Within a couple of years of starting my career as the Help Desk Supervisor at a major golf manufacturer, whispers of a layoff started making the rounds. This rumor surprised me because it appeared that the company was thriving. But, I soon sat in strategic meetings with upper management to determine how to remain a world-class organization and meet the current financial reality. Even after finding ways to reduce spending and operate more efficiently, the company needed to reduce the workforce. It was my first encounter with a mass layoff. It was gut-wrenching for me, filled with anxiety and sleepless nights. Even though the company was committed to helping those impacted by the layoff with severance packages, help to build their resume, and other practical assistance, it was still challenging. While only a couple of the hundreds of people impacted that day reported to me, I knew many of them personally; one was my dad. Over time, as the event’s emotions wore off, it became more apparent that the leadership was committed to the organization’s long-term health. The streamlining paid off, positioning the company to remain dominant in the golf industry.
My story happened in the mid-1990s, and unfortunately, stories like mine are happening again due to the post-pandemic economic downturn. Look at this list of companies reducing their workforce in 2022:
- Netflix 150 people, or about 2% of their workforce
- Snapchat 1,300 people, 20% of their workforce
- Carvana: 2,500 people
- DocuSign is reducing its labor force by about 9%
- Peleton reduced its workforce by 20%
- Ford is reducing labor by 3,000 (2,000 salaried and 1,000 contract workers)
- Vimeo reduced its staff by 6%
- Tesla cut 229 employees from its autopilot team
And the list goes on.
Churches Are Not Immune
But for-profit organizations do not have a monopoly on the need to adjust the size of their workforce to remain effective or solvent. According to Lifeway Research, a shift is happening in the protestant church – more churches are closing than starting. The survey shows an estimated 4,500 church closures and only 3,000 openings in 2019. Additional Lifeway Research survey found that 91% of churchgoers said they plan to return to in-person church attendance, yet the average shows churches are still missing 25% of their congregation. The results are even worse for churches that followed a more cautious approach to the pandemic and followed the CDC and other guidance from local government health professionals. While the recent statistical evidence may look bleak, the need for churches to share the Gospel and build disciples of Jesus remains essential. That’s the mission.
Healthy Church Budget
Like for-profit organizations, churches cannot afford to ignore the organization’s health. Identifying the health of a church is complex and requires evaluating their commitment to teaching God’s Word, desire for fellowship with one another, prayer, focus on reaching those outside the church, and even generosity. However, checking the health through measurable ways like attendance and giving can provide insight into the effectiveness of the church’s ministries. To be clear, just because a church’s attendance is growing does not mean the church is healthy, and a church with attendance in a temporary decline doesn’t mean it is unhealthy. But, in general, it will grow when a church is committed to teaching God’s Word, reaching out to the community, praying, and having unity. Here are a few vital signs to monitor:
- Generosity – A healthy church is a generous church. In fact, a fascinating study by the NSCEP shows that churches that teach about giving and generosity grow faster than churches that do not. And one way to determine if a church is generous is to look at the average giving per person. Tony Morgan, the founder and leader of the Unstuck Group, says the average giving per person in a healthy church should range from $37 to $45. Morgan’s formula to calculate this number is simple: Total Annual Giving divided by the average adult attendance divided by 52.
- Percent of Compensation to Total Budget – Using the term compensation rather than salary or wages is intentional. Compensation includes exempt and non-exempt annual wages, housing allowances, the employer portion of medical, dental, vision, short-term disability, long-term disability, and life insurance benefits, taxes, and retirement. Determine the annual compensation cost and compare it to the total annual budget. Healthy churches spend about 45% – 55% when comparing compensation to the total operational budget.
- The ratio of Full-Time Equivalent to Congregation – The first step in diagnosing this vital sign is determining the number of full-time equivalent employees (FTEs) employed at your church. Let’s start with the understanding that calculating FTEs uses a 40-hour workweek, which equals (40 * 52) 2,080 hours annually. Then, sum the total annual hours of all employees and divide that total by 2,808, which will give you the FTE number. Step two is calculating the average number of people in your church services. Include an accurate count of the adults, youth, children, and volunteers. Then divide the average weekend attendance by the FTE number to produce the ratio. For example, a church with an average Sunday attendance of 500 and an FTE of 7 will have a 71:1 ratio.
- Volunteerism – Churches with a lower than healthy FTE to congregation ratio are likely to have a lower than ideal volunteer rate. In a healthy church, between 39%-47% of the adult and student attendees use their time and talents to serve. For a church, volunteers are the X-Factor. The Apostle Paul wrote, “And He gave some as apostles, some as prophets, some as evangelists, some as pastors and teachers, for the equipping of the saints for the work of ministry, for the building up of the body of Christ” – Ephesians 4:11-12. One of the many roles of a pastor is to equip other believers to build up the church – those are volunteers!
But What If …
If your church’s vital signs show the body is in distress, it’s time to take action because the mission is too critical. The first thing to do is pray. Philippians 4:6-4 instructs followers of Jesus, “Do not be anxious about anything, but in everything by prayer and supplication with thanksgiving let your requests be made known to God. And the peace of God, which surpasses all understanding, will guard your hearts and your minds in Christ Jesus.” Then, take the time to determine the severity of the situation. One bad month doesn’t constitute a crisis, but several months over time will reveal a trend. If it’s a trend, revise the budget target based on the most recent 12 months’ data to determine how much your church may need to adjust. Keep the leadership of your church informed. If the results from the data analysis show reductions are necessary, use the church’s mission, vision, and values to guide your church when looking for ways to cut spending.
Start by looking for low-hanging fruit, like non-safety-related improvement projects, to stop. Then take it to the next level, evaluate vendor contracts, and determine if there are ministries to put on hold or stop altogether. And in some cases, when the compensation percentages exceed 45%-50%, and the ratio of FTEs to congregation size goes below 75:1, evaluating staff is the next step. As difficult as it may be emotionally, personally, and even professionally, an unhealthy church must make prayerful and strategic moves. Again, pray fervently for God’s direction.
If a reduction in the workforce is required, churches should take a page from my old organization and be generous and compassionate to those impacted by the reduction. Will a reduction in hours or benefits relieve the church’s financial issue? Whatever financial solution is best for your church, remain focused on accomplishing the church’s mission.
Most organizations, including churches, will face difficult seasons that require the leadership team to make tough decisions. It’s the leadership team’s calling to check the vital signs to ensure the organization’s health remains intact to accomplish the mission. When those vital signs show reductions are necessary, proceed with prayer and a strategy to identify the areas to improve or eliminate. And if that strategic plan involves reducing the organization’s staff, do so with compassion and generosity throughout the process.
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