Funding Cuts Test Resiliency of Nonprofits
There’s no question that the nonprofit sector and the philanthropists who support it are reeling from changes in federal regulations and funding—proposed or actual—that are being prioritized by the Trump administration.
Since January, we’ve seen proposals for higher taxes on foundations’ endowment income, for example, and efforts to strip the tax-exempt status of stalwart nonprofits like Harvard University, defund programs that undergird the sector such as AmeriCorps, and curtail or end federal funding of the National Science Foundation, National Institutes of Health, Corporation for Public Broadcasting, Institute of Museum and Library Services, and many other key funders of nonprofit endeavors.
Over the decades, leaders of a certain age remember cycles of greater and lesser government scrutiny when federal funding of nonprofits was being considered. Recessions and shifts in larger economic conditions have affected funding, but ideologically based initiatives to defund particular activities long have provided challenges for leaders in the nonprofit sector. (Remember the 1990s culture wars?)
Business cycles in the nonprofit sector are real, just as they are in for-profits. Understanding and responding to external opportunities and threats is part of the leader’s job. Today, many leaders are saying, “This time it’s much worse.” That may well be the case, but drawing lessons from past experiences and perspectives is not a bad response.
Veteran nonprofit consultant and author Susan Stevens had this to say when TCB asked her for advice for nonprofits in our current environment: “What we see is scenario planning happening all across the sector—‘if this, then that.’ One scenario involves re-visioning—in essence taking the organization back to the startup stage where mission is still supreme but budgets are smaller, so staff and board become more hands-on, and funding often is unpredictable and unsure.”
In her 2001 book, Nonprofit Lifecycles: Stage-Based Wisdom for Nonprofit Capacity, Stevens describes nonprofit startup as the beginning stage of operations when energy and passion are at their highest, where energy and dedication take precedence over quality and protocols, and where organizations are characterized by “a willingness to do almost anything to prove that services can and should exist.”
“Re-visioning in today’s environment requires a positive mindset; an opportunistic, hopeful mindset,” Stevens says. “This is tough to achieve from a place of resentment over the loss of funds. Obviously, this is a very difficult time for nonprofits. There is no way around it. But those with an entrepreneurial, can-do mindset will find a way to reimagine their mission and programming.”
The focus should be on the opportunities at hand, not what has been lost. “People are not as likely to respond to an appeal based on loss,” suggests economist, author, and radio host Chris Farrell. “They want to know what you are going to do.”
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He also says that a shift in mindset is needed when times are tough. “You have to think about opportunities, take calculated risks,” Farrell says. “When everyone is retreating, it’s a great time to think about how to advance, how to make the changes you always knew you should or could be making, or to initiate new partnerships, mergers, alliances, or other efforts that may increase efficiency and reach.”
Fostering and projecting a positive outlook and looking for opportunities to increase service and impact—these are not the messages flowing in many parts of the nonprofit sector today.
It’s challenging to cope with the flurry of regulatory changes, the uncertainty of current and future funding sources (including rescissions), and the challenge of recruiting and retaining staff when personnel reductions may be a necessity. Yet both Farrell and Stevens see courage, inventiveness, and positivity as the key drivers of success. Leaders need to think like the leader of a startup.
Can reframing your nonprofit operation as a startup help move your organization to a new mindset? What scenarios would you build to advance your mission while operating wildly differently? How is a focus on startup mode different from focusing on what’s been lost? How can leaders help instill optimism, passion, and energy in their organizations, when the external environment is offering negativity, suspicion, and calls for defunding?
Authors, spiritual leaders, friends, family, and co-workers can offer sources of support for developing and sustaining an optimistic and energetic response to the nonprofit sector’s collective sense of beleaguerment.
The pain and frustration of current circumstances are real for many nonprofits. But the questions remain: How will you creatively bootstrap your most vital programs and services so that they continue to be available in our communities? How will you enlist others to advance your organization’s cause? What new seeds can you plant now that will help your organization flourish in the future?
