Recession creating ‘new normal’ for giving

By Todd Cohen

The economic crisis is spurring new thinking in the giving sector, with givers and giving organizations looking for innovative ways to increase the impact of their giving.

That is the view at The Philanthropic Initiative, a 20-year-old nonprofit consulting firm based in Boston that has provided strategic philanthropic advice to 200 to 300 individuals and organizations, and facilitated over $1 billion in giving.

With 30 percent of philanthropic wealth “sucked out of the system” because of the recession and failure of the capital markets, individual givers, foundations and corporations are taking a hard look at the way they give and the causes they support, says Ellen Remmer, an 17-year TPI veteran who was named its president a year-and-a-half ago.

The recession has triggered self-scrutiny in the giving sector about the nature of philanthropic leadership and the role of strategic collaboration and partnerships, she says, and has created greater willingness to move beyond financial contributions.

“That imperative is incredible now with fewer resources,” Remmer says.

Jim Coutre, vice president at TPI, says corporations, in particular, are looking for ways to “embed” giving into their organizational culture, increase the involvement of their employees in their communities, and step up their giving in other countries in which they do business.

Remmer says the recession also has prompted givers and giving organizations to pay more attention to the operating needs of nonprofits.

“They’re being forced to look very deeply into how nonprofits are achieving the mission or not,” she says.

Foundation trustees, for example, traditionally “haven’t been that smart about understanding balance sheets and the finances of nonprofits,” she says.

But now, she says, “they really need to understand that,” as well as nonprofits’ need for working capital, and to be “thinking practically about how to sustain the mission.”

The recession, which is creating a “new normal” for the giving sector, represents a rare opportunity for nonprofits to develop new ways to work together “to accomplish the mission, as opposed to institutional survival or preservation,” Remmer says.
Nonprofits are “starting to suspend their egos,” she says. “And the donors are listening.”

Donors are being “more flexible and more willing to give operating support,” she says. “They’re really trying to understand nonprofits better, and become more attuned to the challenges for nonprofits. The best of the best funders are giving more for strategic planning and to do reflection and encourage those kinds of collaboration.”

And with government evolving to cope with the economic crisis, she says, givers and giving organizations are talking more with government about how to work together, and government is more open because of the decline in its resources.

“We’re poised for some interesting changes in the field,” Remmer says.

Recession offers lessons for giving sector

By Todd Cohen

The giving sector quickly needs to become a learning sector.

An urgent task for nonprofits and giving organizations is to understand the connection between their recession damage and the way they do business.

By recognizing and addressing internal flaws that put them at risk, charities can better equip themselves to carry out their missions.

So charities must be brutally honest about their operations and the changes they need to make to fix their finances.

And the financial pain in the charitable marketplace has been serious.

According to recent reports:

* Overall giving in the U.S. is down.

* The value of foundation assets has plunged.

* Financial reserves at nonprofits in the District of Columbia are inadequate.

* Most foundations burned by Bernard Madoff had boards that were too small and probably too homogenous.

* Most nonprofits say they are under serious financial stress.

* Nonprofits are taking tougher steps like layoffs and programs cuts to cope with the recession.

No one can predict the ups and downs of the economy, but nonprofits and giving organizations owe it to their donors and constituents to be prepared.

No magic formula exists for survival. So instead of desperately accepting philanthropically-correct trends and feel-good gimmicks, often peddled by consultants and trade groups that are in the business of promoting themselves and often are dependent on big foundations' support, nonprofits and giving organizations should tap the knowledge and common sense of their own boards, staff, supporters and constituents.

What truly matters is an organization’s mission, not what a hired hand or big funder preaches.

And advancing the mission requires smart, committed staff, board members and volunteers who can and will work together; listen to and communicate clearly and honestly with one another and their funders, clients and partners; keep their operations and goals clear, simple, realistic and focused; take calculated risks when they make sense; and learn from their mistakes.

Nonprofits and giving organizations are in business to address the symptoms and causes of social and global problems.

Those problems often are complex and interconnected, and typically get fixed slowly through a step-by-step process, often with missteps, that requires commitment, vision and a willingness to listen and adapt.

By learning from the mistakes that made them more vulnerable to the current economic crisis, nonprofits and giving organizations can equip themselves to be more effective in running their operations and programs, and fulfilling their mission of making our communities better places to live and work.

Time for nonprofits to declare independence

By Todd Cohen

Nonprofits are society’s unsung heroes.

Sadly, however, many see themselves as victims and supplicants, or at least act as if they are.

Nonprofits are heroic because they address the symptoms and causes of urgent social and global problems that government and business cannot or will not take on.

Nonprofits work hard for little pay, continually are expected to do more with less, and face growing scrutiny and expectations from funders.

And in the current economic recession, with rising demand for services, nonprofits face growing pressure to reduce costs and increase their fundraising and impact.

With those kinds of seemingly intolerable working conditions and stress, people who work at nonprofits often feel alone, under siege and burned out.

They stick with it, however, because they care, and because they find fulfilling the job of making a difference and working with people in need and with other people who care.

Yet, needing revenue to meet their payroll and pay their rent, and fearing they lack the know-how to map a business strategy to sustain their organizations, they are too quick to swallow funders’ demands and consultants’ advice without critically questioning it.

Nonprofits are not victims and should not underestimate the knowledge of their staff and board, the value of their programs and services, the extent of their impact in the communities they serve, or their potential to generate even more contributed and earned income.

Rather than falling prey to the herd hysteria the recession has unleashed in the giving sector, nonprofits should treat the economic crisis as an opportunity to get back to basics and recognize the value and impact of the work they do and the untapped potential they possess to do more and do it better.

That means scrutinizing their mission, board, staff, operations and programs with brutal honesty.

It means using common sense to look for ways to improve their efficiency, impact, fundraising and communications.

And it means finding smart supporters and partners who care about their cause and understand that getting involved by making a donation, volunteering, serving on a board, collaborating or even merging requires recognizing the organization’s true needs and potential.

Nonprofits play an indispensable role in America, serving both as the safety net for the most vulnerable among us, and as the research-and-development arm to find ways to fix our biggest social and global problems.

America’s economic crisis has underscored nonprofits’ role and value, and compounded the challenges they face.

To fulfill their role, expand their value and meet those challenges, nonprofits must stop acting like victims and start thinking and working as independent and entrepreneurial agents for social change.

Doing the right thing is job one for nonprofits

By Todd Cohen

Nonprofits need to raise their sights, move beyond their panic-driven goal of simply surviving for one more day, and start leading America out of its economic crisis.

Because that crisis is rooted in a widespread breakdown in ethics across the government, for-profit and giving sectors, nonprofits need to lead by example in doing the right thing.

That is the view of Tim Delaney, the president and CEO of the National Council of Nonprofits, who says nonprofits can best serve their mission and communities by “focusing on their core missions and then acting with purposeful attention to ethical leadership.”

The first step, he says, is for nonprofits to “see the broader context in which they operate” and then set high ethical standards and build them into their thinking, planning and operations.

Speaking last week to a lunch ‘n’ learn workshop in Charlotte, N.C., sponsored by the Philanthropy Journal, Delaney said a widespread “moral meltdown” led to America’s current “economic meltdown.”

To show the context in which massive ethical failures have eroded public trust, he cited dozens of recent headlines about scandals in all sectors, often involving groups “previously seen as pillars of community values.”

To help America rebuild its economy, Delaney says, nonprofits need to lead the way in “rebuilding the public’s trust that has been breached.”

Rebuilding public trust, he says, starts with organizations intentionally gearing themselves to make sure they always do the right thing.

Delaney suggests 12 steps for creating a responsible ethics program.

Those steps range from recognizing the need to set ethical expectations, naming an ethics officer and assessing the current state of the organization’s ethics to involving all stakeholders in developing an ethics policy, continually monitoring compliance and tweaking the policy, and making sure the organization’s leaders serve as ethical role models.

In the worst economic crisis since the Great Depression, nonprofits face rising operating costs, growing demand for services, and the fear that individual donors, foundations and corporations will cut back their giving.

Instead of panicking and worrying only about the survival of their own institution, nonprofits can best serve their missions and communities by setting high ethical standards and organizational aspirations, Delaney says.

By doing the right thing and truly practicing what they preach, nonprofits can help lead America out of its moral and economic mess and move on to the job of addressing the symptoms and causes of our most urgent social and global problems.

Resourcefulness can boost nonprofit advocacy

By Todd Cohen

Speaking up for a cause is critical, yet the giving sector often lags in pursuing advocacy work.

Many nonprofits may be reluctant to play an advocacy role because they believe they lack the resources or know-how, or because they fear they might put their foundation, corporate or public funding at risk.

But advocacy work can make a big difference in shaping the public policies that affect nonprofits and their clients

Recent research in New Mexico and North Carolina by the National Committee for Responsive shows investment in nonprofit advocacy and community organizing in those states yields a big return in benefits for underrepresented constituencies.

And as two new reports make clear, nonprofits that are resourceful about fundraising and use of the Internet can better support their advocacy work.

Untapped, a new report by The Linchpin Campaign, offers a practical guide for community organizers to cultivate and strengthen their relationships with major donors.

“Community organizing attracts financial support from major donors, pointing to a viable and important opportunity for those raising money for organizing,” says the report by Linchpin, a project of the Center for Community Change.

Ninety-four percent of over 100 private donors Linchpin surveyed give to community organizing, with 42 percent of those donors focusing less than one-fourth of their giving on organizing, suggesting the potential for even greater giving for that work.

A second report, published in Administration & Society, says nonprofits are becoming more active through their web sites in promoting causes and civic engagement.

While regulations limit nonprofit advocacy, many nonprofits are finding innovative yet legal ways to serve as advocates, says the study, Nonprofit Advocacy and Civic Engagement on the Internet, by David Suarez, an assistant professor of policy, planning and development at the University of Southern California.

Already faced with more than enough challenges in delivering services and operating their shops, many nonprofits may look at advocacy work as beyond their mission or their means.

But advocacy work can address the policies at the root of the problems nonprofits exist to address.

By tying their fundraising to their role as advocates, and using the web to push their cause and engage their supporters, nonprofits can be more effective in serving their clients and advancing their mission.

Foundations should step up in downturn

By Todd Cohen

The recession is putting a world of hurt on nonprofits, and foundations can be doing a lot more to help ease that pain.

Responding to big losses in the value of their endowments, foundations have looked for ways to reduce their spending.

That has ranged from cutting staff and freezing pay to trimming benefits and curbing training and travel.

But foundations also have been slashing the funds they pay out in grants, and that is deeply troubling.

Private foundations are required each year to pay out only five percent of their assets, and can count overhead as part of that payout.

According to a recent report by The Foundation Center, the combined U.S. foundations’ endowment fell nearly as much last year as the total grants those foundations paid out over the past four years.

Hoarding, in short, cost the charitable world four years’ worth of grant dollars that now is lost forever.

Economic crisis is a time when foundations should be giving more and giving smarter. For example:

* Grantmakers for Effective Organizations, in a new report, calls on grantmakers to hold their grants budget steady, engage their stakeholders to get a better idea of their needs, and provide flexible funding for operations and free of restrictions.

* Hodding Carter III, former president of the John S. and James L. Knight Foundation, in a guest column in The News & Observer in Raleigh, N.C., calls on foundations to provide more unrestricted support, longer-term funding and multi-year grants “so nonprofits have the flexibility they need to respond to changing conditions.”

* John Hunting, founder of the Beldon Fund, commenting on its successful completion of plans to spend its entire corpus of $120 million that was dedicated to supporting environmental policy work, says that, given the state of the environment, “I felt it would be inexcusable not to spend out now.”

Despite the loss in the value of their endowments, foundations should be digging deeper and acting more strategically during critical times to help nonprofits address urgent social and global problems.

Cutting back on giving when it is needed most betrays the purpose for which foundations were created in the first place.

Fundraisers should get more respect

By Todd Cohen

Fundraising professionals play instrumental roles at nonprofit organizations but get less pay and support than they need and deserve.

Two new studies suggest nonprofits may not be investing enough in their fundraising staff, particularly in women.

A new Compensation and Benefits Study by the Association of Fundraising Professionals says salaries for charitable fundraisers fell 2 percent in the U.S. and 3.9 percent in Canada.

Paulette Maehara, the group’s president and CEO, attributes the declines to the recession.

But a recession, when raising money can be a lot harder, nonprofits should be careful not to reduce spending for the part of their business they depend on to generate financial support.

And the recession does not account for a persistent gender gap, with men consistently paid roughly $20,000 more than women with comparable jobs in the nine years the survey has been conducted.

Women, who account for the majority of fundraising professionals, represent 70 percent to 75 percent of members in the Association of Fundraising Professionals, and of members who have responded to the organization’s annual salary surveys.

The study also says four in 10 fundraisers responding to the survey looked for jobs with new employers within the last year.

The reasons, the fundraisers say, include wanting higher pay, or frustration with their work environment, or the desire for more interesting or challenging work or for opportunities to advance their careers elsewhere.

Underscoring the key role fundraisers play at nonprofits is a second study, by the Association for Healthcare Philanthropy, which says high-performing philanthropic fundraisers heading up major-gift and planned-giving programs often were their organization’s most-effective “rainmakers” in fiscal 2007.

And with major gifts averaging $55,000 from individual givers, the highest-performing fundraising organizations invested three times more, on average, than other groups surveyed, and earned five times more in high-dollar gifts.

As the U.S. moved into a recession in December 2007, and fewer dollars coming from government, business and foundations, the study says, the cost of raising a dollar was rising while the return on investment was declining for annual giving and special events.

Still, the study says, the highest returns from annual gifts and special events were generated by fundraisers who invested the most in staff and resources devoted to those fundraising programs.

Annual giving and special events, while not producing the highest return on investment, “remain worthwhile sources of contributions from new and repeat donors,” and “provide the base in order to succeed with major-gift and planned-giving solicitation,” William McGinley, the group’s president and CEO, says in a statements.

Successful fundraising requires adequate investment in fundraising, but professional fundraisers, particularly women, are not getting what they want from their organizations.

And as a Bank of America-sponsored study conducted by the Center on Philanthropy at Indiana University found last year, wealth donors are relying a lot more on legal and financial professionals to help them make decisions on their charitable giving than they did two years ago, and a lot less on nonprofit staff.

The way a charity’s fundraising staff treats donors is more important than any other factor in determining whether givers give to a particular charity, according to Adrian Sargeant, Robert F. Hartsook Professor of Fundraising at the Center on Philanthropy.

So if they expect to be more successful in their fundraising, nonprofits will need to increase their investment in fundraising, particularly in paying and supporting the work of their fundraisers and closing the pay gap between men and women.