Nonprofit Restructuring: What to Do When Funding or Staff Shifts

Organizational restructuring is never easy—especially for nonprofit organizations, where tight budgets, mission-driven work, and closely-knit teams define the culture. Whether driven by funding cuts, grant expiration, or sudden employee turnover, restructuring can feel disruptive and uncomfortable. However, with thoughtful planning and communication, restructuring can also be a catalyst for resilience, renewed focus, and long-term growth.

Nonprofits operate in a constantly shifting landscape. Therefore, it’s necessary for nonprofits to restructure in order to accommodate the constant changes. These changes may include:

• Sudden loss or reduction of funding due to changes in grants, donations, or contracts

• Change in strategic priorities

• Leadership transitions

• Multiple unexpected employee exits

• Merger or partnership with another organization

• Operational inefficiencies revealed by external audits or internal reviews

  
  

Key Steps for HR Leaders During Restructuring

Organizational restructuring is uncomfortable for everyone involved, but it doesn’t have to be a negative experience. Organizations can take the following steps to turn this required shift into an opportunity for growth and development.

1. Assess the Current State Thoroughly

Start with a full organizational audit:

• Identify which positions are funded by grants that are expiring or changing.

• Pinpoint gaps caused by staff exits and how they affect workflows.

• Clarify which roles are mission-critical and which can be reorganized or paused.

• Analyze structural inefficiencies (e.g., duplicate roles, unclear reporting lines).

This is also a great opportunity to involve department heads or team leads. By bringing them in early on, they can help map out dependencies and mission impact.

2. Communicate Early, Clearly, and Often

Transparency builds trust—even when delivering difficult news. Be upfront with staff about:

• The “why” behind the restructuring

• The timeline and process

• How decisions will be made

• What support will be offered to affected employees

Avoid sugarcoating things. Even if you’re delivering some hard-to-hear news, your employees will appreciate honest and empathetic communication over vagueness or delay.

3. Develop a Restructuring Plan

This should include:

• A revised organizational chart

• Clear rationale for position changes, consolidations, or eliminations

• Updated role descriptions for any impacted roles

• A timeline for transitions, including offboarding and onboarding milestones

As a bonus, your organization can use this as an opportunity to embed equity and inclusion into the org structure by rethinking access to leadership, representation, and decision-making power.

4. Support Affected Employees

If employees’ roles are changed or eliminated, you shouldn’t share the news and walk away. Consider providing support to affected employees by:

• Providing outplacement services or career counseling

• Extending health benefits for a defined period

• Offering letters of recommendation or assistance in networking

• Keeping doors open for rehire when funding allows

5. Stabilize and Rebuild Team Culture

It isn’t uncommon for retained employees to experience “survivor’s guilt” or anxiety post-restructuring. Rebuild your team’s morale by actions such as:

• Acknowledging emotional impact in all-staff forums

• Reaffirming commitment to mission and values

• Clarifying new team goals and roles

• Hosting activities that focus on team connection, such as retreats or special team days

6. Document Everything

For legal and compliance purposes, it’s important to keep a clear record when restructuring your organization. Be sure to document:

• The reasons for organizational changes

• Steps taken to evaluate options and communicate them

• Documentation related to layoffs, severance, and benefits

It is also important to revise internal handbooks and HR policies to reflect new structures and processes.

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While restructuring feels disruptive and unsettling, it can bring with it some opportunities. When handled thoughtfully, restructuring can make your organization more agile and mission-aligned, free up resources, clarify reporting lines and decision-making authority, and spark innovation through new collaborations and leaner systems.

HR plays a crucial role as both strategist and emotional anchor during nonprofit restructuring. Your HR department’s ability to lead with clarity, empathy, and fairness can ease transitions and lay the groundwork for a stronger, more resilient organization.

If your organization is in need of support during a time of restructuring, Cause Capacity can help. Reach out today to learn more about our services.