Funding effectively in the economic crisis

Kathleen Enright
Kathleen Enright

Kathleen Enright

We’re in the midst of some incredible times right now. Donors are watching their assets tumble and they’re trying to figure out what to do to protect them in the future.

They’re feeling a tension between the commitments they’ve already made and the near-term needs that are so very visible as a result of the failing economy.

A real concern before all of us is that the work we’ve supported — the important work of nonprofits across the country — is beginning to unravel due to forces outside our direct control.

Given that our success as grantmakers is inextricably linked to the results that our grantees achieve, we have some tough choices to make.

What matters most right now? Is our top priority to preserve our assets for the future, or is our top priority to preserve the work that our assets exist to support?

The good news is that we may have some time before the full impact of this recession is felt. So now is the time to act — to do all we can to help the organizations we care
about prepare.

The nonprofits we fund and the populations they exist to serve are incredibly vulnerable just now. Demand for nonprofit services is increasing at a time when access to financing is in sharp decline.

Now is the time to lean forward rather than away and to recommit to the work.

The question all of us who care about the nonprofit sector should be asking is, “How can we minimize the impact of the recession on the people, causes and organizations we care about?”

* Pay special attention to maintaining and building relationships. Let those you fund know that you’re in this with them and that you’re going to do everything in your power to help. Most nonprofits operate on a razor-thin margin. Just acknowledging that fact and suggesting that you’re putting them first in your considerations will be helpful.

* Call them up and listen, pull small groups together to share. Just to know that someone’s on their side, ready to help however they can, might give them the energy they’re going to need to lead creatively through crisis.

* Keep grantmaking steady. Some grantmakers are changing their behavior in light of the economic crisis. They are viewing five percent as a floor, not a ceiling.  Paying more than five percent in tough times displays a real commitment to the nonprofits on the front lines and may provide  them with some breathing room to adjust.

* Consider making no-cost changes like releasing restrictions on grants so grantees can better react to the changing environment.

* Provide more operating support. There’s no better time for operating support than right now.

* Provide access to credit. The current credit crunch is affecting nonprofits as well. They may need cash-flow loans now more than ever.

* Engage in other forms of “mission-related investing,” a practice some grantmakers were engaged in prior to this economic meltdown that has both helped them preserve their endowments and commit substantial resources to their charitable purposes. For some funders, mission-related investments are far out-performing the rest of their portfolio. Having nearly 30 percent of their assets invested in this way was helpful when the economy began to tank.

* Encourage the focus to be on collaborative problem-solving. Our individual resources have always been out of scale with the kinds of issues that our foundations exist to
address. That disparity will only become more obvious in the months ahead. We have a big opportunity here to shift the focus away from our individual interests and resources and look instead at how best to solve problems in combination with others.

Grantmakers for Effective Organizations has long focused on a single question: What changes can grantmakers make to improve nonprofit performance the most?

The economic crisis hasn’t changed the answer to this question; it has only served to heighten the importance and urgency of our response.

Kathleen Enright is president and CEO of Grantmakers for Effective Organizations, based in Washington, D.C.

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