January 19, 2016
For readers in Texas, the new year opened with added downward pressure on oil prices. For readers in other parts of the country, the low pump prices are one positive sign in a sea of volatility. Perhaps, as in recent years, what we can safely forecast is the unpredictability of the stock market. Clearly, there are enough signs of a slow, slowing or sluggish economy to raise the questions about what impact this will have on philanthropy and how are we to raise money this year for our most important nonprofit projects and priorities. In Houston, on January 11th, CultureMap published an article entitled, “The Lowdown on the Slowdown: As oil plummets, Houston non-profits starting to feel the pain”. The article can be found at http://houston.culturemap.com/news/city-life/01-11-16-lowdown-on-the-slowdown-as-oil-plummets-houston-non-profits-starting-to-feel-the-pain-1/. We can anticipate seeing additional articles such as this in light of the continuing fall of oil prices and the volatility in the global and U.S. stock markets.
For nearly ten years, we have been adjusting to the uncertainty in markets and economies and the issues of donor and leadership confidence that impact decisions concerning capital campaigns and major gift fundraising programs. We have become accustomed to (1) uncertainty as the new normal, (2) volatility being as much a part of our lives as the cycle of flooding and draught and (3) realizing that the survivors in the midst of these economic storms are the steadfast, the fighters and leaders. Thousands of nonprofits and their consulting partners have come through these ten years in sound condition and financial health due to remaining bullish about the work they do, the causes they serve and the people they impact. Most importantly, these survivors have understood the importance of the relationships that are so central to their existence as nonprofit institutions.
Since we have been sailing on these turbulent waters for so long now, there is value in periodically turning back to the lessons first learned in the great recession of 2008-2009. The following notes are some “talking points” which we have shared with our Dini Spheris team as a way of encouraging us to encourage others in these uncertain times. When people look to us and seek our advice, we wanted to be prepared to speak clearly about our expectations about the nonprofit sector and giving in 2016 and beyond. We would encourage every CEO and chief advancement officer to clarify their position before they are asked about the impact of falling oil prices and stock market volatility on philanthropy.
Prudence suggests that in an “oil-based” economy, we should expect individual giving to fall, corporate giving to pull back and foundation giving to be moderated. At the same time, we learned many helpful lessons from the recession – givers continue to give, giving tends to move from the opportunistic edge to institutions that align with donor core values, campaigns continue but wild grab-for-all-you-can-get goals must be right-sized and more time must be spent on cultivation as major gift decisions tend to take longer. We should encourage the continuation and launch of capital campaigns, as successful campaigns can still be run but the giving pyramids may take differing shapes, requiring more donors to reach the goals. We have also seen that in times of economic hardship at the local level, giving will often shift to favor safety net providers for our neighbors. Our surveys of major donors during the recession years reinforced these conclusions.
Additionally, one consideration that is much different today is the great diversification of our Texas economy. While oil is still king or queen, our economy is based on so much more than oil. The old adage is still true. Casket makers thrive whether the price of oil is $100 or $20 a barrel. There are many businesses and professions that continue to make money during oil downturns. What we can expect is moderation, not collapse.
Regarding what we are seeing in the marketplace, we do see a lot of campaign activity occurring. Campaigns are being planned, launched and run. More inquiries about new campaigns are coming in every day. As there will be more frequent articles about the disastrous effect of oil prices on philanthropy in the local press and in national press, we should remind our nonprofit colleagues and peers that we too will face these challenges and we can be successful in this environment. We must pay attention to how we must adjust to changing conditions, while remaining focused on the funding required to achieve our mission. We expect many smaller oil firms to collapse in this market; others will survive and fill the service void. In the nonprofit sector, we can expect a number of smaller institutions and agencies to be impacted by a reduction in gala business, special events, etc. In some cases, institutions and agencies may have to compete more vigorously to win the support that will sustain them. The main thing is to be clear-minded, flexible and ready to rise to the challenge of the unexpected – our new normal.
Finally, what we do know is that the state of philanthropy typically follows the regional/national economy by 12–18 months. This suggests that we must spend the time to keep our campaigns and annual programs vigorous and stay in the business of relationship building and management every day. Let’s carry on clear-eyed about the dangers that lurk around the corner – and our capacity to weather these challenges! As our British friends might commend us, “Keep Calm and Carry On”.