By David H. King of member firm Alexander Haas
September 15, 2008 – a date that is will be infamous for generations. It was the date that Lehman Brothers filed for bankruptcy and we came to realize that the recession was real and that with this, the largest bankruptcy in US history, perhaps there was no such thing as “too big to fail”. The decline in the stock market that followed was unprecedented with the Dow Jones Industrial Average falling from 11, 421.99 on Friday, September 12, 2008 to 6,626.94 by March 6, 2009 – losing 42% of its value.
We all know what happened and it has been well documented elsewhere. The reaction of nonprofits to this collapse was inconsistent. None of us had any experience with this kind of economic meltdown. Many, if not most, nonprofit board members were pouring their energy, intellect and creativity into saving their own businesses and jobs. Nonprofit executives, who often come to their jobs with limited formal financial management education, were largely left to fend for themselves in charting their course through the storm. On the fundraising side of this equation, there were three courses that could be and were taken – Stay the Course, Redouble our Efforts or Shut Down and Wait it Out – and each of these decisions proved to have long term implications.
In the aftermath of the great recession our economist and financiers have learned a great many lessons. Among these are 1) property values cannot keep rising in perpetuity, 2) your home is probably not your single largest “investment”, 3) there is no such thing as too big to fail, 4) there is no such thing as a “risk free” investment, 5) no matter how much money you throw at it the government cannot stop or prevent a recession, any more than it can prevent an earth quake, hurricane or any other naturally occurring force of nature.
In this aftermath we have also learned some lessons in the nonprofit sector, in addition to knowing, for sure, that “shut down and wait it out” is a bad survival strategy. The great recession and the lessons it taught us have changed the way that nonprofit organizations will operate and raise funds for years, perhaps decades to come. From governance, to staffing, to growth rates, business planning, the nonprofit sector is adapting to a new normal which includes 10 major lessons learned that have long term ramifications for the nonprofit sector moving forward.
1) Relationships matter more than causes
2) Serving on a board in not an honor, it is a real job with real responsibilities
3) If you stop fund raising, you will stop raising funds
4) Endowment is not an insurance policy against declines in earned and donated revenue
5) Take donors for granted and they will take their donations elsewhere
6) Financial acumen is, in fact, a requirement for nonprofit executives
7) Your next campaign does not “have” to be larger than you last campaign
8) We have a new definition for what we “need”
9) The donor pyramid has been pinched in the middle (think hour glass)
10) Fear of multi-year pledging has reshaped how capital campaigns are executed.