Coming to the Table: Web-Only Edition
Philanthropy thought leaders continue a discussion about opportunities and challenges in trying economic times and beyond.
As the economic recession wears on, many nonprofits struggle to keep their doors open and increase their impact. To help, the Center on Philanthropy convened a roundtable of key nonprofit sector leaders to gain their insights on tough questions nonprofits face now and look to the future. Roundtable participants joined the conversation from their desktops, participating in an online forum hosted by Center executive director Patrick M. Rooney.
These thought leaders came to the table to discuss a broad range of questions, from the skills nonprofit professionals need to rise to new challenges to the changing expectations of donors and grantmakers. We present a portion of the discussion here; you can find more in the PDF of the Spring 2009 print edition of Philanthropy Matters.
Patrick M. Rooney: What are the most important questions for nonprofit professionals, boards, and donors to ask themselves right now? What should they keep in mind?
Cary Grace: Questions asked by donors in this environment should include: “How can I make an impact? Should I continue giving to causes I’ve always given to or should I look to give more where need may be greater?” If unable to give as much financially as in previous years, donors should consider how else they may be able to lend a hand, through volunteering, board membership, or other means such as simply being an advocate for an organization or cause by discussing it with their personal networks.
[Nonprofits are] competing for a shrinking pool of gifts, and it’s critical that nonprofits recognize the factors that can cause donors to stop giving, and develop strategies for stemming the outflow. Donors need to feel that they have a personal stake in helping organizations achieve their missions; a lack of “personal connection” was cited in a recent Bank of America study of high net-worth philanthropy as the leading reason why donors stopped giving to one or more charities.
Del Martin: Nonprofit professionals: “Am I keeping in touch with my organization’s donors and telling our story accurately?”
Board members: “Have I given my annual gift yet, and can I give more this year? Who can I ask to join me in supporting this organization financially?”
Donors: “How can I keep my philanthropic support steady?”
Irv Katz: “What business are we in and what is our economic model?” It is always valuable to step back from time to time to assess if the mission of an organization remains valid, if activities and resources are aligned with the mission, all of that. But assessing whether an organization’s methods of generating resources are sustainable and contribute to growth for the long term seems less commonly practiced.
I have become increasingly convinced over the years that we can and should adopt business practices that reduce overhead and adopt appropriate and diverse revenue streams that we can influence by our own actions, including earned income.
Howard W. Buffett: I think one of the chief questions everyone needs to keep in mind, regardless of their role, is how to continually refine their approach so that more can be done with less. Seeking true leverage (not just conveniently using the buzzword), looking for meaningful and productive partnerships, and reducing inefficiency need to be paramount.
Art Taylor: Nonprofit leaders of some organizations should gauge the necessity of their actions in response to the down economy. Surely, some retrenchment is necessary. However, it’s important to understand the distinction between cutting back to be able to move forward in the future and just cutting.
Investments in interventions/solutions should not suffer for the sake of maintaining a fund balance when 1) the cost associated with the unresolved problem is higher, or 2) the same intervention/solution will cost more when the economy turns around.
To do otherwise would be to operate out of a fear of the unknown that softens a nonprofit’s innovative edge for tackling tough, intractable problems.
Patrick M. Rooney: What are the most important skills for nonprofit professionals to acquire or hone during this economic downturn?
Del Martin: Without a doubt, the skills of communication and fundraising are most important during this challenging time!
Howard W. Buffett: I am going to disagree in part with Del here, and argue that innovative, out-of-the-box thinking—new ways of approaching old problems—and the skills necessary to find the political will to redesign or close down programs that are not proven to work are more important than fundraising. In short, cutting costs from programs that are being run inefficiently or redesigning programs that could be run more efficiently (i.e., doing more with less) is vital in today’s economic climate.
Cary Grace: Good leadership is required to enable a nonprofit to steer both through and out of this rough patch. Maintaining a dual focus—on the immediate and critical challenges of today, and at the same time on the long-term vision and ambition of the organization—is essential. Good leadership can create opportunity out of today’s challenges by identifying priorities, reaffirming core values, enabling capacity building, retaining key resources, and engaging in strategic planning and investment management.
Effective communication with donors and stakeholders on all of these aspects of organizational thinking and functioning is critical.
Irv Katz: Given the times and the topic of this forum, nonprofit economics has to top the list in terms of something we need to study and learn more about, and effectively financing a nonprofit enterprise, which would vary with the type of enterprise, tops the list of must-have expertise and skills. We’re not charity anymore. We’re not philanthropies. We’re nonprofit enterprises, with links to and relationships with other sectors, and we require economic sophistication and financial acumen specific to the nature of the nonprofit enterprise in which we are engaged.
Art Taylor: It’s not a skill, but more a trait: courage!
Patrick M. Rooney: How do you think the proposed changes in personal income tax rates and charitable deductions for high-income taxpayers will affect philanthropy? How large or small do you think the impact will be and why?
Del Martin: My general optimism about the generosity of America’s philanthropists has me feeling that the negative impact on giving (of which I think there will be some) will not be too much.
Cary Grace: It has often been said that tax incentives may get a donor in the door but won’t keep her in the room. Studies have consistently revealed that tax incentives are not a sufficiently significant motivation for donors to give or to cease to give. Issues of wealth, income, and the financial security/insecurity resulting from them are more indicative of giving levels.
Results from the 2008 Bank of America Study of High Net-Worth Philanthropy indicate that slightly over half of wealthy households would not change their contributions even if they received zero income tax deductions for their giving. And, it is important to point out, there is a significant difference between receiving “zero deductions” and reducing the maximum deduction rate by 7 percent for the “wealthy,” as the Obama Administration proposes.
Steve Gunderson: While we don’t expect the president’s proposal for caps on itemized deductions for charitable contributions to become law, I think this is an important time for this sector to look forward. And we should look forward with optimism and prepare accordingly.
Most recognize and accept that the markets will recover before other elements of our economy. Most project that by late 2009 and into 2010 we will see a growing market, even if at rates far less than the boom years of the past. Second, within the next two years we can expect many of the [Obama] Administration’s proposals for tax reform to become law. Certainly the marginal rates will increase. We will see a new permanent law for inheritance taxes. Finally, our population will continue to age. Combine these events and one must be prepared for new philanthropic growth within the next two to three years. While addressing the critical needs of today, we must also prepare for this new wave of potential growth in philanthropy tomorrow.
Howard W. Buffett: I actually perceive the action of proposing changes in deduction rules as a generally positive thing, but not because of the actual content of the proposal. I find that this proposal has galvanized a great deal of debate on a subject that really needs some attention: the 501(c)(3) tax code. Not to my knowledge has the (c)(3) tax code gained as much public attention in the past few decades as it has in the past few months, to the extent that the president has been responding to numerous inquiries about his intent, the future of his proposed changes, and the merits of current tax structures, which have been in place longer than I have been alive.
Regardless of the outcome of this specific issue, I simply draw attention to this fact because it is far too easy to become bogged down in the minutiae of debate over the topic, and to lose sight of the fact that just having this debate is an extremely positive thing.
Patrick M. Rooney: How are donors’ and grantmakers’ expectations changing? How are those expectations changing the way that nonprofits operate?
Del Martin: I was privileged recently to be part of an informal discussion of some grantmakers in a large urban community, and it was obvious that they were very concerned about the nonprofits in the community. They are hoping that the current economy will force nonprofits to look closely at their internal operations for ways to increase efficiency. They are hoping for collaboration. And they are expecting boards to step up.
Cary Grace: Today’s grantmakers are more sophisticated. They are more proactive and more inquisitive. They have a greater desire for transparency and meaningful communication regarding their donations. They have greater expectations for return on their social investment, including everything from measurable impact on the issues or organizations that they fund to personal and familial fulfillment.
Nonprofits are finding new and creative ways to engage these donors in the furtherance of their missions—whether through more meaningful communication, the development of metrics to measure impact, or the creation of more volunteer opportunities. Successful nonprofits are also becoming more accountable and transparent around their business practices.
Howard W. Buffett: I would like to draw attention to October 2006 research by Independent Sector—a survey of nearly 2,200 volunteers and donors, asking what they perceive as the most important traits or issues in the nonprofit sector, and asking how well nonprofits are acting on those issues. The two most important but least well-perceived/well-performed issues were “accountability” and “efficiency.” This is extremely telling, and indicates that these traits need to be better performed, need to be better communicated, or both, and that demand for more efficiency and accountability will only continue to rise.
Irv Katz: Many foundations are part of a community and we are all influenced by the communities in which we operate, but I don’t envision a change in expectations as a result of current economic conditions. Diverse expectations of individual donors and individual foundations and individual nonprofit organizations will continue to reign, albeit in a context of increased sophistication and accountability that was evolving anyway and that I expect will continue.
More Info
The conversation continues. For more insights from the roundtable participants, see the PDF of the Spring 2009 print edition of Philanthropy Matters.
