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What's to Come for Nonprofits?

Posted At: March 23, 2009 12:57 PM
by Melinda Williams

Credit cards are maxed out, the stock market has plummeted and the unemployment rate is rising. The current economic situation creates a problem for nonprofits. They are needed more, but they have less resources to give. According to the National Council of Nonprofits, “93.6 percent of all nonprofits have budgets of under $1 million.” The economy isn’t going to improve soon so the nonprofit industry will have to make changes to be successful.

Paul Light describes four scenarios for the industry in his article, “Four Futures.”The first unlikely situation is Americans will be generous and continue to give, even though they don’t have as much money. According to a study in the Jan. 15, 2009, edition of The Economist, image is a primary motivation in giving to charitable organizations. People tend to give more when others know about their contribution. Even if Americans continue to give, the decrease in government funding can’t be made up for by individual donations.

The second scenario is the whole industry suffering. In this scenario, all sizes of nonprofits will suffer pay freezes and layoffs and will trim down to the bare minimum. Lifespan, a healthcare system in Rhode Island and New England, just announced a pay freeze for all employees. The Direct Marketing Association has had two rounds of layoffs in the last six months.

In the third scenario, the most visible organizations will survive and the industry will be left with fewer, but larger organizations. Donor contributions are already unbalanced. According to Giving USA’s 2008 report, religious organizations receive the largest amount of donations: $102.32 billion or 33.4%. The report states the rest are as follows:

  • Education, $43.32 billion, 12.1%
  • Human services, $29.64 billion, 9.7%
  • Health, $23.15 billion, 7.6%
  • Public-society benefit (United Way, etc.), $22.65 billion, 7.4%
  • Arts, culture and humanities, $13.67 billion, 4.5%
  • International affairs, $13.22 billion, 4.3%
  • Environment and animals, $6.96 billion, 2.3%
  • Foundations, $27.73 billion, 9.1%
  • Unallocated giving, $23.67, 7.7%

The healthcare industry hasn’t been affected by the recession as much as other industries. Garland Stansell, the chief communications officer of Children’s Hospital of Alabama, said, “During tough times, adults may not take care of their own healthcare needs, but will generally ensure that their children’s health is seen after.”

The healthcare industry also receives government support, but Children’s still relies on donor contributions. Stansell said, “Children’s historically receives generous community support. We have been in the midst of a $100 million capital campaign for the past 16 months or so. Philanthropy typically makes up approximately two-three percent of our net patient revenue. Community support is extremely important to a not-for-profit Children’s Hospital such as ours, to be able to provide extra services beyond the clinical care.”

The last scenario involves all nonprofits coming together and reinventing the individual organization. This situation allows all stakeholders to collaborate and establish more efficient ways to run their organization and industry.

Fundraising Success magazine gives five tips for nonprofits to stay afloat:

  • Run your organization like it’s a for-profit. Managing a nonprofit is almost identical to managing a for-profit. Money has to be raised, budgets are planned and employees are hired and trained. But nonprofits should operate with complete transparency.
  • Honor your donors. Let your donors know how much they are appreciated.
  • Think inventively. Be creative in ways to spend donor’s money. It could make them more likely to give.
  • Vary your fundraising efforts. Have more than one creative fundraising effort.
  • Be meticulous. Make sure to spell donors’ names right. A misspelled name could cost a donation.
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