“A crisis is a terrible thing to waste,” American economist and NYU professor Paul Romer was credited for saying in 2004. His sentiment, unfortunately, is appropriate again today as nonprofits throughout the sector learn from tough decisions that help them recover from the Great Recession and what we are now seeing will likely be dubbed, “The Great Correction.”
Many of you are familiar with the notion that negative news often gets repeated more often than positive news. This post is an effort to tip the scales toward encouraging information I recently read in The Chronicle of Philanthropy: “How Recession-Racked Charities Emerged Stronger Than Before.”
Paul Romer would be pleased to learn the nonprofit sector did not waste the Great Recession. They’re making good use of it and demonstrating impressive resolve. “Hopeful lessons” are shared in the Chronicle article, and one in particular involves Voices for Children. Voices is a nonprofit dedicated to providing every foster child in San Diego County with a volunteer court advocate.
Voices for Children
After laying off a quarter of the staff, the board resigned itself to the fact that it would have to scrap its ambitious fundraising goal set years earlier and rebuild by stepping up with its own members and setting up a skeletal development shop. The executive director courted and hired a seasoned development director from the arts arena and paid the fundraiser more than anyone else. Today the budget is approaching $6 million, double the amount of its pre-recession budget. Payroll has reached 73 employees. Voices is now in a better financial position and perhaps better equipped to handle the next economic downturn.
Stronger nonprofits have also resulted from collaboratives to share space and administrative resources. For example, in Denver, international development nonprofits renovated a 19th-century horse and trolley barn, which they call the Posner Center. The Center is a 25,000-square-foot space that now houses 60 nonprofits. According to the Chronicle, “The Center recently awarded $60,000 in grants to fund partnerships among its tenants, including one between Engineers Without Borders and a group that builds footbridges in Guatemala.”
Built to last
In a related article, “Bold Choices in Dark Times,” St. Louis Opera general director Timothy O’Leary was faced with collecting promised pledges on the day the stock market crashed. The donors told him they needed to “trim” their major gift commitments. O’Leary reported, “The difference [between pledges and fulfillments] was not unsubstantial.”
On the heels of these discouraging donor visits, O’Leary, the new board chair and artistic director, set to work creating a long-term strategic plan that would weather a long economic crisis. While other arts organizations were reducing schedules and turning to crowd-pleasing classics, the St. Louis opera committed to commissioning new and creative work. O’Leary was convinced new and exciting material would compel loyal patrons to return and support the opera.
“The downturn hit the opera’s corporate sponsorships the hardest, and revenue slipped further when the company reduced its draw from its $16.5-million endowment. To compensate, it froze salaries, suspended staff 401(k) contributions, and renegotiated deals with its unions. Yet as the opera rallied donors around its commitment to risk-taking productions, individual giving climbed — gradually at first, and then 21 percent in 2011.”
In 2013, a commitment to innovation and collaboration paid off with an unprecedented debut of “Champion,” which generated more ticket sales than any other production in the history of the St. Louis opera. “Champion” was named a finalist for international opera of the year. Today, the endowment is now topping $28 million.
Always in crisis
With the Great Recession over and a market correction that hopefully will be fleeting, it might be tempting to try risky ventures or allow yourself some wiggle room with financials. Perhaps the lesson here is that nonprofits should act as if they’re always preparing for a crisis. Look for ways to work smarter and leaner and focus on what’s working and core competencies. If you’re interested in engaging in financial forecasting or looking at different scenarios, consider contacting us at Execute Now! where we can help you assemble a financial plan you can feel confident about following.
Image credits: nonprofitcenters.org, urpe.wordpress.com, nytimes.com