After 12 years of small business ownership and a detour back to school, I wrapped up a year working for a non-profit, confronting everything I believed to be true about business, money, and decision-making.  Once the initial shock wore off, and the “you don’t understand how nonprofits are funded” conversations became unnecessary, I slowly conceded my drive and desire to make the organization behave like a business.  I developed an understanding of funding requirements integral to grant-based organizations, and widened my scope of understanding to other-than-profit organizational models.

What did stick with me throughout this experience- and in fact became highlighted in bold- is something which has always made sense to me and I have found to be true in every aspect of my life, as a business owner, a student, a soldier in the Marines, and a Manager responsible for multi-million dollar properties.  It is this one thing, this one fundamental context, I believe makes all the difference in decision-making, regardless of funding source and organizational model.  I believe it is as true personally as it is professionally, applicable in any scope and at every level of decision-making.  Ben Franklin is credited with its early record “penny wise and pound foolish”, but I think my first boss nailed it when he criticized my unwillingness to do scheduled maintenance.  “O’Toole”, he said “pay me now, or pay me later, but you’re gonna pay, and 5 minutes now will save you an hour later on.”  And how true this turned out to be.

My father is 83, old school depression-era and knows how to save a dime.  He always resisted spending money on himself, and thought I was a crazy fool with my massages and chiropractors and pricey supplements and gym memberships, and never failed to tell me of how much money I could be saving. However, he retired at 62 at the top of his financial earning capacity- for health reasons- and I started wondering what the cost benefit analysis would actually have been, had he been able to keep working, even for another few years. If he had spent $300 a month on health products, that’s $3,600 a year, and over a 30 year time-frame, that’s $110K, which is no small number and seems enough to end any conversation about spending it, regardless.  But Dad was earning $85K a year, and many of the men in his field worked till their late 60’s and even early 70’s, and didn’t end up with cancer and bypass surgery.  Another 5 years would have grossed him $425K, and he could have saved 10’s of thousands of his own money spent on medical expenses. Obviously this is a very limited and easily picked-apart scenario, but it did get me thinking.

In capacity as a property manager for high-end real estate, I have consistently reminded my employer that the money we spend now, is to save the money we would have to spend down the road.  It costs $50 to replace a leaky faucet; $500 to do the same a year later, also replacing the water damage to the under-sink cabinet.  $10,000 five years later when we’re pulling up flooring to address rot and mold in base-boards. You change the oil so you don’t have to replace the engine. This makes sense on paper, but does not always translate to financial decision-makers who are stuck on the ebb and flow of money in the moment, especially when decisions are influenced by non-principal agents who do not have big-picture context and training, who do not truly understand that money is spent so that more money can be saved, and that this is true regardless of funding source, mission, or end-goals.  In essence- if you are worried about saving money organizationally, then it is imperative to embrace the spending of money; in fact to see the spending-money-plan as an essential part of the not-spending-money plan; the way out, not the slippery slope down.

This is why HR and Accounting can so crucially side-line long-term success with short-sighted decisions.  Yes, you can find someone to do a $20/hr job for $15/hr, and if you do the math, it’s money saved.  In fact, for a regular non-exempt full-time employee, that looks like a $10,000 savings.  But is it really?  The person who takes the lower wage is having a hard time finding work, or is under-qualified, or desperate, and any of these reasons is not the right reason to invest time and money on someone; someone who may feel resentment at their lower wage; who will spend time and energy looking for other employment; who may take on additional and draining part-time work to supplement their income, who has lower morale, decreased motivation and loyalty.  On paper it may look good, but the quality of work?  The dedication felt?  The costs that will come when this person leaves or is removed for poor workmanship? The costs you will discover in ensuing months and years, when other employees have to redo- or make do- with mistakes and less-than-desirable outcomes; this legacy of short-sighted decision-making costs much more in the long run.  Pay now or pay later, but pay you will.

In capacity as a non-profit Property Manager, I have argued endlessly for the expenditures of funds. Spending money is a Bad Thing in this environment, as spending money looks to the untrained professional as a loss no matter what the reason.  So why then purchase something when money is already tight?  Well, when looking at the long term costs of failing to purchase a $15 item per housing unit when the lack of that item creates problems that cost hundreds of dollars to remedy, it becomes a sort of organizational suicide to not make the purchase: $1,500 in total can save $500 or $1000 per unit down the road.  Who would not gratefully, and gracefully, embrace the opportunity to save this kind of money?

Penny wise and dollar poor is an organizational culture that misunderstands the role of money, and fails to embrace the joy of spending as a path to long-term not-spending.  If your business or nonprofit wishes to truly save money, it is essential to embrace the joy-of-spending-to-not-spend.  It is this sea-change, this organizational perspective shift, that will over time greatly reduce waste and lower long-term costs.  This is not a challenge to any particular business or organizational model, or a criticism of nonprofits in favor of something else.  This is my “if you could change one thing” thing, that I would offer to decision-makers in any capacity and in any organizational setting: you will pay, either now or more later; it is much more expensive to be penny wise and dollar poor; and to keep this in mind when hiring, creating salary structures, and making purchases.  It can be very hard to see the financial windfall of the accident that didn’t happen, the copier that didn’t break, or the job that didn’t need to be re-listed, recruited and new-hire trained with the associated losses in productivity.  Yet these costs surround every decision and every organization, and can be greatly mitigated through a not-so-obvious shift which views spending money as an opportunity to save money, which is especially important for organizational structures with a traditionally difficult time understanding that money spent well is a Good Thing.