I have been reading a book called “Be Yourself” to my 7- and 5-year-old daughters. The book mainly talks about the concept of self-fulfillment; some might feel fulfilled to be princesses while others may feel really bored sitting in a palace all day. The book challenges the most common theme in fairy tales, princesses who are saved by a prince, and encourages the main character to think about her own passions and interests. The book also challenges the common endings of these stories, not every story ends with “…and they lived happily ever after.”
In 2020 the world was hit with one of the deepest, but shortest recessions in modern-day history. Many debated a “U” or “V” shaped recoveries when it began. In these two models, the economy suffers a decline and a fast rebound. Eventually, as time passed, the reality was more of a “K” shaped recovery. Different parts of the economy recovered at different rates. In real life, the ending is not the same in every story.
Nonprofit organizations were affected in different ways during the pandemic. Some saw a significant decline in services due to supply chain needs, while others reported an increase in demand and giving. At Cloud for Good, we work with a variety of groups and organizations, and we had a chance to observe how many of our clients reacted during the pandemic and the outcomes they saw.
Our long-term client, Food Bank for New York City, recently reported that their 2021 impact was higher than any year prior. The CDC Foundation shared in our joint success story their journey from a donor database of 42,000 donors to over 150,000 in just a few months, and individual giving increased by 2,403%.
Sensing an impending recession
According to a recent report published by Bloomberg Economics, there is nearly a three-in-four chance that the United States will be hit with another recession by 2024.
Over the last 12 months, we have been experiencing multiple events that, as a whole, pose a risk to our economic growth. We have seen the geopolitical instability and the war between Russia and Ukraine, the inflation in the United States is reaching a forty-year high, borrowing costs are rising precipitously, and there is ongoing supply chain disruption. And let’s not forget that the pandemic is still not over yet.
McKinsey recently published a report evaluating sentiments about the expected economic conditions. As you will see in the chart below, people’s outlook is very gloomy. We have seen this before in 2008-9 and even just a couple of years ago.
How did the previous recessions impact nonprofits and higher education?
Education Enrollment Numbers Go Up
During times of recession, people tend to seek higher education as a way to gain new skills and improve their future job prospects. The chart below shows how college enrollment tends to increase following recessions.
This is an opportunity for the education sector, especially in the continuing education and executive education space. To be successful during a recession, institutions should focus on automation and process improvement to increase efficiency.
A great example is our client, Louisiana State University Online and Continuing Education. Through Salesforce technology and the power of automation, they could improve the time spent on their application and admittance process while also reaching 105% and 116% of internal application and admit goals.
Economic data from Giving USA 2022, an annual publication led by the Giving USA Foundation with research from the Lilly Family School of Philanthropy at Indiana University, tells us that an astonishing $484.85B was given to charities and nonprofits in 2021, with 67% ($326.87B) of that giving total coming directly from individuals.
According to the same Giving USA Report, total charitable giving increased 9.4% from 2019 to 2020, and these 2021 numbers reflect an increase of 4% up from 2020. Despite a global pandemic, political turmoil, and civil unrest stemming from the racial and social justice environment of America, funds raised by charities and nonprofits actually increased 13.8% from 2019 to 2021.
Going back to the concept of a “K-shaped economic recovery,” the giving was not distributed equally.
There are a few trends that we have identified:
Cause-Specific Giving Increases
During and following the 2020 recession, we have seen an increase in giving as a response to political events. I wrote about the “Trump effect” on giving and the concept of “rage giving.” We have seen a similar effect following the recent Supreme Court decisions. Geopolitical events have also impacted giving. With our Campaign Services offering, CARE USA reached hundreds of thousands of donors within days following the war in Ukraine and raised millions of dollars.
Greater Need for Health and Human Services
Some sectors within the nonprofit ecosystem have historically seen an increase in giving during recessions. The Fidelity Charitable reported that during 2020 and 2021, donors focused on issues highlighted by COVID-19. Specifically, cures for diseases, hunger, and local community needs. There is similar data about the great recession available. Health-related organizations and the human services sector saw a similar increase in 2008-9. When there is strife and suffering being felt on a wide scale, people are more likely to give to the organizations helping to alleviate these problems.
Learning from the Past
Fortunately, nonprofit organizations and higher education institutions can learn from the past. Key elements of the business model are the same today as they were before the most recent downturn, in which resilient organizations outperformed the rest of the industry.
How did they do it? Yes, some made bold moves of pivoting their entire business model. However, a key determinant of their success is timing. In fact, resilient organizations were making bold moves well before the downturn began. The CDC Foundation revamped its technology infrastructure and migrated from Raiser’s Edge and Luminate Online to Salesforce and Marketing Cloud a year before COVID, and the Food Bank for New York City started their investment and innovation with Salesforce as an Enterprise-Wide Mission Management System in 2014 and continued to invest in it every year as their mission evolved using our managed services program. These moves, combined with others during and immediately after the downturn, allowed these organizations to systematically outperform others.
Ask yourself, does my organization understand our stakeholders? Are we able to segment that data easily to reach your donors when needed? What are your organization’s strengths, and how can you communicate them in a quick and nimble way when needed? The girl in the story “Be Yourself” identified that she likes to play outside with her friends, and she loves painting with her fingers. That is where her passion lies. She doesn’t want to be rescued or sit in a palace all day.