Cultivate, Solicit and Appreciate. Repeat

The news has dominated by the coronavirus and what to do about it.  Allow me to offer up a spin on this global crisis, unique to nonprofits.

My message isn’t one of hopelessness, but rather pertains to best practices that should be followed at all times, especially in times of uncertainly like we are currently experiencing. 

It is a message of preparedness, something too few nonprofits do as they tend to be reactive rather than proactive.  To the extent any organization can be proactive, it will be a stronger, better organization.

In 2009, a year into what hadn’t yet been named the Great Recession, The Nonprofit Center conducted research to see how nonprofits in our region were faring.  We asked lots of questions, but one particular response has stayed with me.

We asked what action(s) that board taken in the past year, and gave a number of response options, along with the option to add their own responses.  One choice was the smart and sound act of reviewing the organization’s investment policy.  Of the hundreds of respondents, only 4% indicated that the board had reviewed its investment policy and assessed its investments.  What were 96% of the rest of the boards thinking, because I can pretty much guarantee that less than 4% of board members had any idea of what that policy said?   What was the level of risk tolerance, what were the goals for their investments, where and how were they allowed to invest, how were they allowed to spend money from their investments, when were they supposed to divest, hold or buy, etc.? 

Don’t make the same mistake the 96% made this time around:  pull out that investment policy and give it a thorough examination.  But don’t do it in isolation.  Look at in conjunction with your endowment policy (if you have an endowment), your reserve policy (if you have that and, if you don’t, create one), your spend policy (if separate from the investment policy), and your immediate and ongoing needs.

In light of what is going on with the stock market, the predictions of a recession in 2021, do you need to make any adjustments?  As an example, if your endowment policy allows you to spend annually some of the interest generated, is that money designated for certain budget lines? For unexpected expenses? For icing or for cake?  If it is designated for cake, then certain decisions may need to be made that may well be different if it is there to use for icing. 

We are told again and again by investment experts that investing in the stock market is for the long view, if your investment policy and needs are all about the long view, you’ve got no worries – the market will return.  (And, if you have a good investment advisor, you have a mixed portfolio, so you likely have nothing to worry about, anyway.)  But if you don’t know what your policy says and/or your stances aren’t all about the long view, you have some work to do now.

Sticking with the market and the possibility of a recession, know how your foundation donors calculate their 5% mandatory spend.  Which funders calculate the 5% on a multi-year rolling average and which go year by year.  Clearly, those who use make the determination year by year will feel the impact immediately, meaning you could feel the impact immediately, and they should recover immediately.  Those who choose the multi-year option will be slower to see the impact and, of course, recover more slowly.  You need to take this into consideration as you plan your financial position for the next several years.

Continuing on the topic of donors, value your individual donors.  If this isn’t already part of your ongoing development program, now would be a great time to step up this game.  During the Great Recession, data were very clear that the sector lost more organizational donors than we did individual donors.  Estimates were that only 25% of individual donors who gave in the past stopped giving during that time frame.  The remaining 3/4 stayed the philanthropic course.  Some even stepped up their giving, while others held it flat and the smallest percentage gave less as the times got tighter.

There are several fundamental mantras of individual giving that too many nonprofits let fall by the wayside when times are good.  They are:  appreciate every donor no matter how small the gift; you don’t get what you don’t ask for; and, related to that, don’t ever answer for anyone.  If you haven’t been living by these mantras, start doing so now.  Don’t repeat the mistake that so many made the last time the economy tanked:  cultivate, solicit and appreciate.

It is pretty certain that we are going to hit some rough economic times in the near future.  Plan your communication strategy now, rather than waiting until you are in the throes of the situation. 

What will you say to worried staff?  What are the messages that you want to share with clients,  clients, partners and collaborators, donors, your community?  You want to assure everyone that the organization has things under control and is prepared for and, thus, able to weather the storm.  Will you share what you’ve already got in place? Your strategies for going forward?  Your fears and concerns?  Or will you “fake it ‘till you make it,” and paint a rosy picture?

Let me introduce a caution here.  It has been decades since another mantra was introduced into our sector:  accountability and transparency.  Every nonprofit walks an ever-so-thin balance beam in times of financial crisis, as we struggle to be honest about the situation while remaining hopeful about our future.  Getting that messaging down is best done with a clear, unpressured mind.

But you’ve been smart, right?  In the last quarter plus of 2019 there was a lot of talk that there would be a recession by mid-year in 2020; then that prediction was moved to 2021.  That, was, of course, before the coronavirus.  Regardless of the impetus, though, we’ve known it was coming sooner rather than later.  In fact, we knew it as soon as the last one was over, we just didn’t know when.  That is, after all, the nature of our economy.  So, you are prepared; you learned your lessons from the Great Recession, and you’ve adapted and changed.

No?  Then follow this advice and start preparing now for when it happens, regardless of when that is.  Because with a recession, sadly, there will always be a next time.