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The Case for Optimism

August 20, 2009

Optimism_yellow Anyone who knows me knows that I'm one of the last people they'd expect to make a bullish case for a quick or V-shaped economic recovery. And that's not what I'm going to do here.

But a short essay ("The Case for Optimism") in the August 24/31 issue of BusinessWeek is a nice reminder that even the darkest cloud has a silver lining. Or, as George Harrison might have put it, all things must pass, and this recession is no exception.

How does BusinessWeek make the case for "rational optimism" in the current economic environment? Well, their case has two components:

First, recessions such as this one, painful as they may be, can set the stage for future growth. As economist Joseph A. Schumpeter wrote in 1942, "creative destruction" shakes loose people from old, dying businesses and forces them to figure out new ways to be useful. Second, ingenuity is additive. Equipping one or two billion more of the world's people with higher education and better technology over the past couple of decades has increased humanity's ability to solve hard problems. The next world-changing breakthrough may come from China, or India, or Eastern Europe....

True, these are broad macroeconomic arguments and not entirely germane to what is happening on Nonprofit Street. But there's enough of a correlation between conditions in the nonprofit sector and the broader economy to allow one to argue that the sector will come out of this downturn stronger and better positioned to effect change than it was before it all hit the fan:

  • A lot of nonprofits will be forced to shut their doors, but those that survive will be stronger for it. This is the "arbitrary winnowing" scenario laid out in Paul Light's "Four Futures" paper. "In this scenario," writes Light, "some nonprofits will fold, while others will prosper as contributions flow to the most visible and largest organizations as well as to those most connected and influential with their donors." I'm not as pessimistic as some, in that I don't believe the "winnowing" will be that arbitrary. In this environment, weak and ineffective organizations are more likely to fail than stronger organizations able to demonstrate their effectiveness.
  • Ingenuity IS additive. And, thanks to the Internet and inexpensive (and free) communications tools, it has never been easier for nonprofits to collaborate, share best practices, and access creative, innovative thinking in any field or discipline.
  • Expectations have been reset. In the Reset Economy, the nonprofit or foundation job-for-life is an artifact of the past. And that means a lot of incredible nonprofit talent is going to be available for a very reasonable price.
  • Gen Y and the Millennials are here. Remember, once upon a time, before any of us knew what a 401(k) was, how we dreamed about changing the world? Well, that's what Gen Y and the Millennials dream about. Let's give 'em the tools and encouragement they need to make those dreams happen. I expect we'll be pleasantly surprised.

I know, this is a quick gloss on a serious topic, but I hope some of you will join me in discussing it further. In the meantime, let me just repeat a bit of advice from the BusinessWeek article offered by Paul J.H. Shoemaker, founder of a consultancy that advises companies and organizations on their decision-making strategies: Avoid the tendency to assume you fully grasp future risks and opportunities. Ask people not just what they know, but what they don't know and what they're not sure about. And, if you want to know what's coming down the pike, learn how to look everywhere at once.

Your thoughts? Use the comments section below....

-- Mitch Nauffts

Comments

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Great pointers. I founded a non-profit in May of 2008 and have seen our donations drop dramatically since then. I do not want to be one of those organizations that have to shut their doors.

What advise do you have for start-up non-profits in regards to surviving / adapting / improving during these times?

Hi Luis,

On the Foundation Center's Focus on the Economic Crisis Resources and Training page there are a number of great resources for nonprofits offered by various organizations in the sector. Good luck!

Regina

HAS THE ECONOMY BECOME A CONVENIENT EXCUSE FOR SOME NONPROFITS?

While I agree the economy has presented challenges for nonprofit organizations, I think it has become a convenient “excuse” for some nonprofit organizations as well as donors. The donors are easy so I’ll start with them.

For many people, their income is the same as it was one year ago, even if their savings/investments have declined, which for many people is money they’ll recover between now and the time they intend to use the money. For most donors, contribution decisions are based on current income, at least for annual campaigns which are typically the lifeline for an organization's operating budget. Let's also keep in mind there are people whose financial lives have improved because of our down economy. Certain businesses by virtue of the services they provide or the products they sell are poised to make more money when others are hurting. We also know there are some donors who are most likely to step up and stretch their giving when the chips are down ... becoming a “hero” in a down economy can be quite compelling for certain donors.

For some nonprofit organizations, I think too many of their challenges are being attributed to the tough economy. Perhaps our tough economy should be considered a "wake up call" for many nonprofit organizations about their operations which donors may be scrutinizing now more than ever.

I was disturbed to read an article recently in The Jewish Daily Forward an article titled “The Perfect Storm’ for Day Schools” (http://www.forward.com/articles/112003/) in which I frankly feel the economy was used as a scapegoat to avoid perhaps some of the more difficult realities.

While I’m not arguing the economy is not a factor. I can’t help but wonder if the school has done any kind of self-evaluation of their program to determine the perception of it among potential families shopping around. Perhaps their facility isn’t well maintained, perhaps their leaders aren’t equipped to be effective good will ambassadors, perhaps their marketing efforts are misdirected, etc. If donations are down, it could also be a reflection of weak relationships maintained by the school with their donors who are directing their support to the organizations that have done a better job of stewarding the relationship and ensuring ongoing support.

My personal feeling is that one reason why the economy is “so bad” is because the perception of the economy is “so bad.” I believe leaders in nonprofit organizations have an opportunity – and responsibility – to ensure vital services continue and one thing we can all do to help is to stop talking doom and gloom and commit ourselves to “going the distance.” This may include challenging ourselves to take an honest assessment of our organizations and do what we know we’re supposed to do or what we say we do. Perhaps now, better than ever.

I welcome your opinion.

Seth Bloom, President
Bloom Metz Consulting

Specialists in nonprofit fundraising, strategic planning, marketing and leadership development

2812 Landon Drive, Wilmington, DE 19810
302.584.1592 | F: 302.478.1699
www.BloomMetz.com

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