Latest news, alerts, and events.
Latest news, alerts, and events.
If you have been waiting to register for the Leadership Summit, time is limited. We WILL have a sold out, standing room only crowd in Anchorage on April 20 and 21. We’ve worked with the Hotel Captain Cook to squeeze a few more into the most important summit ever. You need to be there to learn how to face today’s challenges.
Feedback from surveys after previous summits has been conclusive – people left inspired and with new ideas about how to thrive. National leaders who have spoken at our summits say that ours was one of the best conferences they had ever attended.
We know that money is tight. While we can’t support everyone needing financial assistance, we will do all we can to get as many of your organizations represented as possible. Call our office and learn more.
Planning began over a year ago. Our vision for the summit is to prepare for the new demands we face as leaders and to learn new ways to think about structuring our efforts in our complex world. We will also pick up where we left on at the last summit on guidance to become better advocates for the missions we support. These themes are more critical now than ever. When planning started, the price of oil was over $110 a barrel – now it’s hovering around $50 a barrel. The state funded early childhood development and public broadcasting organizations are facing a complete loss of state support and they are not alone. We could not have planned a more appropriate program for the spring of 2015, and we look forward to seeing you there.
In the January 2011 newsletter we described trends the nonprofit sector could expect based on data from the latest economic study. One trend, called the “funding crisis” suggested that the mix of funding for nonprofits in Alaska at that time was not sustainable. We said that we must transform revenue streams – and fast! “Alaska nonprofits must increase individual philanthropy and learn to earn revenue. We have too little time to do each well, but we must try.” We went on to say that since we learned that nonprofits in Alaska received 46% of revenue from government grants, down from a high of 60% in 2007 and, from the 2013 report, that funding has dropped to 42% of revenue – now we know that our predictions were right. What we didn’t expect was that the cuts would be so severe.
Since 2011, we have presented these findings to every Rotary, Chamber, and nonprofit board we could reach. We pointed out that the drop in federal funding would likely continue, but more challenging was an inevitable drop in state funding. We reminded everyone that since over 90% of the unrestricted revenue of the state comes from one source – oil taxes based on the price of oil and its production – state funding was very vulnerable. The industry prepared us for declining production, but we warned that since the price of oil was set by international market forces, we could never anticipate when the price would fall. When speaking to groups, I often ask: “What if the price of oil drops to $80 a barrel?” (Many thought I was being an alarmist!) “Our state’s budget would need to be reduced by over 30%!” Today we know that I was way too conservative, but we sincerely tried to sound the alarm. Recently many of you have reminded us of that fact.
Our newsletter has been published monthly for eleven years. Some articles were about the state of the sector, but more often they presented research about how to address issues that we face as leaders and organizations. We also tried to predict what to expect in the future like in the article in January 2011 where we presented the trends to expect: the funding crisis, crash of the herd, and the need for new structures.
But most often, we provided suggestions to manage various challenges. For example, in the fall of 2008, our country went into the deepest recession since the Great Depression. While Alaska fared better than our colleagues down south, in late 2008 and early 2009, not knowing how bad the recession would affect us, we prepared nonprofits for potential impacts. We developed a series of articles on attitudes and tools to use when facing the challenge of diminished funding. With the current financial realities in Alaska, it is time to share some of those insights. If you like, you could read the complete articles in the newsletter archive on our website.
Excerpts from Newsletters
December 2008
Our country and the world currently face the most severe economic downturn since the Great Depression. In the nonprofit world, emotions run from apprehension, to fear, to panic. What does the declining economy mean for our sector? What can we do to meet the increased needs? What can we do to maintain our own capacity to meet those needs? What happens to our funding?
I remember October 1987, while listening to public radio, I learned about the country’s last major market crash. I had recently become the head of fund development for a large United Way in the Lower 48. This United Way had an 80-year record of raising its announced goal, even during the Great Depression. A month earlier, when the economy seemed okay, we had announced an 8% increase over the prior year. Then the bottom fell out in October. I was terrified. Was I to be the first Campaign Director in 80 years to not reach goal?
As soon as I returned to the office, I met with the executive director who had been in the fundraising business for 30 years. He acknowledged that it would be tough to persevere in such an economy, but provided wise counsel I want to share with you.
He explained that throughout our nation’s philanthropic history, individual giving has rarely gone down. It had been his experience that especially in tough economic times, most people dig even deeper to support each other and the causes that are most meaningful to them.
He also told me the real concern should be about contributions from corporations. While individuals dig deeper during tough times, institutions become more conservative with their giving. He encouraged me to keep an eye on corporate giving, but focus my efforts to maximize individual giving.
In 1987, during an economic crisis and for my first ever campaign in a large city, we not only met our goal, we exceeded that goal. As my boss predicted, corporate giving was level but individual giving increased. United Ways are lucky because most generate 75% of their contributions from individuals, with only 25% from corporations. There is no mystery about why my United Way made goal. As a matter of fact, United Way giving was up around the country that year. They were focused on one of the sustainable revenue sources, individual charitable giving.
So now to Alaska in 2008 — how will we fare in these new tough economic times? Two weeks after the bad news about the economy, many of our public radio stations held their fall membership drives. Most results were up, much better than last year. Both KAKM and KTOO reported exceeding last fall, 2007, and did so in style. KAKM was up over 25% from the prior fall’s drive. KTOO had a huge increase in underwriting and also exceeded their membership goal by over 10%. They gained 125 new members, many under 34 years old.
Other organizations that depend on individual giving — like the state’s United Ways — report that most are on schedule to meet their goals. The United Way of Mat-Su is seeing some ups and downs, but the board is confident that they will do very well this fall. The United Ways in Fairbanks, Juneau and Kenai indicate that while early in their campaign, they are seeing increases in individual giving in many of their completed workplace efforts. United Way of Anchorage is tracking almost $1 million ahead of where it was last year at the same time. All of this hopeful news was shared with us in late October, during the initial shock of the declining stock markets and federal bailouts.
The lesson is that when organizations like public radio or United Way have a mature individual giving strategy, they can manage the tough times with less risk than organizations that rely on events, or corporate or foundation giving. I also have concerns for organizations with large governmental support. With the bailouts, the war, and all the other issues facing our federal and state governments, I am concerned we may have some organizations with few options over the next years.
In Alaska, we depend too much on easy money. Big events almost always do poorly during recessions and large grants from the government are the first to cut support during downturns. In addition, corporate giving, which has up to now been supporting our sector at three times the national rate, will decrease. We have become addicted, or some would say entitled to fast-easy-money.
It often takes crisis for people to act. We have done our best to prepare our sector for this current crisis. I wish we had been more skilled at presenting the facts we learned from the ISER study — maybe the sector would be better prepared to maintain critical service during the downturn.
Last month we provided links to national stories on the potential impact of this economy on philanthropy. A summary of the insights from those articles include:
There is no silver bullet. Jim Collins in Good to Great describes “The Flywheel Effect.” This occurs when organizations have the discipline to continue on the right path, doing the right things with patience over time until the hard work pays off. He determined that organizations that tried for a fast, easy result (a silver bullet), may have a temporary boost, but only those who do the right thing with discipline over time, truly become great. The right things to do over time include:
We are with you, and know you can succeed. I’d like to close with some simple thoughts for tough times:
January 2009
Unfortunately, nonprofits have a tendency to spread themselves too thin. We want to make sure that anything that can be done in pursuit of the mission will be done. In good times, this behavior can be a problem. In tough times such thinking can lead to disaster. When funding is limited, we must re-think what is most important. It will serve no one if we assume that we must do more with less. Instead we suggest that the best attitude, to best serve our constituents is to do the best we can with what we have. We must muster the discipline to not over-extend our capacity. If we make good decisions, identify and then pursue the most important functions, we can actually improve our overall performance during a crisis. In other words, systems can actually benefit from what seems to be a disaster. From disaster, we can actually emerge healthier.
In order to make wise decisions so that when this financial crisis passes your organization can flourish, we offer a few strategies:
March 2009
Today’s tool is the need to collaborate. One of the factors of sustainability is partnerships. Few organizations can accomplish their mission when they try to do everything for themselves without using partners. We would suggest that no organization, like no individual, accomplishes big things in isolation. We need each other, now more than ever. Collaboration is an intentional act with others to accomplish a shared vision.
Collaboration can be as simple as connecting and sharing. We encourage everyone to find trusted friends and share. You don’t need structure for these sessions, just connect face-to-face, online, on the phone, anyway you can, and talk through your strategies, learn from each other, accept a little TLC from a friend and reciprocate. We will all be better from this simple act of collaboration.
This sharing does not have to be with just your external partners. Now is a wonderful time to re-connect with your staff – ask how they and their families are coping? And this is a great time for your board to re-connect with each other. In addition to simple collaboration through connecting and sharing, times like these may provide opportunities to develop deeper collaborations. Such collaborations can begin with simple sharing of ideas but can progress to sharing of resources, and even joint ventures. Examples of this sharing level of collaboration are as varied as the sector and include examples such as organizations sharing equipment, using each other’s meeting room, or informally assisting in another’s project. Joint ventures are also widely used and are identified when two or more organizations, without a legal agreement, work together to start something they jointly “own” or accomplish.
Collaboration can become more formal. When groups work together with legal connection, or decide to create a new organization to coordinate their efforts, collaboration can have an even more substantial and lasting impact.
And finally, collaboration can go all the way to uniting, or merging, organizations. At Foraker, we often hear community leaders urging us to take a stand on mergers. So far Foraker has remained neutral on the subject of merger, but we have worked with national consultants to learn the steps to be taken for successful mergers.
What we have learned is that to merge successfully a true desire must exist for all parties. But the most important factor for success is that mission and values of the organizations are aligned. Some of the mergers we have assisted were the result of organizational dissolution – in non-legal words, when a nonprofit went out of business. It can be a sad day when a nonprofit goes out of business. Many organizations were built around the kitchen tables of concerned citizens. There is strong emotional attachment to most nonprofits. We have learned that it can help individuals who are involved with a disillusioned nonprofit, if the core of their mission lives on in another organization.
April 2009
Experience tells us that when we face financial challenges, the best approach is to plan various scenarios to focus on what matters most – then prepare to implement changes when appropriate. That’s what we’ve done at The Foraker Group, and we’re learning that other nonprofits are doing the same. Our planning model looked at potential shortfalls in revenue and how those decreases will affect our services. As we have advised since late last year, these new economic times require all of us to stay calm, become more observant and disciplined, and focus on our mission and core services. Most important, we encourage everyone not to think of doing more with less, but rather how to do the best possible job with what is available.
We suggested using specific tools such as the Rasmuson financial format to monitor unrestricted cash, to develop a cash flow projection based on newly gleaned information from funders on their expected level of support, and then to develop budget scenarios based on potential income shortfalls. We stressed that organizations should not randomly cut expenses – but did encourage frank discussions about what could be cut, if necessary, with the least impact on mission. For those that have taken these first steps, we offer the following as a next tool to use along the path into the future.
For those who have tried scenario planning, we expect that the first draft provided insight to determine what seemed most likely to occur, but perhaps it was not very specific on action items. Now we encourage you to take action by using that plan to look beyond this period of scarcity and look toward a new, steady economic reality. This way your organization can prepare to emerge stronger and with better insight into the way we do business.
Typically when we lose funding, our first reaction is to deny that it happened – or we get mad at the person who cut “our” funding – or even worse, we cry wolf hoping that either our funders or the public will come to our rescue. A next predictable step is that we over-react, cutting expenses that may send us into an uncontrolled tail spill because we forgot why we (our organizations) are here in the first place.
Basically, we do the very things that don’t help our cause in the short or long term. Instead, what if we think creatively about the future? In other words, what could we achieve if we saw the loss as a blessing, giving us time to focus on what is important rather than continuing work as usual on activities that may not be as critical as we think?
In a prior article, we encouraged organizations to turn to their mission, determine what is truly most important, and then re-focus on what is needed to accomplish that mission. All organizations, as they mature, begin to focus more on what they do instead of who they are. There is nothing better than a crisis to help us return to what is truly important. We need to reflect on who we are, not on what we do.
In order to understand “who we are,” we must dig into our organization’s history – examining our founding. For some of us that was only a few years ago, for others a bit farther back – but the founding is the key for the right kind of focus. Knowing who you are will help you survive in bad times and thrive in good times.
When most nonprofits are founded, one or a few very committed people with a dream were inspired to do something. The dream was often more ambitious than their pockets or talent, but they had the audacity to envision how they could address a perceived need. At some point, that dream became more focused and they took it to the next level and legally formed an organization. During that time, founders discovered the kernel of clarity needed to focus on what mattered the most.
May 2009
At a recent Foraker Operations Board meeting, Jim Caldarola, the (former) Director of Stewardship and Development for the Archdiocese of Anchorage and one of our state’s most influential development professionals, reported that at a recent national meeting, he had an epiphany. He and his colleagues were discussing the economy and its impact on their job when they realized, “we have to just let go of what was and accept that we have now entered a new reality.” Jim said that as soon as he and his friends got their heads around that concept, they began to feel better.
This new reality accepts that while the economy will rebound as it has in the past, it likely will never go back to the way it was. The new reality extends to the way our sector behaves and does business. We will no longer survive without strong boards, without good internal capacity, without measuring and articulating our impact, and without the willingness to work as partners with others in true collaborations.
In his sequel book Good to Great, Jim Collins took exception in Good to Great Social Sector to those who insist that nonprofits should become more “business like.” He found that more often nonprofits were better managed, had stronger mission alignment, and practiced many of the qualities he found in those “good to great” companies than most of for-profit corporations he advises.
I appreciate that sentiment. However, we have witnessed too many nonprofits that are not capable of sustainability. Most provide needed service, but if held to any standard of effectiveness, they would find it difficult to validate their existence.
Let’s look more closely at those standards.
The first concerns outcomes. Does the organization have the tools necessary to monitor mission related outcomes? Is it doing the job it was formed to do? We maintain that the ability to evaluate outcomes is central to making good decisions on sources and use of funds.
The second is sustainability. Does the organization have the long-term ability to sustain itself? After working with the sector for almost a decade, The Foraker Group has identified four interconnected conditions that exist in sustainable organizations. They are:
Many Alaska nonprofits rely on unsustainable revenue. Our dependency on government grants is almost twice the national average. While we will never lose that disproportionate share because of the large amount of federally designated funding to Native nonprofits, it was inevitable that with the shifting priorities of the federal budget, along with the change in our Congressional delegation, some of those dollars would disappear. We also have documented through the ISER study that our reliance on foundation and corporate support is almost double the national norm. That support, too, becomes less reliable during times of economic stress. In short, all these revenue sources simply are not the most sustainable ones.
On the other hand, the most sustainable revenue for any nonprofit is mission related earned revenue, where a nonprofit has a product or service with value and a customer or client willing to pay for it. However, a problem can arise with earned income when a nonprofit undervalues the service or product. Studies show that at best, only 20% of nonprofits using earned income strategies make more than it costs to provide the product or service. For earned revenue to be a viable strategy, nonprofits must at least become more business-like when it comes to making a “profit.” If we can embrace this new reality as a wake-up call on entrepreneurial efforts and develop realistic business plans, then we have a much better chance to earn money to accomplish our mission. And we create a more sustainable future for our organizations.
As we’ve talked about in the past, the other sustainable revenue source comes from individual charitable contributions. And there’s a new reality here, too. Charitable nonprofits can raise money, and many now embrace the potential of fund development. That’s the process where an organization builds a relationship with a potential donor before asking that person to invest, then works to maintain the relationship. Over time, the donor’s expectations are better addressed and when possible the donor is asked for more – in many cases, donors increase their support without great effort. The final step in that process comes when loyal donors decide to leave some of their assets through a will or other asset based gift, providing a legacy of support for a mission they hold dear.
The Operations Board members had another “ah-ha” moment at their meeting last month. Several people commented that upon reflection they realized the factors of sustainability were guiding them to work within the “new reality” – the model offered them opportunities to become more nimble and responsive. They had endorsed the model for some time. But it was clear to them now – with the financial challenges of the past months – that the factors are essential to working and thinking differently, and successfully managing this new operating environment.
Together, we can and will persevere and, in time, come through this challenging period as a stronger sector, better serving our communities. We appreciate the work you do and hope you will call if we can help you.
I hope this trip down memory lane reminds us that few challenges are new challenges and we have survived many before. We will survive again. But we must become more proactive and build capacity in the good times to minimize the impact of harder times.
As I have toured the state for the last four months to present our latest study, Alaska’s Nonprofit Sector: Generating Economic Impact (some call my “Farewell Tour”), the data validates that while today’s challenges are far greater than anticipated, it shows that many nonprofits took the right actions to survive. Not only did the sector reduce dependence on government grants, from the 60% of revenue in 2007 to 42% in 2013, it increased earned revenue during that period to 58%. And collectively through efforts like the development of community foundations and Pick.Click.Give., we have raised $50 million new dollars over the same period! The 2014 Pick.Click.Give. campaign raised over $500,000 more this year! We truly appreciate every nonprofit leader who has played a role in this success. Together, we are steadily growing philanthropy in Alaska.
And if you face challenges in the near term where we can help, please let us know. During these times, we will do our best to meet your needs. Some of our services that may be helpful would be financial analysis, focus on core purpose and priority setting, and support on human resource issues.
Now we need the right leaders, the right structures, and the right policy voice. Don’t miss this opportunity to learn from the best how to transform and thrive in our new reality. See you in Anchorage on April 20 and 21.