recession

Editor's Note: This post originally appeared November 4th, 2011 on NFF's Money and Mission blog at the Chronicle of Philanthropy. 

The economy’s slow recovery has prompted many nonprofit leaders to wonder how to prepare for what could be an even tougher and longer road out of the recession than anybody expected. While concerns about the possibility of a double-dip recession come and go, it is probably wise to follow the old adage to prepare for the worst and hope for the best.

Here’s what it means to prepare:

Shore up the revenue and find your weak spots

Don’t assume that because you have always received a grant from a particular donor that you will continue to receive one next year.  Reach out to your longtime grant makers, arm them today with real information about the value of your work. Do it now even if your annual report is not due until December. Look for reasons to remind them why your work—and hence their money—is essential.

Listen and try to understand how your grant makers are thinking about this crisis; it affects them, too. Virtually every foundation has gone through a reduction of sorts. Sharing is helpful and builds different kinds of bonds.

Seek out information that can be helpful, which means asking your grant makers and your clients for constructive feedback.

If you are not measuring your results, start now. Don’t worry about being perfect or starting a rigorous 10-year longitudinal study. Push yourself to move beyond the anecdote. Jim Collins, the author of Good to Great and other books, had it right:  “It doesn’t really matter whether you can quantify your results. What matters is that you rigorously assemble evidence—quantitative or qualitative—to track your progress. If the evidence is primarily qualitative, think like a trial lawyer assembling the combined body of evidence. If the evidence is primarily quantitative, then think of yourself as a laboratory scientist assembling and assessing the data. … What matters is not finding the perfect indicator but settling upon a consistent and intelligent method of assessing your output results and then tracking your trajectory with rigor.”

Take advantage of networks you have but don’t use.

Think broadly about your networks. Look at your competitors as comrades-in-arms and find ways to complement and enhance your work through partnership. Don’t just say you’ll collaborate because you’re supposed to.

In my work as a consultant at the Nonprofit Finance Fund I’ve seen just as many high-performing, financially healthy nonprofits during the recession as I saw before the recession, which forces me to ask: What makes some nonprofits able to thrive even in the worst of times?  What these nonprofits have in common is an ingrained habit of timely decision making that constantly strives to balance mission with long-term financial health. These nonprofits have a history of managing to a surplus and building their reserves. When the recession hit, did they access reserves to replace lost revenue? Actually, no! They faced the changes and uncertainty head-on and made decisions that would keep expenses in line with falling revenue. They’ve built their decision-making discipline over time and it proved to be a key factor of their survival. These organizations will survive any number of economic jolts.

One example is the Children’s Museum of Houston which frequently faces a common nonprofit challenge: they are given start-up funds for a program but no commitment of ongoing funding. After the start-up funding dries up, the nonprofit is left with higher annual expenses and no offsetting revenue. The Museum says when it accepts start-up program funds, leadership acknowledges up front that if the funding can’t be maintained the program will be cut.  Then, they hold themselves to this decision. And have they actually had to discontinue programs? Yes. But this also forces them to prioritize fundraising for replacement funds as soon as the program launches because they know there will truly be no tolerance for continuing an unfunded program. It also forces them to be more discerning about what they say “yes” to upfront. Since they know that they will need to allocate finite, valuable fundraising resources to the continuation of the program, they will not accept money to start a new program unless they believe the program is absolutely mission critical. Executive Director Tammie Kahn who says, “We don’t want to burn our resources even if the start-up funding is provided if we can’t find a way to maintain the program over time. By doing so, we launch programs with day in and day out decision making that should make the program ultimately sustainable.”

 How has the Children’s Museum of Houston fared during the recession?