This week, I was all set to write my blog post. But then, an article at The Chronicle of Philanthropy website caught my attention: “How a Double-Dip Recession Could Affect Giving” by Lisa Chiu. It was a fine article, but it was nevertheless the last straw. I’ve seen way too many articles, blog posts, and Tweets exploring the “What’s going to happen?” question. I have to respond. And, I have to share some meaningful suggestions.
There’s really no mystery. It’s quite simple. I’ll tell you what will happen if there’s a double-dip recession or, for that matter, if the economy improves. Overall philanthropy will follow the growth trend of the Gross Domestic Product. Philanthropy has long correlated to GDP. It averages about two percent of GDP. So, if GDP goes down, giving will go down. If GDP grows modestly, philanthropy will grow modestly. If a miracle happens sometime soon and GDP growth leaps upward, so will giving. We don’t need more studies. We don’t need to guess. We already know what will happen.
While philanthropic performance is easily predicted, what is more difficult to determine is how individual nonprofit organizations will do in a bad economy. Since we are nearly powerless to alter the course of the economy, we need to focus our efforts on controlling the thing we can, well, control rather than behaving like a deer caught in the headlights. While I cannot provide a plan that will guarantee success, allow me to share three things that can guarantee that your nonprofit organization will crash and burn during a poor economy:
Stop Asking. It may seem obvious that you should never stop asking, but some nonprofit organizations really do think that the current economic conditions are not good for going out and soliciting money. So, they have scaled back their fundraising efforts. The Vancouver Symphony Orchestra (in Washington state), left their Director of Development position open for a year. They ended up on the verge of bankruptcy. If you ask for contributions, you may not get them. But, if you don’t ask, you certainly won’t get them. Ok, maybe you’ll get a few, but you won’t raise nearly as much money as if you get out and ask.
Do Not Have a Compelling Case for Support. If you’re going to ask people for money, particularly folks who might be struggling themselves, you better have a superb case for support. Just showing up and saying, “Hi, I’m here. Give me money,” might work in good times, though it’s still not a particularly effective idea. But, in these tough economic times, you’ll need to do better. So, get back to basics. Examine your case for support and make it stronger. If you don’t have one, create one. Tell prospective donors how you have wisely used previous contributions and what you intend to do with new dollars. Identify a problem and show prospective donors how they are part of the solution.
Ignore Current Supporters. To save money, some organizations are cutting their stewardship budgets. This is a great way to alienate and lose supporters at a time when you can least afford to do so. During the recession of the 1980s, I had a museum client with a senior executive who wanted to eliminate the member magazine to cut costs. Before doing that, the wise membership director and I put together a member survey to determine whether the membership valued the magazine or not and what, if anything, they valued in particular. We found that the magazine was an important member benefit, even among those who couldn’t remember any of the articles from the most recent issue. The most valued feature of the magazine was the listing of upcoming events. As a result of the survey, the membership department redesigned the magazine with a special pull-out calendar rather than a simple event listing. A follow-up survey found that members valued the publication even more. The membership retention rate even went up! And, yes, the great powers allowed the magazine to continue. In a bad economy, it is time to take especially good care of supporters. It is not the time to alienate them.
So, don’t say “no” on behalf of your donors and prospective donors. Get out there and ask for the support you need. Make sure you have a compelling case that inspires support. And, when people do support, make sure to properly steward them. This will help you weather the current economic storm and will well position your development effort during the economic recovery. Taking these three measures will help you avoid crashing and burning.
Let me give one example of a small organization that’s doing things right. I serve on the board of the Philadelphia Children’s Alliance, an organization that brings justice and healing to the victims of child sex abuse which affects one in four girls and one in six boys nationally. PCA made a commitment to expand its services so that it could help every child in need in Philadelphia. When the recession hit, the board discussed putting this ambitious plan on hold, but ultimately decided to march forward. With a detailed strategic plan in place, with a meaningful case for support, and with additional professional development staff, PCA has indeed marched onward and upward.
As the recession began in December 2007, PCA was in the middle of its best fundraising year ever. In 2008-09, PCA took a big philanthropic hit of 14 percent due exclusively to a drop in foundation support during the depths of the recession. However, the organization remained determined and began to further diversify its sources of support. In 2009-10, PCA saw an increase in philanthropic support of 8.5 percent compared with 2008-09, and an increase of 16 percent compared with the pre-recession fiscal year of 2006-07. In 2010-11, we raised about 13 percent more than last fiscal year which is 31 percent more than 2006-07!
I’m greatly encouraged by all that we are accomplishing at PCA. We did not retreat. We did not sit around and whine. And, we most certainly did not generate support through “automatic” relationships. Instead, the board made a commitment to the children of Philadelphia. Then, staff and volunteers went to work to do the heavy lifting necessary to produce results. We strengthened our case for support, expanded and diversified our fundraising efforts, and enhanced our stewardship.
Does PCA still need to raise more to meet its service goals: yes! Do we need to further diversify our funding streams so we are less dependent on government sources: yes! But, we’re well on our way despite the terrible economy.
This economy is tough on most of us. It is particularly hard on organizations that are simply making excuses rather than doing their jobs. Today, there are 48 percent more 501(c)3 organizations than there were in 2001. Competition for philanthropic dollars has become fiercer. The Great Recession has further increased the fundraising challenge. To be successful in this environment, nonprofit organizations must master the fundamentals and exercise creativity. The organizations that do those smart things rather than stare mindlessly into a crystal ball, or do the stupid things, will manage the best. I’m very proud to be on the board of one organization that gets it.
Of course, if you prefer to guarantee failure, just stop asking, don’t have a compelling case for support, and scale-back your stewardship efforts.
That’s what Michael Rosen Says… What do you say?