How should a nonprofit deal with the economic downturn?

Now that’s a million dollar question that we would all like the answer for wouldn’t we? The problem is this question is as elusive and subjective as asking a Wall Street professional when will we “hit the bottom”.

They talk about “capitulation” and “testing the bottom” and the elusive “we could certainly see continued volatility for the next 2-3 quarters in 2009″.

No matter how you slice it no one has the answer – not even Warren Buffet or Congress or Barack Obama or your local stock broker. It’s anyone’s guess. The inexperienced have just as much chance as being right as the experienced. Why? Because we are in totally uncharted territory – both locally, nationally, and globally.

The same holds true for the nonprofit sector. No one has the answer if the economy will adversely affect your individual nonprofit organization or not. There are simply too many variables and too many unknowns.

So with that being said we must not panic.

The sure signs of panic include: laying off dedicated and knowledgeable employees; stopping fundraising activities, cutting back on donor recognition tactics, not sleeping at night, yelling and screaming and pulling your hair out. None of these are good and none will bring you an increase in funds.

What we need to do is remain calm and take a step back. Get up above the tree-top so we can evaluate the situation and make intelligent decisions based on accurate data – not feelings and certainly not fear.

My six point plan would look like this:

  1. Cut costs where possible because if there is fat in the operation this is the time to look for it and cut it out. But you can never cut into revenue generating expenses nor can you cut into stewardship related costs.
  2. Maintain or increase stewardship initiatives because this will ensure that you retain your best supporters and will reinforce the behavior of those that are willing to see you through the hard times. These are your advocates that cannot be thrown to the curb. Thank them and re-thank them often. You can’t go overboard with recognition and affirmation.
  3. Strengthen the relationships with your BEST supporters by continuing the communication process with them at the same levels as before the downturn. This is not the area to skimp. Make the right investment with the right group and your best supporters is certainly the right group…
  4. Reduce your communication with the least profitable donors because you will not see a positive return on this investment. Don’t worry about alienating them. You won’t. You can send them a few mailings or other communication during the downturn just to stay connected but remember you can always reestablish the relationship once the economy picks up at which time they are more likely to support you.
  5. Do not stop acquisition programs otherwise you will die a slow and painful death. But you should look closely at the acquisition programs you have in place by conducting a comprehensive analytical study. Be smarter about how you acquire donors but don’t stop.
  6. And lastly, you must find ways to keep an upbeat staff and office environment. Build a team spirit and encourage out-of-the box innovative thinking. You don’t need to sit around and sing kumbaya but you can certainly find ways to lock arms and build a strong fortress around your organization that can and will survive the downturn – regardless of how long it lasts.

Good luck. And call me if you want to discuss anything.