3 Priorities for Avoiding the Potholes on the Road to Recovery
Recent stock market gains notwithstanding, the great recession and its close cousin, the painfully slow recovery, continue to wreak havoc on the lives of many in our nation. While experts nationwide remain focused on key economic indicators with an eye on forecasting our future, the present impact is still being felt on many real-life levels. Some have lost jobs and been unemployed for months. Others are underemployed, barely able to cover the necessities. Families have lost their homes and are reaching out for help — many for the very first time.
With American charitable giving for 2009 estimated at $303.75 billion, or a 3.6 percent drop from 2008 (in current dollars), it's clear donations are down. How does that compare to previous years? Not very favorably. In fact, 2009 and 1974 (-5.5 percent) are the only years to post declining numbers since 1956, when giving stats first started being collected. Meanwhile, 2008 was initially reported as a down year. However, several large year-end bequests caused totals for that 12-month period to be revised to a 1.5 percent increase over 2007.
To make matters worse, government social services are broken, and nonprofit organizations face an increased demand for services — all while donations are on the decline. A recent survey by GuideStar found that 63 percent of nonprofits reported an increase in demand for services.
However, a silver lining can be found in all of these clouds. Challenging finances cause nonprofits to re-evaluate priorities and pick up valuable lessons, focusing on what's truly important. Adhering to three positive principles will help you survive — and even thrive in — today's sluggish economy.
Clear the focus
Make it a priority to be clear on your organization's core mission. Understand your calling, and focus on it. Now may not be the best time to expand services, open the new thrift store or try an untested marketing campaign. My mom used to say, "Don't bite off more than you can chew." When leaders expand into new, less mission-specific ventures, they place an unnecessary burden on staff members and donors. And they are the ones who feel it when donations slip. These are tough times. Take a moment to review your core mission, and ask yourself if all of your programs and those new ideas are the right fit, especially right now.
Create a community
Along with a decline in giving, the recession created an increased demand for services. More people are coming to nonprofits engaged in human- and social-service work each day seeking help — often seeking help that goes beyond the organization’s core programs. It's heartbreaking.
As demand escalates, we can easily say, "yes," and try and take it all on, feeling compassionate and compelled to meet every need. But, this year, try something different: Decide to share that burden, involving others in your efforts. There may be other people or groups very well-equipped to help — perhaps even more gifted at the tasks than you. Now more than ever, charities need to collaborate with other organizations in their communities. No one can afford to duplicate services, and with the down economy you may find ways of cutting expenses while expanding services. Consolidate and cut out the waste. Don't be a lone ranger.
Commit to a plan
While the recession has affected many people in ways they may not be able to control, stress related to financial challenges can often be avoided with better planning. The problem remains, however, that leaders at nonprofits are often too busy serving to plan. And if they do, they often fail to plan for contingencies.
So, focus on planning for the future. For example, what is the organization's policy on operating reserves? According to the Nonprofits Assistance Fund, operating reserves are usually based on the premise that nonprofits need to have enough unrestricted cash to cover operating expenses for three to six months.
At the high end, reserves should not exceed the amount of two years' budget. At the low end, reserves should be enough to cover at least one full year of payroll expenses. When my own wallet gets squeezed, I am reminded to go back to my budget, take a look at my financial plans (retirement, savings, short-term wants and immediate needs) and reprioritize my plans for the future.
A plan that includes budgets based on +10 percent, flat and -5 percent could avoid a number of surprises such as layoffs and across-the-board salary cuts. This can significantly cut down on stress. No matter what happens, you can just follow the plan. I know this isn't always as easy as it sounds. But, smart planning will help you avoid making rash or reactionary decisions that could be even more costly in the long term.
According to the National Bureau of Economic Research, the recession officially ended in June 2009. In the spring of last year, government officials and economic barometers suggested that the economy would reasonably recover in coming quarters. Yet unemployment numbers are still too high and the blip of GDP growth we saw in 2010 was reduced by half in the second quarter.
"When you look to 2011, the words to describe the economy are glum, lousy, subpar," Rajeev Dhawan, director of Georgia State University's Economic Forecasting Center, told the Associated Press late last year.
Some nonprofit executives have reluctantly accepted such downbeat forecasts and planned accordingly, calling their tepid numbers “reality-based budgeting.” Real leaders, however, have resisted such temptation and purposely charted a more aggressive course — not blindly, mind you, but carefully and strategically. They see opportunity where others only see problems, and they lay out detailed and crystal-clear plans for exactly how they plan to achieve that growth.
Difficult? Absolutely. Impossible? Hardly, especially with the proper focus, collaboration and, of course, planning. These three keys enable you to effectively achieve your goals, even in uncertain times.