Nonprofits and the 99%

By now I'm guessing that you have all heard about the Occupy Wall Street protests and the 99% movement. The Wall Street protests started more than three weeks ago, and was at first largely absent from the domestic press, with coverage only getting to us through the European press until the story was just too big to ignore.

What surprises me is how little I'm still hearing from the nonprofit press about the movement. Perhaps they see the protests as happening outside of the nonprofit sector, being organized without the benefit of structured 501(c)(3)'s, boards of directors, strategic plans, or foundation funding. Perhaps many nonprofits themselves are wary of being seen as part of a protest movement, coveting their professional standing and reputation, thinking they are above the rabble.

But when you look at the protesters, listen to their grievances, and think about what they're looking for, it is inescapable that are us, and they are ours.

Those involved in Occupy Wall Street, and newer Occupy (fill in city name) movements across the country, are collectively the 99%. Not the owners of the banks or large corporations, but the rest of us, working to survive.

They are the middle-aged middle-managers who have found themselves laid off, retirement plans raided, homes foreclosed on, and health insurance canceled. They are the young, fresh college graduates with $50-$100,000 in student loan debt, fighting to get a part-time minimum wage job and holding no hope for the future. They are single parents struggling to keep a roof, any roof, over their children's heads. In short, they are the clients at all of our nonprofit human services organizations.

And, as workers in a traditionally low-wage industry, we in the nonprofit sector are also all in the 99%. We too watched as other industries got bailed out while we slashed our own budgets and laid off staff.

If you see your clients, your staff, and your organization's mission, reflected in the stories of those "occupying" Wall Street and elsewhere, what are you doing to support them? I know, you're afraid of jeopardizing your nonprofit status by "getting too political." But short of endorsing a particular candidate or ballot proposition, there's much you can do.

Begin by simply getting informed about local "Occupy (your city)" meetings, and sharing that information with your clients. Let them know how they can advocate for themselves, and empower them to fight for their future.

Perhaps your organization can't officially march in a protest, but off the clock you certainly can as a citizen. Invite a board member to come with you. Start a discussion and see where it goes.

Read the stories posted at "We are the 99 Percent."

Visit Occupy Together, and the "Events" pull-down menu find your region and search for your closest Occupy event. Follow them on Twitter and Facebook, and learn what's happening in your area.

Nonprofits, Foundations, And Capital Formation

 On Sean Stannard-Stockton's Tactical Philanthropy blog, he commented that "One of the most bizarre criticisms of the Giving Pledge is the idea that it will hurt the economy." He quotes Forbes columnist John Tamny, who wrote:

“But while it’s exciting to contemplate the giving nature of Gates and Buffett, if their true desire is to help their fellow man, they should hoard every penny of their significant wealth..."

Stannard-Stockton's  response is demonstrate how nonprofits contribute to the economy, saying, in part:

"Nonprofits employ people, nonprofits buy goods and services from for-profits, nonprofits are an important economic engine of the US economy. In fact, nonprofits are a bigger portion of the economy than many other industries."

Certainly, for all the reasons mentioned in his post, nonprofits contribute to and benefit the economy of our nation and our individual communities.

But, in relation to the Gates-Buffett pledge, there's another "dirty little secret" of why the Forbes readers (assumed captains of industry) should support philanthropy of this scale: Endowments.

Of the money pledged by the 40+ billionaires, most of it will not be heading directly to our community service organizations; it will be sitting in foundation endowments, being granted out at a rate of 5% each year.

With that 5% barely being the earnings on the endowment, where's the principal of that endowment going? It's being invested. It's purchasing stocks and shares of mutual funds. It's in long-term bank accounts, giving banks the capital to loan to small businesses.

If John Tamny (and Forbes Magazine) is sincere when he says that "money saved and invested constitutes capital... and... capital formation... naturally stimulates job creation" then he should be encouraging more billionaires to tie up their wealth in foundation endowments.

Yes, nonprofits help build the economy, both through our direct actions assisting in our communities with job training, treating addiction, feeding the hungry, distributing gently used clothing, and offering counseling, support, and affordable housing (not to mention enriching our lives through the arts, cleaning our environment, protecting our children, etc.), but our sector is also responsible for the creation of dedicated capital for investment, something that our nation desperately need right now.

Stand up for the nonprofit sector; the most productive sector of all.

Good news for fundraisers

Did I say "good news"? In this economy? Yes, I certainly did. This last January Cygnus Applied Research polled 17,365 people with a history of charitable donations to ask them about their philanthropic plans for 2009. The results (as reported in The Chronicle of Philanthropy) may surprise you:

• 52% of donors said their gifts would be on par with 2008
• Only 17.5% planned to give less than last year
• Of those who were committed to a multi-year gift, 87% said they would pay on time
• 42.5% said they would give to a charity they had not supported in the past if someone they knew was seeking the gift
• 40.3% said they would give for the first time if the charity was working directly to help people hurt by the recession
• Only 16% said they would not consider supporting a new organization

Survey respondents were not being unrealistic about the economy when answering these questions: 39% said they thought it would be at least three years before the economy recovered. 23.4% felt the economy would rebound in less than two years.

A final bit of caution before thinking this news is an open invitation to all sorts of fundraising plans:

Forty-one percent said they had stopped donating to at least one nonprofit group in the past five years because they felt overwhelmed by appeal letters, while more than a third said they were concerned organizations spent too much on fund raising.

As a result, online donations are expected to become more popular, while telemarketing, door-to-door canvassing, and direct-mail appeals may be less successful.

Washing Away in a Flood of Volunteers

Has your nonprofit been overrun and overwhelmed recently with a flood of new volunteers? The New York Times reports on the influx of the unemployed into volunteer service and its effects, both positive and negative.

The two forces feeding this growing volunteerism are, of course, the recession leaving many people with more free time than they'd care to have, coupled with inspiration from President Obama's call to service.

Here in the Bay Area, the Taproot Foundation - who help with organizational effectiveness by placing skilled professionals in volunteer positions - had more people sign up on one day earlier this year than in an entire month a year ago.

For those larger organizations, who are able to properly train, manage, and use these new volunteers, this is a wonderful resource. But what hit home for me was this paragraph:

... others grumbled that the current love affair with volunteerism ... can be a mixed blessing. Smaller organizations, with staffs of fewer than 20 and no full-time volunteer coordinator, have struggled to absorb the influx, especially since many of them have simultaneously had to cut back on projects in the face of dwindling donations and government grants.

“Can you make them stop calling?” groused one nonprofit executive, who spoke on the condition of anonymity...

I'm currently serving as Interim Executive Director at an agency with nine staff members. The Volunteer Coordinator left that position in December and because of budget restrictions has not been replaced. We now have a backlog of volunteers to follow up with, and limited resources to put them into positions where they can be of service.

Taproot has had to scale back on their recruitment of professionals:

“It’s like a Greek tragedy,” according to Lindsay Firestone, who manages pro bono projects for Taproot. “We’re thrilled to have all of these volunteers. But now organizations are stuck not being able to take advantage of it because they don’t have adequate funding.”

But, as much as we may complain now, we know it won't continue forever. The media focus on volunteerism will wane as another issue comes into vogue, and the economy will pick up sooner or later (sooner, please!) sending these volunteers off to their paid positions.

How we handle these eager volunteers now will greatly influence how we can use them and interact with them later.

Bertina Ceccarelli, a senior vice president at the United Way in New York, sums it up this way:

“My hope is when they decide it’s time to do something else, they have fond memories of what they learned at United Way... Maybe they’ll even become a donor..."

Of course, we all know, nobody just "becomes" a donor. Donors must be cultivated. Sending a potential volunteer away today may mean you're turning down a future donation. Something to think about.

Resisting the Pressure to Merger

A couple of years ago, I wrote a post here about when it makes sense to take an existing partnership and explore a merger. In that posting, I wrote that

the reality is that it is increasingly difficult for small organizations (budgets under $750,000) to operate successfully, and create sustainable funding. As much as I love small, grassroots organizations, sometimes they can better serve their communities as part of a mid-sized agency.

Today, that is truer than ever, and many of the small agencies that I love so much are in major trouble as their funding dries up, while clients are still lining up at their doors. Also true right now is that there is growing pressure on these small organizations to merge coming from the funding community (foundations and local governments).

In the long term, many of the mergers they envision may indeed make sense. But the savings they imagine will not occur anywhere near soon enough to be a solution to this year's budget problems. In fact, to make mergers truly work for the betterment of the organizations (and their clients), will actually require an additional investment for FY 2009-10 - an investment that doesn't seem likely to come from any of the sources promoting the mergers.

"Quick and easy" mergers really only exist when one of the partners is in such deep trouble that their only other option is shutting their doors and the other partner has plenty of resources to invest in salvaging the best of what the defunct organization has to offer.

When two small- to mid-sized organizations, who are each struggling but surviving, come to the table together, there's much to discuss and agree upon before any mergers occur. From deciding on what name the resulting organization will be called, to which Executive Director stays on (and what to do with the one that doesn't), to how to merge the boards (and elect new officers), to going through and reconciling each line of the two different sets of by-laws, this is a process that can take at least several months to over a year to settle. And once that's done, it's time for the lawyers to review what's been decided and put it into a legal form.

Here's a sample, simplified merger budget:



As you can see, while mergers may save money in the long run (and even that is often questionable if the deposed ED is needed to stay on to manage a second site), there are considerable upfront costs, and a major time investment required to make them work. And, bringing us back to the start of this post, the partnership has to make sense.

A Plan to Survive

Today I gave a presentation on Fundraising Planning in the New Economic Environment at the Nonprofit Forum in Redwood City. The Forum brought about 200 nonprofit professionals from throughout San Mateo and Santa Clara Counties to the conference center on the Oracle campus to share strategies for surviving the current economic collapse.

I've taught on the topic of fundraising planning many times over the years, and, of course, have my book out on the subject, but the question I had to ask myself in preparing for today was, "Has the current economic situation changed how we should approach the subject?"

The answer was simply, "No." Good planning is still good planning. The process I outline, and the tools I include, are valid in any economy. The plan that each of them creates for their agencies, of course, will be different today than it may have been a year ago, but the process is the same.

The most important thing was simply to take the time to plan, properly analyzing their funding mix, identifying gaps, establishing realistic goals, and working the plan.

Yesterday, while doing my final preparations for the conference, I came across this posting of a new study by Retriever Development Counsel with a few characteristics of nonprofits that are surviving the recession. Those characteristics include:

• Those nonprofits with diversified funding, good management, and "learning cultures" seem to be coping much better than others.
• Successful nonprofits appear to be putting more focus on development activities, particularly donor relations, including cultivation of major donors.

This is nothing new. When I was working for Compasspoint Nonprofit Services (one of the organizers of today's conference) during the dot-com bust of 2002 we did a similar survey, and - not surprisingly - we found that those organizations that were doing best were those that had a development plan.

The plans were all different, and all unique to the organizations that made them. There's no right or wrong plan. The only mistake is failing to plan.

Maybe in a good economy you have the luxury of sitting back and "just letting the money roll in" without any design or thought to how it's going to happen. But today we don't have the time to take chances like that. The time spent planning will be paid back to you with security and sustainability.

"Don't Panic!"

Here's a wonderful quote from a meeting I attended this morning of Santa Cruz County (California) nonprofit Executive Directors, discussing their response to the current financial crisis:

"Don't panic. Not because there isn't reason to panic - there is - but because panic doesn't work."

So, what is your organization doing to respond to the current economic crisis? Have you felt it yet, or have you somehow been spared? I've just set up a survey to gather your responses - Click Here to take survey - Thanks!

(And for those who've wondered if I'd ever blog again, yes, I'm still alive and working. Just working a bit too much in my current Interim ED position... dealing with the just these questions of whether or not we should be panicking.)

What are we compaining about?

According to a new report from the Urban Institute, the growth of the nonprofit sector has outpaced the growth of the economy over the past decade. The report says that, "While the nation's gross domestic product grew by an inflation-adjusted 36.6 percent from 1994 to 2004, the nonprofit sector's revenues increased 61.5 percent." So why are we always whining about needing more?

Probably because all that growth and resources is concentrated in hospitals and universities. Some of the data from the report:

• Hospitals and other health care organizations, 12.9 percent of all reporting public charities, accounted for 58.7 percent of the sector's revenues in 2004, 41.1 percent of its assets, and 60.0 percent of its expenses, dominating each category.
  
  
• Colleges and other higher education nonprofits, less than 1 percent of reporting public charities, received 11.6 percent of the sector's revenue, controlled 22.3 percent of its assets, and recorded 10.9 percent of its expenses.
  
  
• Human service organizations, 34.5 percent of reporting public charities, had only 13.6 percent of the sector's revenues, 11.5 percent of its assets, and 14.0 percent of its expenses.

Get more information from the Urban Institute's web site.