
Reading the Sunday NY Times and came across an article addressing the recalibration that charities with ties to Israel are undergoing. Some of this comes in reaction to the fraud perpetuate by Madoff, some by the deep reliance on American donors who are are changing their giving habit based on the economic recession. Clearly this issue has played out on a public stage but I believe the nonprofit sector is going to see 10 changes in reaction to the current environment:
1. Mergers: Those who no longer can perpetuate their mission are looking for strategic partners (and sometimes organizations that have the best balance sheets). The most requested books and articles in my consulting library are about mergers.
2. Bankruptcy: Who ever thought there would be a rash of bankruptcy filings by nonprofit organizations. Clearly financial reorganization has become a necessary option in some cases. What does filing bankruptcy say to your clients, funders, volunteers, staff, and community? People are too concerned to buy American automobiles because they don’t want to loose their warranty. Would you donate and advocate as actively for a nonprofit organization undergoing bankruptcy?
3. Going Out of Business: Complete termination of services. It use to be whispered about- now it is real and it is taking place more frequently than we realize. What holes is this leaving in the nonprofit sector?
4. Finance Committees: This responsibility was occasionally left to a small group with financial acumen and some boards simply rubber stamped the Financial Committee’s recommendations. I hear stories obout the board asking more questions, requesting additional training and financial reports that they can read and understand.
5. Conservative Budgets: Anyone approving a budget with wild revenue projections this year? Anyone spent a board meeting recalibrating this year’s budget to be in-line with reduced revenue expectations? Enough said.
6. Gala Fundraisiers: Special Events became the poster child for nonprofit fundraising in the past ten years. Auctions were everywhere. The ridiculously boring to the over-the-top versions. They were not unique in most cases, cost a lot of money and a ton of time to produce. Many auction established a transactional method of giving for donors. I give and I get. I believe a new strategy will take the place of special events. Many auctions are off 30-40% this year. Interestingly, the one part of the auction that is meeting budget: Fund-a-Needs (raise your paddle to support a program or purchase an item for the organization). Donors want their money to go towards the organization’s mission.
7. Reliance on Volunteers: The untold secret for many large nonprofit organizations was that the the Baby Boomers were retiring and going to swell the volunteer ranks. Guess what, many of these ‘volunteers’ have had to add years to their careers or are not looking for volunteer opportunities. This was a strategic initiative for may organizations and now they scrambling to adjust. What assumptions has your organization made?
8. Barter and In-Kind Gifts: More groups are seeking unique was to share resources, trade services, or offer creative arrangements. These collaborative efforts often avoid organizations paying cash for services when a trade can be worked out. I recently saw three local theater companies hold joint auditions for their community. One day, many roles, one locations. Seems like a good use of time.
9. Going Against Trends: It is trendy (and for may of us a necessity) to be thrifty right now. Very few donors are not going to attend an auction and spend money just to show-off. Individuals working for companies where layoffs are taking place are not about to be seen spending lots of money in public. You cannot beat the trend or public consciousness. Best to understand it and respect the public pulse.
10: Donor Demands: I have already seen organizations turn down donations with too many strings attached. The mantra for many organizations has become ‘annual operating support.’ Even the largest endowments are seen as vulnerable in these times. A dollar given today is much closer to par. If your organization raises $100,000 in annual support it would need $2 million in an endowment which would have been $3.4 million before the average portfolio dip of 30% endowment value. Unrestricted annual operating dollars are king.
Just ten basic changes that I think will germinate from this period. What changes are you making?