How To Make Budget Cuts In A Healthy Way

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Churches often make budget cuts the easy way, as shown in the chart below. They choose a percentage by which the entire operating budget should decrease. Then they force every department to cut the same amount across the board. Essentially, the waterline is lowered for everyone.

Budgetchart1-2

It sounds fair to treat everyone exactly the same. Hard conversations are unnecessary and no one gets their feelings hurt. The ship might be sinking but at least everyone is going down together! (Actually they won’t. The best leaders will recognize what is happening and jump ship before it is too late.)

Here are some problems with flat-rate cuts:

  • Not every ministry is equally essential to your mission. 

    Forcing the same cuts on everyone does a disservice to your strategy.

  • It discourages high performers. 

    They worked hard to build the ministry only to be forced to scale back efforts, receiving the same treatment as underperforming peers.

  • It focuses on a money issue, not a ministry issue.

    In most cases, if the budget is being cut because the church is in decline, the real problem is not the budget. Avoiding tough calls leaves real problems unaddressed.

Budget cuts, when led well, can actually create a healthy season of pruning in the life of a church.

So if you are faced with budget cuts this year, how can you approach them in a healthy way?  Work through these five levels of a healthy pruning process. Start at the top and exhaust each level of cuts fully before moving down to the next, if necessary:

Budgetchart2-2

PRUNING LEVEL #1: ELIMINATE INEFFECTIVE MINISTRIES

Cutting the budget can be a great opportunity to eliminate a sacred cow. It can also be a good reason to cut a ministry that competes with your strategy. Ironically, these are often the cuts that leaders try to avoid. They often come with hard conversations about ministries with deep histories. The truth is, if these ministries do not have a place in the future vision for your church, the conversations should have probably happened before now. The time has come when you literally can no longer afford to ignore them.

Key Question: Which ministries lack results or compete?

PRUNING LEVEL #2: REFINE INEFFICIENT PRACTICES

This is the “trim the fat” stage of pruning. Look around the organization and identify areas of inefficiency. They are likely to be found between ministry silos where duplicate spending and efforts often take place. Ask yourself, what resources could the team be sharing instead of purchasing separately? What systems do you lack that result in increased project costs? How can you adjust midweek building usage to reduce utilities? Are there any unnecessary expenses you could cut and never miss? Pull ministry leaders together to identify and reduce them.

Key Question: Where do we waste money?

PRUNING LEVEL #3: PAUSE NON-CORE MINISTRIES

If additional budget cuts are necessary after the first two levels of pruning, it is time to identify and pause any non-core ministries. These are components of your church that add support to your core strategies but are not absolutely essential to them. Examples might include events, special services, large connection gatherings, meals for assimilation sessions, or other costly components that are not at the core. The key here is to protect your few core strategies as much as you possibly can.

Key Question: What could we live without for a season?

PRUNING LEVEL #4: REDUCE CORE STRATEGIES

At this point, you’ve hit survival mode. If you fully processed the first three levels, all that is left to reduce are your investments in the core strategic next steps of your church. Those likely include the weekend service, small groups, and volunteer teams. Clearly this comes with difficult decisions. Continue to evaluate, identify, and prioritize the core strategies that can best contribute to the health and growth of your church. This will be important to position your organization for the future.

Key Question: How can we survive?

PRUNING LEVEL #5: INNOVATE, MERGE, OR DIE

Once you’ve started cutting your strategic next steps, Pruning Level #5 is likely just ahead. Here, you’re only left with three remaining options:

  1. Innovate:

    You can try innovating with a leaner model for ministry. It is going to require a lot of vision-casting, strategizing, and entrepreneurial leadership.

  2. Merge:

    You can identify an effective church with a vision you buy into. You’ll have to turnover your assets and help them pursue that vision.

  3. Die:

    Without a drastic step, this is the inevitable end.

In most cases, I would encourage a church in this situation to pursue a healthy merger. I would much rather see Kingdom assets reinvested into a healthy, growing church than see them drained until there is nothing left to invest. That’s just me. I could be dead wrong. But I think God’s more interested in progressing the Church than preserving a dying church.

Key Question: How can we best reinvest in the Kingdom?

Two Common Questions about Budget Cuts

1) WHAT ABOUT STAFF?

Cutting staff for budget reasons can have a damaging effect on the culture of a team. At the same time, cutting everywhere else in the ministry budget to avoid eliminating team members can have an equally damaging effect on the church.

At each pruning level, ask the following question: Do the cuts we are making reduce the need for an existing staff position? If they do, you may reallocate healthy team members to further your strategic next steps. Those are your best opportunities for church growth and increased contributions if you can afford to do so. However, if an individual is underperforming or damaging culture and has been given every opportunity to change, it may be time to release him or her in a healthy way. Reallocating an unhealthy team member to another department will only spread dysfunction.

2) HOW QUICKLY SHOULD WE CUT?

It is generally better to make one significant budget cut in one year to right-size the budget. We’d even encourage you to build that budget on 90% of the previous year’s income. When you make that shift, you create a culture of abundance within the church. It requires a swift move. But that’s far better than a culture of scarcity that develops when budget freezes and annual cuts become standard operating procedure. Read more here about the differences between wise and foolish budgeting.


WHY HEALTHY BUDGET CUTS MIGHT BE IMPOSSIBLE…

As you can see, it is impossible to cut your budget in a healthy way if you cannot distinguish ineffective and non-core ministries from your strategic next steps. That is why budget planning should always come after strategic planning. It is hard to build a budget for the future when you have not established a clear plan to get there. If you are struggling to develop a strategic plan, our team would love to help you do just that.

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About Author

Ryan Stigile

Ryan is the Director of Strategic Resources for The Unstuck Group. Previously, as Director of Expansion at NewPointe Community Church (NE Ohio), Ryan led the launch and development of new multisite campuses. With Mount Paran Church (Atlanta, GA), he guided the leadership team through a strategic change initiative to simplify and align its ministries. Ryan has a Master of Business Administration from Kennesaw State University and degrees in business administration and discipleship ministry from Lee University.

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