Crisis and opportunity – we think

by David Roth and Ardie Geldman

“When life gives you lemons, make lemonade” is a familiar adage that falls into the category of palliatives. Another palliative is “Every crisis is an opportunity.” This expression has been receiving a lot of play in recent weeks and months. Given the almost unbelievable succession of recent financial crises and their effects on economies throughout the world, this saying may just be a prophylactic against the natural tendency to wring one’s hands in desperation. The problem is that we all know that lemons alone are insufficient for lemonade. Lemonade requires the addition of water and sugar. And what if there is no water or sugar?

This is the nature of the crisis that many vital nonprofit organizations are facing in Israel and elsewhere. Larger organizations are more likely to emerge from this economic maelstrom, diminished but still functioning. They will fire some staff members, cancel or cutback some programs, forestall new initiatives, and trim purchases. In the end, their doors will stay open.

Middle-size and small organizations face a greater challenge, especially those who, as is not unusual, have come to depend on foundation support, or a few major donors, in addition to many smaller contributors. They are the most likely to fall victim to the “20/80” principle, namely, that approximately twenty percent of funders are responsible for some eighty percent of an organization’s contributions.

So, is every crisis an opportunity? In fact, the answer is no. Is every crisis a challenge? Absolutely…though not a challenge that every nonprofit organization can overcome.

What is the funder’s role during such an unprecedented period of insecurity? The answer depends, of course, on the funder and the nature of his or her relationship with the organization.

Here are four ideas:

First, in contrast to large nonprofit organizations with a financial staff able to help adapt its programs and management to confront the new economic conditions, smaller organizations that are more vulnerable may benefit from the ideas, skills and experience of one or more dedicated overseas supporters from the business and marketing or professional worlds. This is particularly true in Israel where board members of nonprofit organizations do not traditionally play an active advisory role. Via telephone or email, or during a visit, even an overseas funder, particularly one who has been close to an organization for some time, may step into the breach and consult with its executive. Such advice may be with regard to budget cuts, program changes, staff realignment, plant maintenance, and marketing. Yet, even a well-meaning supporter must beware not to inadvertently “throw the baby out with the bathwater” by distorting the organization’s mission in the effort to remain in the black.

A second role for an overseas funder is to collaborate with other funders, an idea we have suggested before. It is not conventional for unrelated grantmakers or individual funders to communicate with each other regarding their support of the same organization. But with discretion and sensitivity, an executive may initiate a relationship between two or more of an organization’s supporters who can leverage their contributions and direct them to where they are most needed.

A third role is the readiness to serve as guarantor of a short-term commercial bridge loan. This obviously represents a more precarious commitment for a funder. An organization in need of a loan to maintain its operations is, on the face of it, not a good risk. However, after sober analysis, and under certain conditions and circumstances, a stakeholder may feel that it makes more sense to help keep afloat an otherwise successful organization, one that he or she has invested heavily in over many years, than witness its doors close.

Finally, a dedicated donor must be ready to offer, in equal measure, both moral support and truth.  Encouragement does not pay the bills, but it can raise morale and motivate workers. Sometimes the ability to go that extra mile under the most dismal circumstances depends on feeling the support from people you respect. Among other things, especially in times of great difficulty, a donor should pointedly convey his or her support to the organization’s leaders, its staff, and if appropriate, even its constituency, those who benefit directly from his or her generosity. Alternatively, if the time comes, a responsible funder must be able to inform an organization that based on its current finances and its unlikely future prospects, it must either consider merging its depleting assets with a similar, though more sustainable organization, or simply cutting its losses and closing its doors.

In summary: The new and unprecedented economic circumstances point to an ominous landscape whose contours are still unknown. To paraphrase Groucho Marx, “sometimes a crisis is just a crisis.”

David Roth and Ardie Geldman are philanthropic consultants with Donor Associates in Israel, Ltd. and occassional contributors to eJewish Philanthropy.