ACTIVartIST

It has never been easy to keep a not for profit organization afloat, but it is about to get even harder. As all indications have shown, the full impact of the financial crisis sweeping the globe has yet to unfold, and the bailout bill is all but a silver bullet. I would guess that in the coming 18-24 months we might even see an attrition of up to one third of the non-profit sector.

Especially as the giving season nears and organizations close out their fiscal year, 2009 is appearing bleak and more challenging than 2008. With sponsorship from the corporate sector rapidly drying up, the crunch will be severe enough to result first in the cancellation of many conferences, fundraising galas and symposia, followed by the scaling back of programs, staff and service delivery.

However, emerging trends in philanthropy provide keys to surviving the financial turbulence engulfing the world today. It will be those organizations that capitalize on them and leverage efforts to attract greater awareness and support that will not only survive the crunch, but also thrive into the future.

Wallets tightening: year-end giving suffers
Typically, the end of the year marks the season when donor outreach is expected to yield the greatest return for non-profits. Giving campaigns, donation drives, fundraising events and more, all aim to reach donors who wish to satisfy their giving quota or tax write-offs for the fiscal year.

An increased generosity also tends to be present around the holidays. However, the belt-tightening in response to the crisis, coupled with the growing commercialization of the holidays, is bound to result in a much dryer-than-usual giving season this year. Much like the corporate sector, social profit organizations count on funds raised at the end of the year to show strong books and better cash flow to start the next fiscal year.

People will not stop giving; philanthropy is a strong part of our cultural fabric at this point. But, naturally, it is bound to contract, along with the free spirit that fueled the bubble we all just felt burst. Like everyone else, donors want to know they are contributing to something worthwhile, and so their donations will seek out the greatest value and impact.

Corporate sponsorship dries up
Over the past 10 years, and not coincidentally timed with the massive growth in an industry that is quickly letting out a lot of hot air now, corporate giving has provided a substantial boost to organizing efforts in the non-profit sector. Banks, trading houses and other financial service companies have laid out millions in sponsorship, although that is quickly coming to an end.

Many non-profits have come to rely on such support because financial support at that level cannot be found in many other places. Typically this sponsorship has served to underwrite a particular set of initiatives, commonly events of every conceivable size, and it is therefore imaginable that the scale and number of them happening in the next calendar year will drop correspondingly.

The growth of Corporate Social Responsibility has also led to a substantial increase in giving from the corporate sector. But, as the credit crunch slows growth, companies are cutting costs—obvious by the serious layoffs dominating the news on a weekly basis—and one of the first things to go is their giving.

Foundations review their grant-making strategies
Foundations will not stop giving out grants while the country—and indeed, the world—go through this period of financial uncertainty. After all, it is their business to give, and their raison d’être. As with previous market crashes, however, foundations too will suffer.

With the massive dip in the financial market, where most foundations keep at least a fair portion of their investments, many will see a substantial drop in their principal and, consequently, a drop in their giving. Much as a company whose sales are falling, foundations will ask where costs can be reduced while increasing the impact of their donations. In other words, how can they get the biggest bang for their fewer bucks?

Inseparable from this truth will come the revision in their grant-making strategies—a move that will surely place added emphasis on leverage. Directors will be asking their program managers and associates how their portfolios can maximize results, and the boards will surely be emphasizing the same. The greatest potential to leverage their funds will be in getting organizations to work together more effectively towards shared goals, harnessing their collective potential rather than continue to pursue individual and separate approaches.

Along with revisions in the grant-making strategies, we can also expect foundations to continue the trend of increasing their focus on accountability and outcome measurement, demanding that funded projects have specific and tangible results to show. This places an unfortunate constraint on pioneering models and entrepreneurial approaches, as these often do not have the necessary track record and methodologies to measure impact.

All is not lost, though.

Emerging trends in philanthropy provide hope
Perhaps one of the greatest secrets in the world of philanthropy is where the money comes from. I recall being amazed at the breakdown when I learned it early on in my career. I would have guessed that foundations provided the greatest financial support through their grant-giving system, followed by corporate sponsorship and government grants, with individual donations representing a substantial, though not encompassing part of the entire giving pie.

The reality is quite the opposite and very eye-opening: an overwhelming majority of philanthropic giving comes from individuals (83%), as confirmed again by recent data. Corporate giving represents less than 5% of philanthropic giving. Foundations make up most of the difference, and government grants represent only a small fraction.

Individual giving is broken down in several categories: meeting critical needs (i.e addressing timely issues, such as natural or man-made catastrophes, or political campaigns), on-going support of institutions with which the donor is philosophically or emotionally aligned (i.e. educational, religious, health or social organizations), and bequests, which amount to billions of dollars on their own.

Other trends have been the growing public participation in philanthropy—lowering the threshold, if you will—and also the myriad of networks designed to encourage and support giving (or connect donors in various capacities and spheres). The size and volume of the contributions, especially, is where the real story lies.

Surviving the crunch
In recent years, great milestones have been set and record levels of fundraising success have been reached by groups such as MoveOn, or politicians—notable among them Howard Dean, Ron Paul and, of course, Barack Obama. Their campaigns have, in a large part, been funded by thousands – even hundreds of thousands or millions – of donations in small amounts (typically under $200), which add up to hundreds of millions of dollars.

These numbers serve only to reaffirm the fact that individuals comprise the greatest portion of philanthropic giving; they always have and, most likely, always will. Having a broad base of individual donors who give regularly, whether through member dues, monthly or annual gifts, donor drives or fundraising events, still represents the greatest likelihood for achieving financial sustainability.

Organizations that survive the crunch will do so, in a large part because they have a sizable number of people who, in their belief and support of the work being done, make a small donation on a recurring basis. An important benefit to increasing an organization’s individual donors base is freeing the group up to focus on their core work and mission, without having to adapt their work and programming to meet funder interests, guidelines or restrictions.

Getting through these times means not only tightening up operations and expenses, but also elevating impact by partnering with other groups. Admittedly, this level of cooperation—long since needed in the sector—can be one of the strongest upsides of the challenges facing the industry today. Organizations will be forced to explore ways to leverage their assets and strengths to make it through this period, and that is a good thing.

Among the ways in which organizations can easily minimize their operating expenses are sharing office space and administrative resources, like technology and equipment. To truly maximize the cost-savings, organizations can also share services and personnel, such as accounting, design and web departments.

A strong likelihood is that, much like in other sectors, we will begin to see some consolidation as means to survival, with non-profits examining their positions and even exploring potential mergers as the crunch worsens.

Ultimately those who are able to capture the public’s attention and interest, inspiring hope and having the results to show, will be those most likely to tap the resources that will no doubt continue to flow, albeit in a smaller stream and more focused fashion. But the true key to getting through this period will be collaboration; those able to partner up, leverage strengths and maximize impact will be most likely to stick around.

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Benjamin Quinto is founder and former executive director of the Global Youth Action Network and has a twelve-year history in the not-for-profit sector. His work with six organizations in a management capacity or as a consultant has helped to reach and engage millions of young people globally, combining effective use of media and emerging technologies, multi-sector partnerships and alliance-building. He is currently working with select clients as a strategist and continues to support greater collaboration in the sector.

Tags: activism, bailout, financial crisis, non-profit, not for profit

This entry was posted on Friday, November 21st, 2008 at 11:54 am and is filed under Op-Ed. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.