The ability of youth to rise above our baby boomer negativity is both refreshing and amazing. Over the past several months I have had the opportunity to speak to several groups of non-profit executives. The subjects of these meetings have inevitably been about 'how to survive these troubling times'. And I assure you that these times are troubling for non-profits.
For example, by law, private foundations are required to give 5% of their principal each year. During the past few decades (other than a blip in 2001) returns on their invested assets have surpassed that 5%, allowing assets to grow and gifts to increase each year. In fact, this positive experience, combined with a need to provide some stable funding, allows for multi-year granting (e.g. committing to $100,000 a year for five years). However, last year many foundations saw their asset base reduced in value by 30% to 40% (or worse for the foundations invested with Madoff). That shrinkage, combined with carry over commitments from prior multi-year grants, is expected to reduce foundation gifts this year by as much as 70% versus 2008. Furthermore, individual donors have in many cases totally eliminated donations this year - especially those in the previously prolific financial industry.
And while non-profits are often accused of wasteful spending, the truth (based upon my experience involving 18 years on Wall Street and seven years running a homeless agency) is that no industry is better at working with less. How do you reduce staff when demand is up? No business would shut down services when people are waiting in line. But in the non-profit world, demand for services and supply of capital are independent variables, if not actually negatively correlated. Demand for poverty-related services goes up as supply of donations to pay for them goes down.
In the face of this, all non-profits are struggling to stay above water. And my colleagues and I sit on these panels with little to offer. Our advice is often less than encouraging, to say the least - merge, shrink, partner and by all means, don't start anything new! In fact, numerous private foundations have publically announced that they will not fund any new programs or organizations. (On the flip side, they will fund pure operating expenses - the life's blood of service agencies.) And although we do offer concrete tools such as ways to explore revenue-producing models, the faces of the executives show the weight of their predicament.
But last night I spoke to a large group of 'millenials' who are looking at new models for solving problems. And my social entrepreneurship students at the USC Marshall School of Business are actively pursuing the use of technology and business models to address global poverty and environmental issues. They know that times are hard, but they also know that web 2.0 has significantly reduced the barriers to entry for new ideas. Connections can now be made person to person. Organizations like Donorschoose.org and Kiva.org have broken down long existing walls and have used the web to eliminate the high cost of intermediaries.
But most important, the 20-somethings are not beaten down by the economy or the heaviness of the air. Rather they are encouraged, excited and ready to go. They seem to be asking me and my colleagues to step aside so that they can get to work solving problems. I trust them.
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