How bad is it going to be?

Another week of remorselessly terrible news. It’s enough to make the most pollyannaish of individuals start to become a bit gloomy.

This isn’t just a health crisis. It is an economic and social crisis of unprecedented scale with stupendous but literally unfathomable consequences.

There is enormous concern in the charity and non-profit sectors about the impact of the crisis on their beneficiaries and their organisations.  There is a developing perfect storm of rising demand for services with falling, perhaps collapsing revenues.  An Institute of Fundraising survey has found responders anticipating a massive 48% fall in income over the next months.  We are hearing of lots of emergency board meetings and increasingly drastic measures being taken as a result, mass furloughing of staff including fundraisers, hiring freezes, cancellation of fundraising activities and more.

So how bad is it really going to be for charities?

What do we know so far? Some fundraising activities are stopped, all kinds of events, face to face recruitment. Charity shops are closed. Legacies will be hit by the stock market crash and a frozen property market (perhaps around 9% down this year according to Legacy Foresight).

But none of this is for ever. Shops will re-open, eventually (and are likely to be deluged with goods form all the houses sorting people are doing now). Cancelled events can be rescheduled. Slowed legacies will eventually come through.

What we don’t know is what the impact on donations, regular and reactive will be. There are some reports of increased cancellation rates of regular gifts but this isn’t a deluge, at least not yet.

None of us know how this thing is going to turn out. We have never been here before. But that doesn’t mean we don’t have relevant knowledge and experience. Fundraising has a long history. There’s data on giving to charities for over 100 years in the US and the UK.  What this tells us is, unsurprisingly, there’s a link between the health of the economy and giving to charity. So in the USA, giving as a percentage of GDP has been around 2% for the last forty years. In boom times it has reached as high as 2.3%, and in recessions it has dipped as low as 1.7%. (UK giving is around 1% of GDP and also hasn’t much changed in the last half century).

But even in the depth of the worst recessions so far experienced, giving has continued. Some donors may stop giving or give less but others continue to donate and some will even give more.  We can already see the same pattern in this crisis. Many philanthropists, companies and foundations are stepping up and appeals by all kinds of organisations, by no means all charities are getting real traction.

We have also the lessons of the 2008-2009 recession. This felt a lot worse at the time than it looks now. There were many charities who, essentially panicked, they cut back activities and reduced fundraising. Others held their nerve. Over a decade later there are still many charities who haven’t recovered from these mistaken decisions.

There aren’t an easy answers for charities grappling with these very difficult decisions in exceptional times but there are some principles to follow that might help in selecting the right path:

  • Mission above all.  All decisions must be driven by the needs of the charity’s beneficiaries. Immediate needs demand response now. But needs are likely to continue beyond the immediate crisis and the organisation has to consider how to meet them.
  • This is the rainy day. Charities hold reserves and sometimes get criticised for it for these exact circumstances. It’s now pouring down.  Use the reserves, all of them, if they are needed but not just to meet demands now but also to ensure that the organisation has a future beyond it.
  • Plan flexibly. In a crisis, it is more important than ever to plan to make sure limited resources can be applied most effectively. But plans have to be super flexible. Have a 1 week plan, a 30 day and a 90 day plan. Adjust continually as more information emerges.
  • Don’t forget the long term. In the crisis, the immediate is all-consuming. But it’s the job of leaders to ensure that the delivery of the mission longer term is protected. There needs to a functioning organisation to achieve that.
  • Don’t stop fundraising. Charities who stop asking for money now can’t need it and shouldn’t be fundraising in the first place.  Donors will give if they are asked properly, in the right time and the right way.
  • Resource fundraising. In a crisis you need good fundraisers more not less. And fundraising cannot operate on hot air. You need quality people with enough resources to be able to create and implement proper donor cultivation and development strategies.  
  • Create hypotheses not assumptions. We don’t know what’s going to happen and there’s a huge danger we will make the wrong calls. So don’t make assumptions about how donors will behave, create hypotheses and test them to see if they hold.
  • Allow for the dynamism of the situation. Today might be the wrong time to ask your key donors for an extra gift, but next week is about a light year away at current time speeds and they might be in an entirely different place by then.
  • Data, data, data. Gather all the information you can and continually update it. Data, not anecdote or fear needs to drive decisions.

And, above all

Don’t panic.

Now is the time of maximum fear and uncertainty, with  whole population under house arrest and going mildly demented. So of course everything looks and feels terrible.

But the lockdown won’t continue for ever. Don’t see some donors stopping or reducing giving and think this will continue indefinitely.

And even if things look really grim, kneejerk decisions aren’t the answer. Get a plan, get hold of those reserves and talk to as many supporters as you can.

And we’ll get through this.

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