Now What?

"More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other to total extinction. Let us pray we have the wisdom to choose correctly."  -- Woody Allen

Okay, so maybe the world isn't coming to an end. The sense of impending doom that hung over the economy last fall and the early part of this year seems to have dissipated. We have a new president committed to minimizing the human costs of the recession and to correcting many of the mistakes and practices that contributed to the mess we find ourselves in. Some have even spotted "green shoots" of recovery amidst the wreckage of the boom-turned-bust. "It's bad," we tell ourselves, "but we'll get through this." Then we knock wood and try to focus on something less depressing.

We will get through it -- though when and in what shape remain to be seen.

For the moment, however, the nonprofit sector is hurting. Consider these findings from The Quiet Crisis, a recent report (22 pages, PDF) written by Bruce Reed, president of the Democratic Leadership Council, and John Bridgeland, president/CEO of Civic Enterprises:

• The United Way saw a 68 percent increase over the past year in the number of calls for basic needs such as food, shelter, and warm clothing;
• The state of Arizona reports an increase of more than 100 percent over the past year in the number of people who sought social services;
• More than 70 percent of Michigan nonprofits have experienced increasing demand for their services, while 50 percent report that their financial support has dropped;
• Churches, an important provider of social services to the poor and needy, were expected to raise $3 billion to $5 billion less than anticipated in the last quarter of 2008.

Or these findings from a survey and series of roundtable discussions conducted by the Community Foundation for Greater New Haven earlier this year and in the fourth quarter of 2008:

• Nonprofit organizations are experiencing significant challenges in raising money and a significant decline in donations;
• As a result of the downturn, donors in general have been more focused on giving to basic needs organizations;
• Arts organizations are seen as especially vulnerable during these turbulent times;
• Executive directors are deeply concerned about cash flow;
• There is great concern, especially among larger organizations, about the effect that state budget shortfalls will have on nonprofit revenue streams;
• Executive directors are concerned about the well-being of their staff and their ability to continue to deliver critical services in an increasingly stressful environment;
• Nonprofits are deferring plans for new initiatives and programs;
• Donors are becoming more focused on giving locally.

A "quiet crisis," indeed. As Rip Rapson, president of the Michigan-based Kresge Foundation (and the source of the Woody Allen quote above), remarked to a gathering of YMCA leaders recently:

The nonprofit landscape of yesterday or today will not be the nonprofit landscape of tomorrow. Undercapitalization, chronically a problem, will become a death spiral. When revenues decline by 10 or even 20 percent, a nonprofit can put itself on a diet of discipline and flexibility and emerge at the other end with its mission pretty much intact. When demand skyrockets and revenues decline by 40 or 50 percent, however, you're a different organization altogether.

Generous benefactors will almost certainly rise to the occasion and try to stabilize their organizations of choice. But they can't begin to provide enough support to offset diminished public and philanthropic dollars. And their generosity will flow selectively, leaving outside the rescue pipeline vast numbers of organizations that are largely invisible to most of those donors -- particularly organizations that have traditionally been heavily subsidized by government.

Regardless of which direction you look -- other sources of private capital, the stimulus package, elsewhere -- the result is not so different. Too few dollars, too rapid an unraveling, too little time to plan systematically for thorough-going change. We have to face the very real possibility, therefore, that the kind of re-examination and re-invention demanded by this new world is either not possible or simply too difficult. If that were to become the case, the consequences for our social and economic fabric would be correspondingly harsh, cruel, and disruptive....

Will it become the case? It depends on how we respond, as individuals and as organizations, and whether we believe our actions can make a difference.

In his speech, Rapson outlined the strategies that Kresge, a national funder, will pursue going forward: more flexibility with respect to the way the foundation works with current grantees; closer scrutiny of new funding requests so as to avoid squandering resources; and a greater focus on field-building efforts in its areas of interest.

The Community Foundation for Greater New Haven, a local funder, is taking steps of its own: more operating support grants for key nonprofits in the community and more technical and capacity-building assistance for the nonprofit sector in general; convening and connecting institutions; developing and disseminating knowledge about the sector to donors; promoting collaborations and mergers; and using the current crisis to encourage broader thinking in the region about its economic future.

Our own Michael Seltzer has some wonderful advice for nonprofits (here, here, and here). And Steve Rabin reminds all of us that a little bit of spending, done wisely, can go a long way.

These are great ideas and will make a difference -- especially if implemented by funders, large and small, nationwide. But they're not the final word on the subject. So, now it's your turn. What do you think foundations and other donors should do to address the crisis in the nonprofit sector? And what can nonprofits do to ensure their own survival in these difficult times? Don't be shy...

-- Mitch Nauffts