A Hearty Warning That A Second And Perhaps Worse Economic Collapse Looms, Nonprofits

On Wednesday I received an e-mail from Rachel Katz, Analyst for Global Philanthropy encouraging me to write my blog post this week about the current economic climate, especially given that economist Nouriel Roubini (who was one of not many economists that correctly forecasted the 2007 economic collapse) just this week warned in an interview with Bloomberg that a second and perhaps worse economic collapse is looming now if the world economies do not break up and reform the banking, investing, and other financial industries.  He is concerned that since no real action has been done yet to the financial industries, given the world economic collapse; to keep what caused the 2005 collapse from happening again; and because Europe's economy is tenuous right now; and because America's economy is recovering slowly and mildly - not enough has yet been done to avoid another now potential second collapse.  Roubini's concern is world governments won't have enough resources, if another (and if larger) collapse occurs to either stave it off or rebound from it easily.

I read an article that Global Philanthropy's President, Trevor Neilson, wrote for The Huffington Post, this week, What Roubini Just Said and Why Those Who Work in Philanthropy Should Listen.  His article is the reason that Ms. Katz requested that I consider blogging on the world economy.

Despite Ms. Katz's e-mail (simply letting me know about the article and requesting that I blog about the topic as their office finds Mr. Roubini's warning so compelling) I was not going to blog on this topic but two things changed my mind.  First, I have seen Roubini speak as a guest on The Charlie Rose Show (PBS) and his arguments are logical and compelling.  He is not a politician, nor a mouthpiece for one party's ideologies or another.  Second, as this blog exists solely to assist nonprofits (which by virtue of their business model have few resources at their disposal) a warning (even one that might be hasty and unwarranted, in the end) can be prudent if not perhaps ultimately vital.

So, with a healthy dose of open-mindedness, faith, and balance (check out other reputable, credentialed, seasoned economists forecasts; and other reputable and trust-worthy sources for their opinion on the current economy and its potential), I ask you to please consider the following.

Ms. Katz stated in her e-mail, "We believe that now is a crucial moment for nonprofits to be prepared to weather the storm, particularly as social services continue to be cut at the very time they are needed most."

In his article for The Huffington Post (link, above), Neilson wrote, " And at the very same time, in response to the financial crisis, decreased tax revenues and massive budget deficits, social services are under siege." after describing the still churning foreclosure monster, slow job recovery, and the unemployment rate in America. He then recommends three things that nonprofits can do, now - to stave off being harmed by a second economic collapse. His second and third recommendations are excellent.  He says at the end of his article, "Let's hope that Roubini is wrong...".

Here are my thoughts:

I do not know whether Mr. Roubini's warning is on track, premature and unwarranted yet, or just foolhardy.  I agree with Neilson.  I'd love for him to be just altogether wrong.  What I do know is that any of us working for or volunteering with nonprofits operating today, has weathered one hell of an economic storm that began in 2005 and has, seven years later, not really ended.  So, frankly, based on your experiences and lessons learned, some of you could write his article and my blog post better than either of us.  I wish you would.  

1. On both a regional and local scale, we as a sector must communicate openly and often about what each of us is experiencing, improving, learning, and finding successful operationally within each of our individual organizations, in each of our unique communities and geographic regions.  Professional nonprofit best practices are only constantly evolving.  As a sector (that bares more weight in responsibility right now than it is empowered to by its communities) we benefit if we engage, inform, and evolve.  We can only do this if we come together.

Our sector is a part of different economies.  The nonprofit sector provides billions of dollars to their respective state economies in donations, payrolls, purchases, and more.  What's more - it has been proven in state level studies of the sector over and again that nonprofits indeed lessen the welfare expenses within the communities they serve.  As we nonprofit organizations are vital, efficient, and effective mechanisms of delivery of solutions for our respective communities - we must engage our local, state, and even federal representation either as united bodies (perhaps on local or state levels) and talk.  

2. If our regional, state, and national leadership does not hear from our sector about what we achieve, how, and what we are being challenged by right now and why - how can we expect them to know how nonprofit organizations operate, what their unique challenges are, and what we accomplish?  If your organization is a 501(c)(3), I am not saying lobby.  I am saying that just because we're nonprofits - it doesn't mean we can't speak to our representatives (just take notes or record the conversation and keep records on file, per talk, to be able to prove (if necessary) that no lobbying occurs in these talks).  Get with your lawyer, determine what can and can not be discussed - and steer clear of the off limits discussions.  But for goodness sakes - we are a critical part of our communities but often altogether cut off from our leadership for one reason or another.  Make it a priority to talk to leaders such that they come to understand our unique sector.  If leaders understand what we accomplish for their constituency, and how; and if leaders become used to seeing our sector as a vital part of their region's economy; and if we have open channels with our leaders - they are more likely to budget for our sector proactively; they are clearer about what our sector's challenges and limits are economically (and why); and we become our sector's own advocates.  Again, if your organization is not allowed to by law - do not lobby.  Rather, empower our leaders to understand our unique sector in your region.  [Update: 7/19/12 Rick Cohen, regular contributor to Nonprofit Quarterly responded to this blog post (link is below) rightfully pointing out that I was wrong in advising nonprofits they should not lobby.  I advise so, here, to be cautious on behalf of my readers and what they may do based on my advice in this blog.  Having said this, Mr. Cohen is correct and I am wrong: 501(c)(3) organization can not politic they can get their issues before their representatives.  I say that in order to be cautious and clear on what can or can't be done by a 501(c)(3) such that they remain in good standing with the IRS and state authorities a nonprofit should understand what it can and can not do legally before striking out and and lobbying.  As such, I've updated this blog post with several resources, below for 501(c)(3) organizations rights to lobby their politicians.  These resources are not provided as a substitution for a nonprofit speaking to legal counsel to be clear about its legal responsibilities and rights, though.]

Create a nimble organization operating such that it can weather storms.  How?  

3. Retain donors and volunteers, and retain talented board and staff members.  Create an endowment, save, cut costs, share expenses with other nonprofit, collaborate with other organizations to deliver expensive but necessary services and programs.  Create an operations budget that is padded, based on sound key economic indicators for your region and its economy, and build emergency funding options into it (to be used if and when needed).  Have contingency plans in place for your organization's fundraising and leadership ready to conduct any necessary additional emergency fundraising (i.e. grant donors, major donors, and key sponsors that your organization already has established healthy relationships with.

Always share your organization's recent organizational achievements, benchmarks, accolades, potential (i.e. credentialed well known board, staff, and volunteers), and current goals.

4. Retention (whether of key staff, board, volunteers, donors, or community partners) saves money and time.  How can a nonprofit retain the key players it wishes to?  Be sure to let them know what your organization has accomplished by virtue of having their support or assistance.  These key players are your organization's partners and your organization remains successful (even in this economy) only because of its support from the community.  If you do not let key supporters know what you and they are accomplishing (based on your organization's mission) - then how can you expect them to continue to support your organization or even find a reason to?  Toot your organization's horn and do it (eh hem... elevator speech, even) whenever you can.  Retention does one more thing.  It creates a buffer for difficulties including recessions.  An organization that has a community of its own (i.e. volunteers, donors, community partners, etc.) has a ready lifeline even in financial slow downs.

I am with Mr. Neilson, though.  Let's do what he suggests, what I suggest, and what any of your colleagues working for efficient successful organizations share that has worked for them.  But for goodness sakes.  Let's hope that Mr. Roubini is indeed wrong this time.

Meanwhile, let's regard his warning with a measure of restraint but take it and all good ideas to survive to our leadership and budgets and let's be prudent.

Additionally: Financial Post's June 15, 2012 interview with Nouriel Roubini, Dark clouds are gathering around the world

Update: Nonprofit Quarterly 's Rick Cohen's article Nonprofit Strategies In Case of Another Economic Collapse published July 19, 2012 reiterates Neilson's recommendations in his article for Huffington and the suggestions I make in my blog post, here, about Roubini's comments this week.

Free resources for thought for 501(c)(3) nonprofits wishing to engage their government and representation without risking their good standing as charity organizations (not to be used in lieu of legal counsel's advice):

Nonprofits Scramble to Learn Rules on Advocating Versus Politicking

Overview of Findings of Strengthening Nonprofit Advocacy Project (a landmark study by OMB Watch, Tufts University, and the Center for Lobbying in the Public Interest on the Strengthening Nonprofit Advocacy Project (SNAP) of 2000)

5 Snap Recommendations for Political Times by The NonProfit Times

Strengthening Nonprofit Advocacy Project Summary of Findings Power Point

Center for Lobbying In the Public Interest explains why nonprofits should actively lobby By the Numbers

Stoking the Nonprofit Advocacy Engine by Gita Gulatee-Partee

Here is some scholarly thought on the topic: The Inequality of Representation: The Impact of Charity Law on Political Advocacy by, Jeffrey M. Berry, Department of Political Science, Tufts University

 Recommended book: Seen But Not Heard: Strengthening Nonprofit Advocacy by, Gary Bass, Kay Guinane, David Arons and Matthew Carter published February 12, 2010 by the Aspen Institute discussed in
A Call to Advocacy for Nonprofits interview with above book author Gary Bass published by The Washington Post