Nonprofit University Blog

If ever there were a time to be reminded that all nonprofits are not alike, now is it.  Independence Blue Cross is not the same as a health clinic in a poor neighborhood.  A university is not the same as the local literacy or GED program.  Nor is the Museum of Modern Art the same as a community arts organization.

Yes, they are all nonprofits.  But there the similarities stop.  The infrastructures are vastly different.  The resources—from dollars to humans to energy—are vastly different.  The boards may look and act very differently, be equipped with very different knowledge and skill sets.  And the ability to survive during tough economic times is vastly different.

And given that we are in those tough economic times it is important to remember that not all nonprofits are created the same.  In my personal e-mail in-box this evening was a letter from the president of the university my son attends.   It was a letter explaining how the university had positioned and was still positioning itself “to weather the current economic conditions.”  There was no worry or angst expressed in this letter.  Rather, there was a careful reporting of the measures taken to date and being taken now.  He talked about conservative budgetary practices followed in the past, about a prudent approach to managing the endowment and how the Investment Committee of the Board of Trustees, along with the financial management team of the university, was monitoring the market.   Had I been worried before—which I had not—about the future of my son’s education, this letter would have quelled any fears.  If nothing else, I knew the paid and volunteer leadership were awake at the helm, paying attention and in charge.

But then again, these “current economic conditions” don’t worry me for all nonprofits because I know all nonprofits are not alike.  These times worry me for those nonprofits that don’t understand budgetary practices, let alone conservative ones.  Those organizations who operate, year after year, without a budget at all, or with no clue of their overall financial health and wellbeing, or with no understanding of how they are doing this year compared to last .  These times worry me for the nonprofits lucky enough to have surplus dollars, regardless of whether it is a rainy day or emergency fund, an operating reserve, an endowment fund, invested in something—a CD, stocks, bonds, real estate—but operate without written investment policies spelling out where to invest, risk willing to be assumed, when to hold, when to sell, etc.  These times worry me for the nonprofits who don’t have a board exercising its oversight responsibility and being that strong, auxiliary brain trust that is especially needed in these difficult times.  And these times worry me for the nonprofit boards too afraid to fire their executive director knowing s/he would retire in a year but now cannot because the market took what little had been set aside for retirement and made it invisible.  And this is just the beginning of why I worry for the nonprofits—regardless of their size, as size has nothing to do with it—who are unsophisticated in how to run their businesses. 

Before this economic downturn hits bottom, before we begin our recovery, and well before the next downturn happens—which it will, as it always does—every nonprofit which wishes to see its future must take immediate control of its business.  The board and staff must work together to implement best business practices first and foremost, and then, and only then, identify a strategy for weather the immediate weather conditions.

One of the most important lessons of economic downturns gets lost in the panic of the moment, allowing too many to miss the lesson.  I don’t want that happening.  The lesson is quite simple:  prepare now for a healthy financial future.  If we are always preparing for the future, the present will be taken care of as well.  Instead, far too many organizations, and individuals, take care of the present, never thinking about the future. 

While many things go through my mind in thinking about the future of the sector and what needs to be done to protect it, one of my chief concerns is the future of philanthropy.  In particular, what are we doing to teach our children to be philanthropists?  Concerned parents work continually to prepare their children for the future—their future education, livelihood, health, relationships, happiness, etc.  But do parents work equally hard at preparing their children to be future philanthropists?   

In our American culture where immediate gratification is ranked so highly and want is viewed as synonymous with need, what are we—parents, schools, society—doing to instill in children and youth the importance of taking care of others, of giving back or, to dredge up an oft-used phrase, of wanting to be part of the solution?    As the crowds at the food cupboards expand, the waiting rooms in local clinics grow and we develop a new picture of homeless Americans, we should not forget to prepare for the future.  We must teach our children and youth the importance of philanthropy in its broadest of understandings.  

Here are some resources about encouraging philanthropy in children:
http://www.blogher.com/encouraging-philanthropy-young-age-teaching-your-kids-give-causes/
http://www.jewishaz.com/jewishnews/030627/teach.shtml/http://www.slate.com/id/2183509/
http://tacticalphilanthropy.com/2007/11/how-to-make-your-giving-more-effective/
http://www.networkforgood.org/KidsGuideToGiving/ 

  Unless this year is the exception to the rule, nonprofits should not be worrying about whether or from where their next dollar will be coming.  Relax; it will be coming.

According to the Center on Philanthropy at Indiana University (the Center), philanthropy is stronger than the stock market, social upheaval and catastrophic events.  It suffers well political turmoil, terrorism and economic havoc.  In a 2001 report, the Center said, “The total amount of giving in the United States has increased every year but one (1987) for the past 40 years.”  Think about the turmoil this country alone experienced in that forty year period:  the assassination of a President, an attorney general and a civil rights leader; rampant riots; a prolonged war and other things that some would call a war but the government prefers to label something else; two stock market plunges (I dare not use the word crash) and one stock market high; the worst terrorist attack on American soil, plus another “less serious” one and many attacks on American soil and citizens around the world, natural disasters galore, and I’ll stop now.

In a more recent look at economic trend data and philanthropy, the Center found that in 2002, when the Dow Jones Average dropped 17% and the S&P 500 Index dropped 23%, overall philanthropy actually increased by 1%.

So, this is good news.  The question that is begged here is whether these increasing dollars are allocated in the same way during the periods of calm as they are during the periods of crisis?  The crisis may not cause the dollars to shrink, but do they cause the dollars to be allocated differently?  During the tough economic times such as now, are we more likely to give our dollars to the food banks, homeless shelters and medical clinics than to the community arts centers, natural preserves and historic mansions?

Nice thing to hear, perhaps even a welcome relief.  But the real message in this is to be prepared:  insure a robust, well-diversified development strategy that is adhered to and implemented and monitored by a healthy partnership of board and staff.

Perhaps this isn’t fair to say, but I do believe that there are some things that we can afford to ignore—at least for a while—and other things that we cannot—not even for a nanosecond.   Something that falls into the latter group is all matters financial:  your own, your organization’s, the country’s, etc.  Recently, a subscriber to our e-mail notices asked to be removed from the list because she had received a notice of two upcoming workshops—one on the basics of financial management, the other on financial planning—and found these topics too depressing given the state of the economy. 

Whoa!   If ever there was a time not to be playing ostrich, that time is now.  And if it is depressing now, wait to how it feels when you avoid careful financial oversight. Now is the time to be paying heightened attention to your organization’s financial position.  Watching it closely.  Lining up contingency plans while cool heads still prevail.  The executive director, program directors, the CFO, the board—all need to be playing a role.  If your board has, like far too many other boards, simply gone through the motions of reviewing the financial statements at every board meeting, now is the time for it to step up to the plate, learn how to execute this all important fiduciary responsibility, and do its job! The reality is income is going to take a hit at some point before the economy is well on the road to recovery.  We are already seeing it.  I’ve run out of fingers to count the stories of corporate sponsors needing to back out on promises made.  My toes are spent with funders saying “money is tight.”  And there is no way that as individuals watch the cost of their daily lives rise, that they, too, won’t need to cut back.  So, where is the sense in ignoring the reality? Nonprofits with their eyes wide open will weather this storm—by cutting back, by merging, by being creative.  Those fleeing reality with the speed of an ostrich or choosing to hunker down, with heads dug deeply into the sand, not so much.     

 I am desperately searching for something uplifting about which to write this week.  Surely, there is something good out there?  Not so much.     But not to worry, I am not going to do what everyone else is doing:  talk about how to protect yourself from this economic mess, wring hands about how dire the future looks, bemoan the fact that so many of our nonprofit peers will be working harder with fewer resources.  Those of us in the sector know all of this and cannot forget it.  Instead, I’d like to take this opportunity to sing the praises of the nonprofit sector and remind everyone about all the good nonprofits do in our communities.  We tend to forget the services and enrichment they provide during good times; during bad times, when negativity seems to take over, we most definitely forget. So, the reminder.   As you take your well-needed relaxation walk through the park and along the clean stream, be mindful of the friends of the park association that protects the park and the environment group keeping the source of the stream clean and healthy.  When you stand on the side lines watching your child or grandchild’s little league game, thank the nonprofit sports association in your township.  Your weekend diversion of attending the Sunday afternoon concert was brought to you by a nonprofit music group, and the coffee you sipped afterwards was provided by the catering business of the local jobs training center.  The phone call from your employee was addressed by taking her to the local abuse shelter where, no offense, she will be better served than spending the night at your house.  And you are confident that your elderly relative will be well cared for at the local nonprofit clinic.  The scenarios, as you know, could go on and on.  No matter how bleak the economic forecast or the world seems, our lives are always made better thanks to nonprofits.  Remember that.