This blog post was originally published by Giving Tree Associates.
There are some questions everyone is thinking but no one is asking. We are known for helping our clients work through some of the toughest challenges – even the things that are hard to address. That’s why we’re excited to kick off our new series called Ask Evolve where we aim to tackle the topics that are extra daunting in the nonprofit world.
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I was recently with a client reviewing their year-end revenue projections and talking about the year to come. They’ve had a relatively strong period of growth with their fundraising but are seeing a few signs that it may be slowing. We were trying to get to the root of the slowdown, discussing things like staff turnover, board involvement in fundraising, donor stewardship and the like. When I asked if the board had started any conversations about planning for an economic slowdown, the room became silent…and the answer was a resounding “NO”.
As someone who was in a senior fundraising leadership role when the Great Recession hit in 2008, this response made me cringe, especially since I read this article in the Chronicle of Philanthropy a few months ago. By nature, I’m not one to hit the panic button easily, but I also believe that preparation requires discussion and planning. And, it’s clear that most of the nonprofits I interact with are doing neither of these things right now.
Yes, it’s complicated because there is clear disagreement from economic experts about what is on the horizon. No one can predict exactly when a recession will occur. However, there are signs that we should not ignore including increasing trade tensions and deficit, decreasing domestic business investments, and weakening global growth.
Also, while the overarching U.S. economy recovered since 2008, that doesn’t mean that every household did. According to Anand Giridharadas, author of Winners Take All: The Elite Charade of Changing the World, citing 2016 data from the Federal Reserve, the average American household is still 30% poorer than it was in 2007. However, according to The Washington Center for Equitable Growth, the average income of the top one percent of American families soared from $999,000 to $1.36 million between 2009 and 2015, while the incomes of the remaining 99 percent crept up from $45,300 to $48,800. When it comes to philanthropy, while the total dollars being given to charity have recovered, the total number of donors has decreased significantly, which is covered in more detail in this thoughtful article from Forbes.
How does a nonprofit leader like you make sense of all of this information?
First, take a look at some of the past research and articles about the Great Recession and its impact on philanthropy so you can make informed decisions. One of the best articles I read in 2009 about recession fundraising was in the Stanford Social Innovation Record and I shared it with my whole team and our board of directors at the time. I pulled it out of my files and re-read it last week and all of the advice in it is still applicable today.
Second, have a conversation with your fellow board and/or professional staff members about this topic. The goal of this conversation is not to incite panic, but to have a measured dialogue about how you can prepare for a future downturn and what core decisions you may face in the wake of economic challenges.
To help guide your conversation, I suggest using these questions as a starting point:
- How much cash reserve do we have right now and is that amount enough to sustain us through a period of lower revenues?
- What programs, services, or operational costs would we scale back if needed?
- Are we too reliant on a few sources of revenue and what can we do to diversify?
- What can we do now to better care for and communicate with our organization’s top supporters?
- How can we expand our fundraising reach without adding to our budget? How can the board or close volunteers participate in cultivating relationships and securing new gifts?
Finally, have conversations with peers at other nonprofits, especially those who were in leadership roles during the Great Recession. Ask them what they learned and what they would do differently in the future. Find out what mistakes they made. Trial by fire was how many of us got through that time and it has shaped what we will do in the future. Let’s share honestly about our experiences so we can do better next time.If you have any advice you’d like to share with me about what you learned or would like to talk more about how you can start this dialogue at your organization, please email me at firstname.lastname@example.org.