This post is co-authored by Olivia Miller Gattuso with input from the entire Ostara team.
This post is part two of a three-part series. If you haven’t already, go back and check out part one, where we describe what happened to the nonprofit sector in Washington between 2007 and 2012 during the last economic recession.
Nonprofit workers, we see you: you are overwhelmed, tired, and genuinely fearful about the future of your work. The organization that you have invested so much passion, time, and energy into may be wobbling. Donations may not be coming in, you may have had to cancel big in-person fundraising events, your programs may have shifted or paused in ways that threaten your ability to achieve your mission, and your colleagues may be losing their jobs and livelihoods. You are scrambling to adapt, to pivot, to ensure that your organization—and its vital team of people—still exist in three years, in one year, or even next month.
A New York Times article quoted Tim Delaney, chief executive of the National Council of Nonprofits, saying, “In an ordinary disaster, no matter how severe the impact, there is a border beyond which life is normal. Here there is no border. We see the first tidal wave coming in, but know there will be a second, a third and a fourth after it.” Another article points out that three-quarters of nonprofits say they will run out of cash in less than six months. “Nonprofits live on the edge, pouring everything they have into their mission.” For organizations like this, a short-term dip in cash can mean layoffs, program cancellations, and dissolutions.
But, it can also mean survival or even growth; improvements in long-term planning, cash position, and donations; higher contributions by board members and volunteers; more effective program service and delivery; and a greater understanding of the need for capacity investments when this is all over. In fact, overall the nonprofit sector was, in some ways, able to weather the last recession better than for-profit businesses. What makes the difference between an organization that closes its doors and an organization that grows to meet community demand during an economic downturn? What can you—tireless nonprofit leader—do right now to ensure that your organization survives this crisis and serves your community through it?
We have waded through the rising waters of resources out there to pull together a data-driven list of the strategies that work, proven through real nonprofits’ experiences of the last recession. As you figure out how to proceed, consider these tried and true crisis-responses.
1. Clarify the gap between your expenses and revenue. An article by Steve Zimmerman at Nonprofit Quarterly identified a few steps that we recommend every nonprofit do now in response to COVID-19. He said to:
2. Engage your donors and funders to help you fill the gap. Approach funders that you have strong relationships and make a clear ask to help you through any short-term cashflow challenges. Find creative ways, like challenge pools, for your major donors to lead the way. Don’t be afraid to ask funders for overhead funds, unrestricted grants, and multi-year commitments. We recently wrote posted twice about how to do this. Check out here and here.
A 2011 study led by David Harrison at the University of Washington examined a set of nonprofits in King County, WA and the actions they took between 2008 and 2010 to weather the last economic recession.
Learning from this research and our decade of work with more than 350 nonprofits, we recommend that nonprofits do the following this year:
1. Involve everyone. Include your full team in identifying creative solutions that mitigate harm to the organization and its community. Talk to the people you serve – what do they need and what is the best way to provide it? Draw on the energy and passion of your staff and board to create a team-based approach to getting through this. Engage your donors and volunteers – how are they able to give and what do they care about?
2. Move swiftly and boldly. After you have determined your cash position and the programs or expenses that are not serving your organization, act quickly to make difficult decisions that will preserve assets and engage effective fundraising strategies. As Harrison’s research pointed out, this may mean reducing your fixed costs in ways you couldn’t have imagined before. Do you need your office this year? Can you immediately cut some utilities, the monthly water cooler delivery, or other nonessentials?
3. Engage in shorter-term, more nimble planning. We all know things are changing rapidly, seemingly every day. Now is not the time for a five-year strategic plan. Work with your team to determine what you are going to do in shorter bursts of time, and then reassess together as things change. What is your 1-month, 3-month, and 6-month plan?
4. Don’t be afraid to think outside the box. The nonprofits that survived in Harrison’s research pursued partnerships, pivoted programming, and sought new service delivery methods to adapt to their changing environments. We have already seen tremendous examples of this - like the Refugee Artisan Initiative who pivoted their artisan production process to sew greatly-needed masks for healthcare professionals, or Cancer Lifeline who has started hosting their in-person support groups and classes online.
5. Focus on relationships always, but especially now. The common thread throughout all our work here at Ostara is relationships. Whether we are talking about grant writing, holiday appeals, events, capital campaigns, boards, or major gifts – relationships are paramount to the success of a nonprofit. Never has this been more true. Take time to connect with clients, staff, donors, volunteers, and your board – check-in and have honest conversations. Invite them into your process, and find out how you can support them.
6. Always come back to your mission – and make sure it’s a clear one. It’s never a waste of time to review your mission and values. Now more than ever, we are encouraging our clients to make sure everyone on their team knows why they exist, and that any project that does not support that mission in some way falls to the back burner.
1. Appreciate and communicate with your team. Show that you appreciate your staff and the work that they have done up to this point, and continue to do this into the future. Consider donors, funders, volunteers, and board members part of your team, and invest heavily in stewarding those relationships.
2. Re-examine your revenue mix. The biggest action that organizations in Harrison’s study took to sustain their operations over the last recession was to reimagine their list of revenue sources and ensure that list was as diverse as it possibly could be. As you do this, consider:
3. Build—and don’t be afraid to use—your reserves.
If you have an operating reserve, use it! Now is the time to draw on that fund to engage in intentional deficit spending. That means you may approve a deficit budget next year. Explain to your staff and board why you are doing this and what it will allow you to achieve. Communicate this decision with funders and explain why it is a wise financial choice that allows you to continue serving your community. Make a plan to rebuild that reserve in the future.
If you don’t already have an operating reserve, reiterate to your board why this is a crucial element of emergency preparedness. Nonprofit best practice is to establish three to six months in a board-designated operating reserve. Set a goal for annual contributions and a target number you would like to hold in reserves. When you are able, create an operating budget that includes a contribution to your reserve. Create a culture of understanding on your team about the importance of a reserve and its value to your long-term sustainability.
4. Take time to plan for unexpected challenges. Once you have made it through the initial six to twelve months of this economic recession, work together to create plans for the next unexpected disaster. Are you prepared for an emergency? Do you have a leadership succession plan in place? Do you know what you will do if an expected revenue source drops off?
5. Lastly, advocate for the sector. Follow along and support regional conveners like Washington Nonprofits and Communities Rise as they fight for funding and systems that support the nonprofit sector. Your voice is important.
Nonprofits have proven their resiliency time after time. We know that COVID-19 has affected our world and community in unprecedented – and still unknown – ways. And yet, you are the real-life nonprofit heroes, continuing to show your bravery, responsiveness, and commitment to your communities and mission during this difficult time. We look forward to helping you along the way and witnessing the impact of your work as we work through this crisis together. We plan to share stories of positivity, community, and hope in nonprofits on our social media pages as much as we can over the coming weeks and months. Follow these stories here.
Read Part III of this series where we discuss how funders can make the biggest impact for the long term, where and how to invest to help nonprofits survive this pandemic and the years that follow, and what mistakes to avoid.
We are here for you and we will walk with you as you navigate this situation. Please don’t hesitate to reach out to us if you would like to discuss how to shift your fundraising event plans, how to respond to funder inquiries about programs and services, how to manage remote work for your teams, or to navigate fears with donors or volunteers. We’re here to connect.