Monday, December 22, 2008

Nonprofits: Danger? Opportunity? Or Some of Both?

An economy in peril. State government “unallotting” money budgeted for human services, education, and other purposes. What will happen to nonprofit organizations? What does the future hold for organizations dedicated to the public good?

The Minnesota Council of Nonprofits reported last week:
· about half of nonprofits have seen a decline in total revenues;
· about half have experienced increased expenses;
· just under half have suffered a decline in individual contributions.

Interestingly, MCN reported that both the number of nonprofit employers and the number of nonprofit employment locations in Minnesota declined, while the number of nonprofit jobs increased by nearly 4% from 2006 to 2007. The increase seems to be in health care, since employment in community relief services (e.g., food shelves) and in social advocacy organizations dropped below previous years’ levels. See their report at:

Some evidence suggests that demands for services may have begun to increase as a result of 2008 economic events.

So, what should we do during a year filled with uncertainty, and one in which resources will undoubtedly diminish while demand to meet needs most likely increases? A couple of strategic suggestions appear below.

First, let’s set our sights on what we can reasonably expect, positive and negative, based on what we now know about the economy.

Paul Anton, Chief Economist here at Wilder Research, exhorts us to current economic crisis in perspective. We have not entered another Great Depression. To reach that point, the 1.8 million jobs we saw disappear this year would have to grow to 30 million in the next few years. Nonetheless, many indicators of economic health have declined and show no prospect of rebounding for at least a year.

Paul sees hopeful signs because Obama’s economic advisors recognize the need to inject the right amount of Federal stimulus into state economies and because we’ve become intelligent enough as a nation not to repeat the huge policy mistakes of the past. That is, we know it makes no sense to fight the forces of globalization and restrict the sale of foreign goods in the U.S. (as we did through the Hoot Smalley Act in response to the 1929 stock market crash, with the result that we created a trade war which probably turned a bad recession into the Great Depression). We also have a Federal Reserve which will seek to support banks, not drive them out of business.

We will most likely need to survive at least a year of bad economic times. We should develop contingency plans based on neither too much optimism nor too much pessimism, but we should not focus exclusively on those plans. We must more than ever before keep our eyes on our missions and ask how to accomplish those missions in a time of increasing need and declining resources – which leads me to my second point.

Second, let’s seize the opportunity to become more efficient and more effective and to use new tools to accomplish our goals.

We never have “good economic times” in our nonprofit work. Needs always exceed the capacity to accomplish goals and deliver services. However, during normal times (however you define them), we can become complacent. We tolerate inefficiency. We feel some desire to innovate, but can encounter difficulty when attempting to create the momentum for change.

So, perhaps 2009, and the uncertain economic climate, can call us to new leadership – to do what we do in new ways, more efficiently, and more effectively. Perhaps the incentive for change will be apparent. Nonprofit organizations have an opportunity, like never before, to re-organize and re-energize.

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