Veldon Law: Giving in Challenging Times

Though there has been an increase in the “Dow,” there are many that continue to portray economic doom and gloom. With the needs of non-profits as great as or even greater than ever before due to the economic and employment crisis, what is the board and leadership to think and do when they receive requests for philanthropic support?

Many in leadership are rightfully torn between recognizing and giving to the need, the internal difficulty of just having laid-off staff, having fewer dollars for operations and thus having less, if anything to give. These are real dilemmas and give leadership pause as to whether or not to move forward with giving during a time when they have concerns about the current and future economic climate and for some, survival.

Research on giving provides some interesting perspectives and hope to requesting organizations, if the current situation mirrors the past. Two separate studies by the Center on Philanthropy at Indiana University have recently been conducted: 1) giving during and following a crisis; and 2) giving during economic recessions. These studies provide information on the percentage of change in the stock market and on philanthropy in the United States. Findings include the following:

• With 4 exceptions, there was a conspicuous drop in the stock market within 30 days after a crisis.
• With 3 exceptions, the market recovered (within 1% or more) within 1 year.
• Despite crises, giving in each of the past 54 years has increased every year except 1.
• Each year, Americans have given more than the year before.
• Rates of market growth have varied.
• With 3 exceptions, giving in the calendar year after the crisis grew at a faster rate than it had during the calendar year before the event.
• Despite crises over the last 40 years, giving has grown at an average annual rate of 8.4% in current dollars.
• During past recessions, giving has grown at a rate of 6.2% in current dollars.

Below are other thoughts, research, and sources of information on giving during times of economic turmoil.

Article by Ray Clements, CG’s CEO and Managing Member, on economic crises, community colleges, and donor reactions.

Article by the Sharpe Group on giving during the great depression, fundraising in the current environment, and giving during economic downturns.

Article by Effective Philanthropy indicating that in a time of economic crisis and political change, isolation is not an option.

A variety of studies on The Foundation Center’s website on foundation giving in times of economic stress.

Article by the Association of Fundraising Professionals on facing the economy with a sharp focus and solid strategy.

Article by Kathryn Masterson published in The Chronicle of Higher Education (September 26, 2008): “Fund Raisers Keep a Close Eye on Financial Markets’ Movement.”

Article by David Shieh published in The Chronicle of Higher Education, (January 9, 2009): “Despite Downturn, Some Colleges Continue to Receive Major Gifts.”

Organizational leadership has numerous issues to consider as they “invest” shrinking philanthropic dollars. Many are now focused on the ROI of the gift. Wise requesting organizations must illustrate, in very concrete terms, the benefit the gift will provide to the organization, to the organization’s customer and/or market base, and/or how the gift assists the organization in branding itself with its client and market base.

Best Practices Tips:

1. Organizational leaders should question and learn the results of the requesting organization’s feasibility study.
2. Organizational leaders should learn who the requesting organization’s potential donors are and what they say about the proposed project.
3. Organizational leaders should learn who will lead the requesting organization's potential campaign project.
4. Organizational leaders should question other potential donor’s interest and thoughts on the project.
5. Before making a giving decision, organizational leaders ought to consider the following key questions: a) Is our organization’s mission and giving objectives in alignment with the requesting organization?  b) Can the requesting organization complete their proposed project successfully – can they get the fiscal support, right leadership, volunteers, complete the project under the projected timeline, etc.?  c) Does the requesting organization really need our assistance?  d) Is the “internal climate” right to provide the gift?   e) Is the “external climate” right to provide the gift?  f) How will the gift impact our organization’s operation, survival, success?  g) What is the ROI for our organization; customer, market base?  h) How does the gift brand our organization to our market base?  i) Does the gift set a precedent we wish to avoid?