Changing and Challenging Times
The situation is fluid. Things are changing minute by minute; but our hope, as you are reading this, is that you, your staff, your family and your organization are healthy, as we are all doing our best to persevere during this situation. The health, humanitarian and economic crisis brought on by the COVID-19 virus has induced uncertainty, fear and, in some instances, panic. (Try buying paper towels or toilet paper!) As Mohamed El-Arian, chief economic adviser at Allianz SE and president-elect of Queens’ College, Cambridge, noted in a recent Bloomberg opinion piece, the coronavirus shock has “triggered unprecedented economic sudden stops.” The economy is clearly worsening, with many economists saying a recession is already with us. The stock market has entered bear territory, the only question being how low it will go. The average decline in a bear market is roughly 30% and the Great Recession saw a roughly 50% decline. While not in the fetal position (in contrast to the Great Recession), many business leaders and investors are clearly pausing to consider how best to act.
Lessons from the Past
The impact of these economic headwinds and market turbulence on giving is yet to be fully understood or realized. That having been said, we do know from previous recessions that giving can dip. So, before offering some recommendations about what we can do, let’s take a minute to consider history.
First, let’s look at what happened in 1973-75, when we were in a serious recession, coupled with inflation that was raging. Giving in total dollars in that period was relatively even in terms of current dollars, but declined by approximately 10% in inflation-adjusted dollars in both 1974 and 1975, remembering that inflation was 12.3% in ’74 and 6.9% in ’75.
Second, let’s look at how giving was affected in the Great Recession. According to Giving USA, giving in 2007 totaled $311.06 billion-the apex. In 2008, giving fell to $299.61 billion and in 2009 to $274.78 billion, the nadir, representing an 11.66% decline. Giving in the following years increased and, in 2012 reached $332.61 billion, finally eclipsing the previous 2007 high.
While no one knows with any precision what will happen in this instance, let’s just say that we see a 10% decline in giving for 2020-maybe not this fiscal year (which is roughly 3/4ths of the way over), but in FY ’21. Let’s also use 2018 (the most recent year for which we have Giving USA information) as the base line for that decline. According to the data, in 2018, giving stood at $427.71 billion-another record year, by the way. A 10% decline would reduce giving in FY ’21 by roughly $42.7 billion to $384.94 billion. That is still at a level higher than pre-recession 2007. Let’s say for argument’s sake that we saw a 20% drop in giving-something unprecedented and something I do not believe will happen. That would decrease giving to roughly $342.17 billion. That would be a substantial drop-off. That having been said, it would still mean that giving was nearly 25% above the 2009 bottom level.
In short-even a substantial decrease in giving would still leave a very substantial amount that would be contributed. Ask yourself this: Has the importance or relevance of the work of your organization decreased because of what we are experiencing? Has the importance of your plans to do that work even better somehow lessened? I suspect the answer to both is, “No.” Donors will still give because they know the importance of the work of our institutions to individuals, communities large and small, the world’s economy, and the overall quality of life that we enjoy.
However, one thing that is different about this situation is the loss of earned revenue. It is particularly evident for the arts and cultural organizations that are closing their doors and cancelling performances. These closures are resulting in loss of ticket sales, concessions and gift shop revenue.
Some Actions to Take Now
- Don’t assume: It would be the easiest thing to say, “suspend solicitations.” It would also be wrong. While we can assume that current conditions may make people more reluctant to give, we can’t say that is true in any specific instance. (If it were, how would one account for the massive amount of money that continued to be given during and on the heels of the Great Recession?) You may well have a new set of needs right now because of what has happened-and you likely have some donors who would be willing to help meet that real and pressing need. Further, you may well be far down the road in discussing a gift with a major prospect. If so, a conversation with that prospect recounting the conversations to date about the gift, that prospect’s interest in the project, and a genuine question regarding the appropriateness of continuing or suspending (for a time) the conversation, would be entirely appropriate. In short, you are not deciding for the prospect based upon what you assume.
- Consider developing appropriate content: You may well want to consider a Q&A with the CEO. How about getting a staff member or two to do something of general interest? Possibly have a board member who is also a financial advisor do a session on what to do and what not to do in times like these-making sure that she/he doesn’t try to solicit business! In short, you may well have sources of interesting and/or relevant information that you could offer.
- Stay positive: Think of all the events we have faced over time and have overcome. How about the Great Depression, World War II, stagflation, 9-11, or the Great Recession? Think of the immense value of what our not-for-profit institutions do. Let’s remind ourselves of the important work we do in service to our communities and constituents to make them stronger. In doing that, not only do our institutions benefit, but those who are giving of their time, talent and treasure also benefit. They are doing something for others and in so doing enhancing and enriching their own lives. And we get to play a role in that.
- Communicate externally: It may not be the best time to solicit a prospect, given the uncertainty around health, the economy, and markets, but it is always a good time to touch base with your donors and your prospects. And, given that most staff are being discouraged, and in most instances restricted, from traveling, this is a very good time for them to draw-up their list of donors (outright, planned, LAF-any/all) and begin contacting them just to check-in-see how they are doing, let them know you are concerned about them. Let them know how much you value and appreciate them and be ready to bring them updates on what is going on at the organization and how best to keep abreast of what is going on. That said, the focus should be on them. Calls are certainly in order, but emails and notes can also work, particularly for those who need to be contacted, but who may not rise as high on the priority list.
- Communicate internally: It will be critical that you determine and disseminate among staff-particularly those who work directly with external constituents (DOs, Alumni Relations, for example)-the key messages to be conveyed. This will consist of what you know, what you are in the process of determining, and what you don’t yet know, as it relates to the institution and your delivery of services. This message should be consistent with the institution’s message but is likely to be more nuanced. It will be important for everyone to be singing the same song when talking with your constituents, and that requires an intentional formal effort. Given how rapidly the landscape is changing, regular communication “meetings” should be held. Gather what you are hearing from your constituents. Synthesize that information. And, on the basis of that and what you are hearing internally, modify what you want and need to convey.
Are we facing some significant challenges? It appears that we are. But I suspect that you entered the development profession not because it would be easy, but because the work is meaningful. You believe strengthening our organizations is worth investing your life’s work in. That belief is well justified. You know it. And your donors know it as well. If they can’t give now, they will later. If they can’t give as much, they will give some. And when the uncertainty and fear that is gripping so many subsides, we can have confidence that they will once again choose to direct significant portions of their philanthropic support to our not-for-profit organizations.
Best regards and health,
David H. King
President & CEO