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Nonprofits Proving Resilient

(July 21, 2009) Nonprofit organizations are proving themselves to be quite resilient during the current recession compared to previous times of significant economic stress.

The Johns Hopkins University Nonprofit Listening Post Project found that nonprofit organizations are feeling strained by the recession, but that various coping strategies have allowed many organizations to steer clear of severe problems.

Eighty-three percent of responding organizations reported some level of fiscal stress during the target period of September 2008 to March 2009. Close to 40 percent of the organizations considered the stress to be “severe” or “very severe.”

Yet, the proportion of organizations reporting “severe” or “very severe” fiscal stress during the target period of this survey, while substantial, was still considerably below the level reached in the 2002-2003 recession that followed the events of Sept. 11, 2001 (37 percent vs. 51 percent of the organizations). Most subsectors reported a majority of organizations experiencing just minimal or moderate fiscal stress.

Less than 5 percent of all respondents reported that they were in imminent danger of folding due to financial reasons.

Coping Strategies

Faced with new challenges in the current recession, nonprofits have also responded with a host of additional coping strategies, focusing particularly on three strategies: Intensified fundraising, belt tightening and entrepreneurial expansion.

Particular targets of intensified fundraising efforts were individual donations (61 percent of organizations), state and/or local funding (57 percent), federal funding (56 percent) and foundation or corporate support (55 percent).

A second strategy utilized by numerous organizations to cope with the economic downturn was to tighten their organizational belts further.

Especially common here were cutting administrative costs (56 percent of organizations) and creating or expanding collaborative relationships with other nonprofits (47 percent). The latter is especially encouraging given the sizable numbers of nonprofits in existence and the considerable opportunities that consequently exist to share services, facilities and expertise.

In terms of entrepreneurial activities, nearly half of all respondents improved or expanded their marketing efforts (48 percent) and implemented or expanded advocacy efforts for organizational funding (45 percent).

Between 20 and 25 percent of organizations expanded existing fee-for-service activity, introduced or raised fees and reached out to new clients or patrons.

Arts organizations were particularly inclined to expand their marketing efforts in the face of the economic downturn, with 60 percent or more of theaters, orchestras and museums turning to this strategy.

Entrepreneurial Strategies Prove Fruitful

Interestingly, the survey responses indicate that while these entrepreneurial strategies may not have been the most common among survey respondents, they tended to be more effective than many of the other strategies.

While substantial majorities of the agencies pursued many of the fundraising and belt-tightening strategies, their likelihood of achieving “successful” or “very successful” financial performance was about on a par or slightly below that of all organizations.

By contrast, far fewer organizations pursued the entrepreneurial strategies such as increasing marketing, developing new giving vehicles, or starting a for-profit subsidiary, but those that did were more likely than all organizations to report “successful.”

Click here to read the full report of the Johns Hopkins Listening Post Project titled Impact of the 2007-09 Economic Recession on Nonprofit Organizations.

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