Nonprofit leaders in the United States and around the world are grappling with the possibility of a looming recession. With plummeting consumer confidence, near-record inflation, and rising interest rates from the Federal Reserve, there is good reason to be concerned. However, with proper planning and strategy, the situation for your nonprofit need not be dire.
We’ve received a number of questions from clients and other fundraisers about how they should be preparing if indeed the economy is headed for a recession. We have compiled some of the most common questions and our answers below.
How should I talk to my donors about the recession?
As fundraisers, assumptions are our enemy. Back in 2017 when the Tax Cuts and Jobs Act passed, many fundraisers assumed that donors would stop giving when tax treatment of philanthropic gifts changed. However, at the time, the US Trust Study of HNW donors found that only 12% intended to decrease their giving in response to the new tax law.
No two donors share precisely the same set of motivations or economic circumstances. Rather than guess at what a potential recession may mean for a donor, ask these four questions to better understand their thinking:
- What impact do you hope to achieve through your giving?
- Are there specific projects that are of interest to you?
- At what level do you envision supporting [echo the intended outcome the prospect just shared with you; remember, they are giving to the outcome, not just to your organization]?
- Do you have specific timing and/or gift vehicles in mind?
Our gift officers have navigated uncertainty for years and now they’re facing even more. I can tell that they’re fatigued. How do we keep their productivity on pace and with continued goals alignment?
To perform at their highest levels, your gift officers need to know what is expected of them (i.e., goals) and how they’ll know if they are achieving it (i.e., metrics). Conversations about goals and metrics must be intentional and regular to ensure mission fulfillment and organizational growth.
But beyond that, your team members need to know how they, themselves, can grow. Have career conversations early and often with your fundraisers. Carefully examine where employees are thriving and where they are missing the mark, looking for opportunities where they can do more work in areas where they excel.
They need to feel professionally fulfilled, which means that there must be pathways for career growth within your organization, and those pathways must be clearly articulated and equally and thoughtfully applied.
Lastly, address fatigue by promoting (and modeling) flexibility. Don’t demand gift officers be back at their desks by 9 a.m. after working a weekend or after-hours fundraising event. Offer your employees the option to work remotely, at least part of the time, so that they have the flexibility to achieve a work-life balance that can ultimately improve their performance.
Costs are increasing in our organization. How can we best communicate our funding needs to donors at this time?
In just a few words: impact and engagement. With high gift officer turnover and fewer events due to the pandemic, many donors feel abandoned right now. There’s an opportunity to be the nonprofit that is showing up for your donors.
Talk to donors about the impacts of their giving in the world or in your community. If your case for support does not communicate this, now is the time to rethink your case, because for donors, giving is less about keeping your organization’s lights on and more about supporting work that has tangible outcomes.
Talking with donors about how they can help make those outcomes possible creates engagement and buy-in, and such conversations provide them the opportunity to work through your organization to meet their own philanthropic goals.
Chief Creative Officer
What will a recession mean for donor giving? What will the rest of the year look like and should I freak out?
Let’s look at past recessions and dips in the market. In 2008, the S&P fell 38%. While giving did fall too, it only fell by 7%.
The moral of the story is that philanthropic giving does, indeed, rise and fall alongside economic drivers but by a smaller order of magnitude. Why? Because what we must always account for is donor motivation.
Donors are not only motivated to give based on their liquid wealth or lack thereof at any given moment in time. They are also motivated by the desire to make an impact through their investments. That’s why the ability of an organization to show its impact is critical.
What’s more, we cannot assume we fully know an individual donor’s circumstances, so having transparent, respectful conversations with donors about their own personal “whys” and “hows” makes all the difference.
We were starting to think about planning for a campaign. Should we put that on hold now? Our board chair says we should wait.
Now is not the time to slow down. Our experience over the course of the pandemic showed us that organizations that moved forward with their fundraising initiatives, including campaigns, met with great success, while those organizations that paused are still working to regain lost ground.
That is not to say that you shouldn’t use your own emotional intelligence – especially when dealing with major gift donors – but you should not make assumptions about a donor’s willingness to give nor should you apply full stop pauses to all fundraising programs. In past recessions or times of uncertainty, giving typically stayed flat or only dipped a fraction of what the market experienced. It is a fundraiser’s job to continue asking.
Campaigns typically last between five and seven years, so a dip in the market or other economic volatility is highly likely during that timeframe, regardless of when you launch. Think long term and use this opportunity to build strong, long-lasting relationships with donors, and don’t default to pausing your fundraising programs just because a recession is possible.
Your mission is no less important in tough times and, in fact, is probably more so. How are the outcomes you intend to achieve relevant to the world today? How are you contributing to the greater good? If you can answer those questions in good economic times and bad, there will be donors who are willing to step forward.
How do we manage donor relations amidst this uncertainty when we are down a team member (or many team members)?
The “Great Resignation” has created unforeseen challenges for many organizations. Our teams are often short-staffed and overworked, and those challenges may feel insurmountable.
So how do we make meaningful progress with fewer staff members? Consider how the addition of resources such as transitional staffing can fill the gap. Transitional leaders fill an urgent need and bring fresh eyes to your work at a time when re-engaging with donors is so important.