How Nonprofits Can Successfully Navigate a Recession
Tips to Prepare for an Impending Economic Downturn
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During the 2007–2008 financial crisis, Shanti Bhavan, like most nonprofits, went through one of the most difficult periods it had faced as an organization. Some donors cut their charity budgets and tightened their contributions because of their own financial challenges and the unpredictable direction of the economy. Even though we came out of that period generally intact, it has taught us many valuable lessons to prepare for the next economic recession that the world might be heading toward.
I want to share our experience of the last recession with the expectation that it might be helpful to other nonprofits in the next downturn.
Anticipate and Alert Your Team to the Difficulties You Expect
Your NGO might anticipate the economic storm and understand its impact on the organization. Be transparent about the danger you’re facing and communicate it to your colleagues. It will help build confidence that you are planning for adverse conditions and develop trust. Instead of fear and concern within your organization, your team will feel confident that you are taking the necessary steps to face the challenges.
Additionally, it will foster a sense of urgency within your team to develop creative solutions to overcome the difficulties. During difficult times, it’s better to have several minds coming up with good ideas.
This is what we did at Shanti Bhavan. I conducted several meetings with my team, detailed the situation, and sought input from the staff and close supporters. Despite their concerns, the group came together to find ways to save money and get more external support for the school. It was inspiring to see their response and passion.
Look for Ways to Cut Costs Wherever Possible
While running a lean operation is always essential, finding opportunities to make significant savings during challenging periods is even more critical. Minor cost cuts might be easy, but they may not accomplish much. Before making substantial cuts, you will need to go back to your mission and determine what expenses are essential to meet your goals, and what projects you might have to abandon or temporarily pause.
During our difficulties, we made several major cost reductions at Shanti Bhavan. For example, we had to eliminate a lively farming operation that provided good-paying jobs to poor village women. We had been running this program for several years, and yet, we decided to focus nearly all our energies and finances towards our primary mission of providing a world-class education and a safe environment for some of India’s poorest children.
In addition, the entire staff took a temporary 10–20 percent pay cut, giving us some breathing room during this exacting period. While we tried our best not to let go of anyone and to shuffle people around to different projects or roles, some staff left on their own because the projects they were assigned didn’t match their career plans or because of the temporary pay reductions. This was difficult for all of us, but the team agreed to the strategy in hopes of keeping Shanti Bhavan alive. We felt good about remaining true to our primary mission, retaining most of our staff, and functioning in a way that ultimately brought stability to our operations.
Re-evaluate Your Programs
Nonprofits should periodically evaluate the relevance and sustainability of their programs, especially during an economic downturn. It should also consider the impact of the downturn on the communities they serve. For instance, it might be essential to redirect resources to address new or emerging needs, such as initiating job training programs, mental health services, or food assistance. This might require pausing less essential projects and embarking on new critical ones.
For example, during COVID-19, we focused on more outreach efforts, knowing that the economic condition of local communities was precarious. We started a specific donation initiative to raise money to buy rice and other food provisions to help the poor sustain themselves during this difficult period. This endeavor allowed our community, staff, and children to create a real and direct impact on the ground during a global pandemic.
Be Honest with Your Supporters about Needing Help
During challenging times, the natural response can sometimes be to hide your problems and try to solve them on your own. However, this might be the best time to strengthen relationships with your supporters by seeking their involvement. Keep your donors, volunteers, and other stakeholders informed about how the downturn is affecting your organization and how you are responding. This way, they will understand your challenges and learn about your needs.
Be transparent about how their donations are being used and their impact on your organization’s mission. We regularly communicated to donors about our financial needs and the changes we were making. We used our email list and social media channels while connecting directly via phone calls or in-person meetings with larger donors. We were surprised by the outpouring of support from so many who continued to believe in our mission. This concerted support made a real difference, helping us quickly obtain tens of thousands of dollars in just a few months.
Be Creative about Fundraising
While many supporters helped directly, others spread our message and organized fundraising events by contacting their families and friends. We did small concerts and auctions as well. This was the period when we initiated individual sponsorships of children — something we hadn’t previously explored. It proved to be a successful and valuable program.
Grants can be another avenue for generating capital. Grants are based on different criteria, such as project goal, mission alignment, demographics, etc. Similarly, corporate sponsorships can be an alternative funding opportunity depending on the kind of work you do and its scale. In this way, if one funding source becomes less reliable, you can still have other sources of income to keep your organization running.
Explore Partnerships and Collaborations
Partnerships and collaborations can be a useful tool for nonprofits to achieve sustainability. However, forming effective partnerships requires careful planning and coordination. It is important to consider the following factors when evaluating potential partners:
Alignment of mission and values
Complementary strengths and expertise
Capacity and resources
Accountability and transparency
Nonprofits should establish clear goals, expectations, and communication channels with their partners to ensure effective collaboration.
Two of our key nonprofit partners came to our aid during this period to provide nonmonetary support, such as training our children in the arts and music and tutoring those who needed help. Since then, we have lent our support and expertise to these organizations and others wherever possible. In addition, we developed relationships with large corporate partners with offices in India, developing volunteering initiatives, employee engagement, and mentorship opportunities.
Challenging times can often be formidable while going through them. Still, if we remain calm and stay creative, they can also be an opportunity to refocus and develop new ideas. See what works and doesn’t, and follow through as best as possible. Remember why your mission is critical and what drives you to accomplish it.
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