Stanford Social Innovation Review

Recession offers lessons for giving sector

The giving sector quickly needs to become a learning sector.

An urgent task for nonprofits and giving organizations is to understand the connection between their recession damage and the way they do business.  By recognizing and addressing internal flaws that put them at risk, charities can better equip themselves to carry out their missions.  So charities must be brutally honest about their operations and the changes they need to make to fix their finances.

The financial pain in the charitable marketplace has been serious. According to recent reports:

• Overall giving in the U.S. is down.
• The value of foundation assets has plunged.
• Financial reserves at nonprofits in the District of Columbia are inadequate.
• Most foundations burned by Bernard Madoff had boards that were too small and probably too homogenous.
• Most nonprofits say they are under serious financial stress.
• Nonprofits are taking tougher steps like layoffs and programs cuts to cope with the recession.

No one can predict the ups and downs of the economy, but nonprofits and giving organizations owe it to their donors and constituents to be prepared.

No magic formula exists for survival. Instead of desperately accepting philanthropically-correct trends and feel-good gimmicks, often pedaled by consultants and trade groups that are in the business of promoting themselves and often are dependent on big foundations’ support, nonprofits and giving organizations should tap the knowledge and common sense of their own boards, staff, supporters and constituents.

What truly matters is an organization’s mission, not what a hired hand or big funder preaches.

Advancing the mission requires smart, committed staff, board members and volunteers who can and will work together; listen to and communicate clearly and honestly with one another and their funders, clients and partners; keep their operations and goals clear, simple, realistic and focused; take calculated risks when they make sense; and learn from their mistakes.

Nonprofits and giving organizations are in business to address the symptoms and causes of social and global problems. Those problems often are complex and interconnected, and typically get fixed slowly through a step-by-step process, often with missteps, that requires commitment, vision and a willingness to listen and adapt. By learning from the mistakes that made them more vulnerable to the current economic crisis, nonprofits and giving organizations can equip themselves to be more effective in running their operations and programs, and fulfilling their mission of making our communities better places to live and work.

Todd Cohen, a veteran news reporter and editor, is editor and publisher of Philanthropy Journal, an online newspaper published by the A.J. Fletcher Foundation in Raleigh, N.C. Cohen has taught nonprofit reporting and media relations at the University of North Carolina at Chapel Hill and at Duke University, and regularly speaks on the topics of nonprofit media relations and trends in the charitable world.