Nonprofits Are Infected – We Have The Vaccine unveils the inoculation developed a DECADE AGO for the nonprofit virus currently infecting the charitable sector. While the coronavirus pandemic is a surprise for everyone, National Association of Nonprofit Organizations & Executives (NANOE) has known for years that most nonprofits are not positioned to weather a major downturn in the economy.
Many nonprofits will close as a result of the COVID-19 crisis and many others will have to layoff staff to survive. This is no small thing.
The nonprofit sector includes more than 1.5 million organizations that employ over 12 million people – that’s 5% of the workforce in the United States. In addition, more than 25% of Americans volunteer each year at nonprofits. But on the other side of the corona virus, millions of nonprofit jobs will evaporate and volunteers will have fewer opportunities to be involved. Fewer employees and volunteers to deliver crucial programs will mean increased suffering for our communities.
The impact of the COVID-19 pandemic will be particularly felt by small and medium nonprofits who serve people in need daily. The very people who need our help the most will not receive goods and services provided by nonprofits because these organizations will either be closed or not have staff to deliver impact.
Yes, there will be an outpouring of gift-in-kind support for nonprofits, but the number one measure of a nonprofit’s ability to achieve significant community impact is staffing. And staffing only occurs when there is money to pay employees. Money, which is the air nonprofits breathe, will be in short supply.
Programs and services have to be properly administered and program staff must implement assistance for our communities. However, nonprofits do not have the cash reserves to survive this crisis and will not be able to employ the staff needed to deliver vital programs long after COVID-19 is conquered.
The nonprofit virus killing our communities is a fundamental lack of free-market principles. Small and medium nonprofits are infected and it prevents them from:
• Maintaining proper cash flow
• Keeping money in reserve
• Planning for long term impact
• Building financial capacity
• Serving the needs of their customers (donors)
• Leveraging capital to take calculated risks
• Securing commitments for their endowments
NANOE has predicted this for years because we have seen the effects of the nonprofit virus for far too long. We interact daily with nonprofits who are working hard today to pay yesterday’s bills. They worry too much about their programs and not enough about their donors. Their pietistic thinking allows them to hope that a 501c3 designation, a website, a newsletter and a whole bunch of good intentions will get them the funding they need. They have little or no cash reserves or unrestricted endowments. Unfortunately, this has been an ongoing problem for decades.
The founders of NANOE conducted a study of nonprofits who built capacity during the Great Recession (VISIT LINK BELOW). 15% of organizations studied grew during the recession because they exercised free market principles under the leadership of a strong CEO. These leaders knew that donors were their customers and that fundraising (capacity building) is an ongoing task regardless of the state of the economy. The problem, of course, is that 85% of nonprofits had no idea.
Nonprofits have allowed themselves to be infected with this virus because of their piety around program service delivery. It’s the same old, tired framework: “We need to put every dollar into our programs and pay our employees less so we can help more people. We can’t save for the future because we have programs to deliver today.” Nonprofits have spent 95-99% of their time on program service delivery and have neglected relationships with major donors.
It’s this kind of sick thinking that pervades the nonprofit sector. They are focused on their missions at the expense of their financial health. The respiratory disease killing nonprofits is a shortage of cash coupled with an inability (or unwillingness) to raise money – every day.
Money is oxygen. Nonprofits can’t breathe without it. The virus causing nonprofits to suffocate is a shortage of cash. This shortage already existed before COVID-19 and now will lead to ruination of the charitable landscape as businesses close, restaurants shutter and volunteers stay at home. Social distancing is not temporary, but will become a permanent part of our society (in fact, we were already headed in that direction). Donors will continue to give, but only to nonprofits with whom they have the closest relationships. Hospitals and universities will endure this catastrophe, but many small and medium nonprofits will not.
Get ready of the wailing and gnashing of teeth as nonprofits cry out for emergency support in the coming months and years. They will blame the coronavirus, but really, they need to take a hard look at revising how they spend their time. Rather than having a capacity building plan in place, rather than spending time with donors, rather than investing in relationships, rather than securing commitments for their endowments, nonprofit leaders have focused on programs instead of financial stability.
Why are we so surprised by this crisis? We experience these calamities every decade. Consider:
• 1980: the Iranian revolution and resulting energy crisis put the U.S. economy into recession
• 1990: inflation, rising oil prices and accumulated debt caused a recession
• 2001: the 9/11 terrorist attack and associated economic downturn
• 2008: the housing bubble burst leading to the Great Recession
• 2020: the COVID-19 crisis will send the economy into another recession
Nonprofits need to understand economic cycles and plan for difficult times. By having a plan and working the plan, nonprofits can inoculate themselves against the deadly cash shortage virus.
NANOE has the vaccine for the nonprofit virus. It’s called Major Gifts Ramp-Up. The same free market principles that apply to business and personal finance also apply to the nonprofit sector. Having cash reserves and endowments are not luxuries, they are necessities. In the same way families must have emergency funds and retirement plans, so too must nonprofits have financial reserves and unrestricted endowments.
Here are vaccine’s primary ingredients:
1. A management philosophy that prioritizes strong relationships with major donors over program service delivery.
2. An organizational development plan that maximizes the time nonprofit leaders have to serve philanthropists.
3. A written fundraising plan with clear deadlines and accountability for staff.
4. A robust case for support that describes a heroic mission of scale with an associated five year budget.
5. An awareness event to introduce case for support to new donors in a non-fundraising environment.
6. Investing deeply in face to face conversations with donors to meaningful involve them in the mission of the organization.
7. Asking (often and with grace) supporters for their best gifts to achieve significant impact.
8. Stewarding relationships with major donors to retain their generosity and leverage their ability to give and influence other gifts.
But it’s not just about surviving economic downturns. Major Gifts Ramp-Up installs a permanent culture of philanthropy within organizations. We need only to look at colleges, universities and hospitals to learn how this is done. Large nonprofits hire top talent and utilize metrics tracking to ensure full time fundraisers raise billions of dollars for their organizations. Why should it be any different for small and medium nonprofits?
NANOE has been concerned about the nonprofit virus for years. This is why we developed on online library of more than 10,000 pages of guidelines and resources for nonprofits. We offer Ph.D. researched findings and resources to help small and medium nonprofits build and boost financial capacity. NANOE exists to serve our members and grow the impact of the nonprofit sector, but we can only help those nonprofits who are ready to listen and ready to change.
For too long, national and state nonprofit associations have provided outdated information to small and medium nonprofits and focused on social issues rather than sound financial teaching. NANOE has the vaccine for nonprofits because our focus is on free market principles that grow impact.
The nonprofit virus must be eradicated! There can be no more piety around financial matters and no more short sighted thinking about program service delivery. Nonprofits need to start today by planning and implementing the correct strategies that will insulate them against the next economic crisis.
Know this: we at NANOE are suffering with families, philanthropists, businesses and nonprofits as we weather this historic financial calamity. It pains us to see nonprofits shrink and die because it means fewer children will be helped, fewer veterans will be served, seniors will suffer, the arts will lose funding and education will be diminished. We pray for the day when pain and suffering and tears will be no more. But until that day comes, we must act.
We are America and we will survive. Let’s work together to make sure nonprofits never have to suffer and die again.
Nonprofits Are Infected – We Have The Vaccine was first posted by INSIDE CHARITY
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Nonprofits Are Infected – We Have The Vaccine was written by Louis Fawcett.