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Analyst Predicts Slow Recovery for Sector, Advises Engagement and Planning

(June 24, 2009) The economy is not likely to rebound quickly and will require strong donor engagement. However, now is also an opportunity to improve the way nonprofits do business, says Susan Raymond, Ph.D.

Following the report by Giving USA that revealed a drop in total giving in the U.S., Raymond, who is executive vice president at of Changing Our World Inc., gives insights into the state of economy and how nonprofits can meet the challenge. Her full article can be found here.

Raymond notes that there have been a number of years that the United States has seen year-over-year declines in inflation-adjusted giving, but that there have been only two periods with sequential annual declines—the mid-1970s during the oil embargo and the period following the terrorist attacks of Sept. 11. She says it is possible that we are in the midst of another multi-year reversal of U.S. giving totals.

A Slow Recovery

There are three reasons why the charitable sector is going to take time to recover from the recession, Raymond says. First, huge increases in the federal budget deficit will be a burden on economic growth in coming years. Second, she notes that high levels of unemployment are taking their toll on giving. Her firm’s research shows that unemployment is a strong indicator of individual giving—more so than GDP or the stock market—and cites a report by the Department of Commerce that estimates unemployment will not return to previous low levels until 2013. Third, rebuilding wealth takes time, Raymond explains. She points to a report by AARP that shows that nearly half (46 percent) of its members have lost at least 30 percent of their retirement accounts in the economic downturn.

What You Can Do

Despite the bad news of a slow climb out of the recession for nonprofits, Raymond says that recovery actually triggers higher levels of giving than before or during a downturn. She advises creating a plan now that manages the effects the slow climb to recovery that nonprofits are likely to face. The plan should revolve around donor engagement—not dollar values of gifts.

“Today, and looking at where we are going, the absolutely most important job of every nonprofit is engagement,” Raymond says. “If we focus on HOW MUCH people are giving, we miss the point. We need to be sure THAT people are giving.”

“Recovery will come, and with it giving,” she continues. “But, without determined, purposeful, meaningful engagement of people, that giving will flow elsewhere. Engagement is the North Star of strategy where economic recovery promises to be prolonged. Measure engagement before you worry about measuring dollars.”

Handling the current economic environment also demands that nonprofits closely examine the way they do business, Raymond says. “Now is the time to go back to the management drawing boards, to examine every last system for efficiency. Moreover, now is the time to pick up the phone, call the executive directors of your colleague nonprofits and sit together to determine how services might be shared, how programs might be combined, how collaboration might both reduce costs and improve quality. Now is the time to take a sledgehammer to organizational silos. It has always been the right thing to do. Now it is the necessary thing to do.”

In the end, nonprofits can arise stronger than when the current challenges began, Raymond says. The key is deep engagement and purposeful collaboration.

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