process
  • Reviewing program portfolios and making strategic decisions about divestment and growth
  • Innovations to introduce new funding streams (e.g. employer of record)
  • Focus on workplace culture in servant-leadership, productivity, fundraising, and project management
  • Expense management
  • Partner relationships: rate setting approach and contract negotiation discipline

Changes implemented across all levels of the organization resulted in remarkably impactful outcomes. LSS divested $5.8 million in programming and at the same time grew over $6.5 million in four strategic programs, resulting in an overall increase of 2,500 more individuals served. LSS has since achieved a 95% overall client satisfaction rate, with 91% of those served saying LSS services improved the quality of their lives. LSS has also earned a quality index score of 94.3, indicating that LSS programs met 94.3% of its outcome targets.

Key takeaways from this transitional experience for LSS highlight that the right team, board, and partners are necessary to achieve great results. In addition, co-creating with staff on strategy and the future of the organization makes a difference with execution and engagement. The LSS workplace exemplifies the value of fostering a culture around mission, vision, values, and accountability. Some hard decisions were made and there were lessons learned about the importance of saying “no” to certain opportunities.

This overhaul at LSS highlights the symbiotic relationship between business strategies and mission success.

Members of the LSS executive leadership team will present a workshop on financial health and sustainability strategies at the Senior Leadership Conference in Savannah, Georgia, Feb 22-25.  Be sure to learn directly from these leaders about organizational turnaround and financial viability.