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Recent Entries

• Take the Nonprofit Stress Test
• A New Era for Philanthropy?
• No, Not A Retreat!
• Dogging Questions
• Cleansing and Renewal

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There are few laws of nature more powerful than the “Law of Unintended Consequences.” As an example, in their new book, SuperFreakonomics, authors Steven D. Levitt and Stephen J. Dubner document that prior to the Equal Pay Act of 1963 and the Civil Rights Act of 1964, a stunning 40% of teachers were in the top quintile of IQ and other aptitude tests. Then, as women left teaching for other higher paying professions, that number dropped to under 20%.

Could a similar fate befall nonprofits today as a result of government stimulus and local rescue efforts such as The Community Foundation’s 2009 Safety Net Fund? Could these short term efforts help nonprofits survive for today, but unwittingly encourage them to delay the hard decisions necessary to ensure their long term future? To protect against this possibility, when I speak to nonprofit audiences today I recommend they take the following nonprofit stress test and that they ask themselves five important questions.

The Stress Test: Assume that that your revenues beginning in 2010 will drop 5% annually over the five years. How will you survive? What actions could you take today, while stimulus and rescue funds are available, to ensure that your nonprofit remains relevant and has the capacity to meet future community needs?

I am careful to say that the 5% annual decline is not a prediction. However, it is an increasingly credible scenario. Why?

1. The federal government can’t keep printing money forever, so stimulus spending will end.
2. State governments are about to get clobbered by the triple whammy of declining taxes, declining federal stimulus and rising costs.
3. We don’t know whether the new health care plan under consideration might increase expenses for nonprofits, whose largest expense category is typically payroll.
4. Foundation spending formulas call for a year of grantmaking declines in 2010, and likely again in 2011, as a result of declining endowment values year over year.
5. Individual wealth has been dramatically reduced because of the recession.

The Effect of Donor Advised Funds: To this latter point, we have observed that affluent donors are maintaining their giving to charities by drawing down the balances of their donor advised funds. Typically, these donor advised funds are created or supplemented during the good economic times and then granted out during recessions.  Conversely, when the economy improves these affluent donors will rebuild their donor advised funds before other nonprofits see an increase in giving. Thus, donor advised funds have a stabilizing influence not only in a recession, but also during the initial stages of a recovery. Thus, nonprofits should be cautious when predicting a rapid rebound in giving by their more affluent supporters.

The five questions: So, here are five basic stress test questions that nonprofits must address to avoid budgeting traps that may threaten future sustainability:

1. Can you identify your least productive and most costly programs and eliminate them?
2. Can you identify programs that are consistent with your mission and have revenue-producing potential for expansion?
3. Can you trim administrative expenses, including staff, before doing so becomes an emergency measure?
4. Are there opportunities for administrative collaborations and mergers between nonprofits that work to mutual benefit?
5. Do you have the right board talent to lead effectively in tough times, and do they have the capacity you need to protect and grow your revenue sources?

We have all heard the cliché, “Prepare for the worst, and hope for the best.”  Nonprofits are very good at hoping for the best, but are they taking seriously enough the call to prepare for the worst?

The possibility of a new era for philanthropy is probably better suited for a thesis than a blog. Nevertheless, a convergence of new data and observations has me thinking on this subject. Please join me to consider the possibility that we may be witnessing the dawn of a richer philanthropic future.

Big Idea Number 1: Do we have enough? John Bogle, now 80 years old, founded the Vanguard Mutual Fund Group in 1974. In an interview for the most recent issue of the Journal of Financial Planning, he commented on the genesis for his thinking in his book, Enough. “In 2005, I read this wonderful poem by Kurt Vonnegut, in the New Yorker magazine. It followed a party given by a billionaire hedge fund manager, whose guests included Joseph Heller and Kurt Vonnegut. Vonnegut noted that the party’s host had made more money in a single day than Heller had made in a lifetime from his novel Catch-22. Heller responded that he had something the billionaire will never have: enough.” Bogle continued musing, “Enough is an important concept about coming to grips with what you really want and need in life and your responsibility to self, family, career, and community.” How many others are coming to the same conclusion?

Big Idea Number 2: Srini Pulavarti, Chief Investment Officer for the University of Richmond’s Spider Management Company, recently gave a presentation where he included four data charts that definitely portrayed a society that has enough. Chart 1 showed dramatic growth in the average size of homes from 1982 to the present. Chart 2 showed a sharp decline in the average number of people living in each home over that period. With fewer people living in larger houses, Chart 3 was unsurprising as it showed a dramatic increase in the quantity of “stuff” owned per person over the same time period. Chart 4 showed that this accumulation of houses and stuff was largely financed, and now consumers are burdened by a record level of debt. Could we be at an inflection point following a 26-year trend of accumulating stuff, where we will begin to reduce the amount of stuff we own? 

Observation Number 3: On CNBC last week, I heard a talking head from the travel industry opining, perhaps self-servingly, that coming out of this recession people are showing a propensity for buying experiences as opposed to buying stuff. Could it be that the absolute decline in the value of tangible assets – equities, homes, antiques and other stuff – is causing a shift in the perceived value of this stuff compared with the value of intangible assets like sharing a vacation with family, serving others and serving a purpose larger than oneself?

Observation Number 4: After two years of feeling in some senses akin to the Maytag repairman, my life has gotten very busy again at The Community Foundation. Some large donors who stopped giving to their donor advised funds last year have recently begun to give generously again. Many conversations about new funds that have long lain dormant have sprung to life. There seems to be a new urgency to giving before year-end. Certainly the recent rise in the equity market is a key factor. Fear of possible higher tax rates next year and lower deductibility of charitable giving – both bandied about by political powers that be – could be driving some of the urgency. But, could it also be that the recession has caused many of us to step up our giving to help people who were hurting worse than ourselves? And, could it be that we enjoyed the way we felt when we did that? And, now that assets values have partially recovered, could it be that we are seeing consumer preferences shift from consumption to philanthropy?

Cautionary Data Point Number 5: In Giving USA Spotlight (Issue 2, 2009), data is presented about the pattern of giving after recessions from the Great Depression to the present day. Likening the present recession more to the 1973-75 recession than to the Depression, this data-rich research concludes that giving from households and individuals will likely not return to 2007 levels until at least three years after the recession ends. If donors follow historical patterns, then the recent burst in philanthropy will prove short lived. However, it is also possible that philanthropy will benefit from a shift in consumer preferences from spending on stuff to spending on intangibles. 

On Tuesday, October 27, The Community Foundation will host the largest crowd ever at its Annual Luncheon. Attendance has shot up by 20%, following a decade of flat attendance, and goodness knows the number of donors this past year has not increased by 20%! People are inspired by having participated in the 2009 Safety Net Fund, and they are now voting with their feet. Could we be witnessing the dawn of a new era for philanthropy?

The very idea strikes fear of boredom and endless prattle into the hearts of even the most spirited volunteers. Yet, without a strategic plan a nonprofit drifts, loses focus and becomes ineffective. While painful to develop, a good mission statement guides good decision making on a daily basis and helps keep staff, volunteers, donors and clients on the same page.

New leaders invariably instigate a new planning process. The results are sometimes simple, such as at Maymont (http://www.maymont.org/NetCommunity/Page.aspx?pid=292). Or they may be complex, such as at the Southeastern Council of Foundations (http://www.secf.org/s_secf/sec_full.asp?CID=13268&DID=29218). The latter encompasses 360 grantmaking foundations of all stripes throughout the southeast. Talk about herding cats! To me, the best part of this detailed plan lies in its values—servant leadership, partnerships and collaboration, agility and creativity to name a few. For those who really dig this stuff, you can even blog about it at http://blog.secf.org/blog/southeastern-council-of-foundations.

I met last week with a representative of ChildFund, whose planning process culminated in a name change from its historic roots as the Christian Children’s Fund. The board felt that “Christian” was an impediment in some of the international communities they serve, and they developed a new mission statement: “We help deprived, excluded and vulnerable children have the capacity to improve their lives and the opportunity to become young adults, parents and leaders who bring lasting and positive change to their communities….”

Consider how Family Lifeline’s mission statement reflects the organization’s name. “To provide families with the tools and resources needed to create a better future for themselves and their community…from the birth of a baby, to adolescents in school, to caring for older adults.”

Now, take this thought and apply it to a family. How does a family stay together through generations? What would be the difference if a family had a mission statement? How would the very existence of articulated shared values affect the behavior of children and adults? On a personal note, is it time for my family to revisit the work that our father did with us in 1992, when he prepared the mission and vision statements that continue to guide the shared portion of our lives? (I can already hear the groans.)

When I speculate about families that must have thought through their vision and mission, I think of the Ukrops, who seem to embrace each other’s individuality and who also seem to move in lock step when it comes to values. I have no personal knowledge, but I feel certain this result requires hard work—intensive planning and constant nurturing.

Few nonprofits and few cohesive families survive for 100 years. I venture that success only comes with plowing through the groans, battling the boredom and articulating the vision. Survival is a constant cyclical process that requires planning, nurturing and evaluating. And, with each new arrival on the team, we need to refocus on the future and adjust our course, if only slightly.

My entire life, with the exception of my college years and a brief time living in an apartment, I have had a dog. I frankly cannot imagine life without Maddie, Kismet, Hershey, Snowbear or Bebe. They have provided daily joy, and in times of sadness, sickness or loneliness they have provided comfort.

What happens when a person wants a dog but can’t afford one? Or, what happens when a person who once could afford a dog no longer can? For some people the answer is simple. If you can’t afford a dog, then you can’t have one. But to others the answer is less straightforward.

Those people who cannot or can no longer afford a dog might benefit most from a dog’s companionship. Could there be new options to resolve this issue?

Today I welcome guest blogger, Robin Starr. Robin has spearheaded the development of the country’s finest SPCA facility, spoken passionately as an advocate for animals, and endured gracefully the controversy that comes with her role. Cynics try to frame animal issues by comparing spending on animals with spending on the human condition as an “either—or” question. Robin lends her voice to those of us who prioritize the symbiotic relationship between people and their pets.

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Late one evening, after an event at the Richmond SPCA, a man arrived at our building highly agitated about his young dog who was terribly ill.  He begged for our help.  We ran out to his car with him and saw a puppy of about six months old on the back seat.  The puppy was in dreadful condition with the recognizable symptoms of parvo virus, an often fatal but preventable disease that primarily affects puppies.  It seemed unlikely the little dog would live.  We explained that we did not have a full service veterinary clinic and that our Director of Veterinary Services had gone for the day.  We urged him to go to the nearby Veterinary Emergency Center (VEC).  He then said, through his tears, that he could not afford veterinary care for his dog.  He left saying that he would go to VEC anyway.

The horribly sick little dog and his distraught, loving owner haunted me for weeks afterward.  This was far from the first time that someone had come to our doors wanting veterinary care for their beloved pet and saying that they could not afford to go to a private office.  Our clinic staff was always deeply pained by having to send them away knowing that there was no good answer for them. 

The easy response to this dilemma is to simply say that people who cannot afford the cost of caring for a pet should not have one.  That is a popular theory even among people in the animal welfare field.  But “easy” quite often does not mean “right.”  Having a pet undeniably improves the quality of life for most people.  Should people of modest means be prevented from having the unconditional love and companionship that pets bring to our lives?  An even tougher question is raised for us when the pet owner acquired the pet when economic times were good but now is having trouble providing for that pet because of a job loss or other hardship related to the downturn in the economy.  Is it fair or ethical to suggest that such a person should simply abandon the pet that they love and treasure? 

My own answer to both of those questions is a definite no for several reasons. The joys that pets bring to our lives should not be denied to people of modest means.  During these tough financial times, many people are struggling with threatened or actual job losses, diminished incomes and fears about their futures.  More than ever, they need the haven of love and comfort that a beloved pet provides them.  In addition, during hard times, we should help families to stay together and pets are family members too.  Lastly, healthy and sweet pets are losing their lives all over this country for the lack of a home. It is crucial to saving their lives that we not eliminate all of the good and loving homes that folks of limited financial means could provide to them.

For these reasons, we are now providing wellness clinics for the pets of low income families at the Richmond SPCA.  We began in February to hold monthly clinics at which we have provided basic exams and access to preventative care and medications at very low cost.  The response of our community to this service has been overwhelming.  We had more calls for appointments than we could come close to providing at the monthly clinics.  So, in October, we will begin providing these low cost wellness clinics weekly for the pets of low income families.  This service is a part of our Project Safety Net which provides an array of supportive programs to help pets stay in the loving homes they have.

Had that distraught man who came to us with his dying puppy been able to bring his dog to one of our wellness clinics, the puppy could have been inoculated against the parvo virus.  If our weekly clinics can help to prevent other people from losing their best friends like he probably did, then we will have helped both pets and people to have a better quality of life during tough times. 

Robin Starr ( )

It cannot be accidental that the Muslim holiday of Ramadan and the Jewish holidays of Rosh Hashanah and Yom Kippur share this season, share the rituals of fasting and feasting, and share the themes of cleansing and renewal. Being of the Jewish faith, this season has always been a time of reflection, a time where I seek spiritual meaning and again try to make my life more relevant to something greater than myself. I have always found symbolic the astronomical events that mark the Jewish holidays—the new moon ushering in Rosh Hashanah (New Year’s Day), followed by the cleansing fast of Yom Kippur (Day of Atonement) and culminating on the full moon with the feast of the harvest holiday, Sukkot. The juxtaposition of the lunar cycle lends timelessness to man’s yearly struggle to purify his soul.

My introspection this year is further stimulated by a Christian faith-based nonprofit, Boaz & Ruth, which Teri Lovelace and I visited earlier this week. Located in the north Richmond community known as “Six Points,” the neighborhood is defined by street names we once associated with crime scenes – Meadowbridge Road, Brookland Park Boulevard, Second and Third Avenues. A store window with shattered glass and bullet holes relates the story of the neighborhood’s violent past. One is not surprised to learn that Six Points lies within a two-mile radius of six of the seven census tracts with the highest number of released prisoners in our City.

Enter Martha Rollins in 2002. Many of us remember Martha’s Mixture, an iconic antique furniture store in up-tempo Carytown. Enlightened and inspired by her shepherd and pastor, Reverend Charles Summers of First Presbyterian Church, as well as by the Book of Ruth from the Old Testament, Martha pondered the tremendous resources of the wealthy and the severe needs of the poor. She wondered how she might use her talents to productively conjoin the two. Thus called to serve, Martha migrated her used furniture store and restoration business to this blighted block of boarded up buildings, where she has deployed her 30 years of business experience to create a series of enterprises that seek to renew both the human spirit and this neighborhood. In only 7 years, we see the people and the buildings transforming before our very eyes.

After a tour of the original furniture restoration business and used furniture store—which has evolved to include a thrift shop, a construction crew, a moving company, six transitional homes and a restaurant/catering business housed in a restored and historic fire station—Teri and I dined with Martha, her development director Lou Mazzini and Alton Mitchell. We learned that other than Martha, Lou and a few other visionary and committed cohorts, these business enterprises are run entirely by formerly incarcerated prisoners who are seeking to turn around their lives. Alton is one of the former prisoners. We had seen him on the tour restoring the beautiful features of a house, which only months ago had been disguised by debris that had gathered through years of neglect and abuse. Permit me to paraphrase and condense Alton’s words, which he eloquently delivered in soothing tones that tenuously veiled a former life of crime in the manner that new pink skin grow over a long-festering wound.

“I grew up in this neighborhood. At the age of 12, I discovered drugs. At first, it was marijuana, and later much stronger drugs. I chose the wrong friends and lived a life of crime. I was arrested many times and lived in many jails. I tried to go back to school, but they put me in a grade with much younger kids so I headed back to the streets. Most recently, I was in jail in Beckley Federal Prison in Beaver West Virginia, and when I was released in 2006 I returned and discovered Boaz & Ruth.

“I found love here. I found God. I learned that I could rebuild this neighborhood that unfortunately I had helped to destroy.  I was always my mother’s favorite, and I am again living with her in the house where I grew up. Now, when I see my former friends, they know that I have changed.“

Alton’s story, punctuated by our bedazzled questions, kept us spellbound for half an hour. The air of ease around our table echoed the spirit of the daily prayer circle with which Martha and her growing family of former felons complete the lessons of each day. It cannot be a coincidence that this neighborhood has experienced a 37% drop in crime, and it has not had a violent incident since 2004. After hearing Alton’s story, which punctuated our two hour journey with a bold exclamation point, we were not surprised to learn that Martha was recognized last month at the White House, at which time she personally delivered to President Obama a notebook with photos of her colleagues engaged in productive pursuit.

Martha Rollins’ entrepreneurial approach has enabled her virally growing business enterprises to self-fund 30% of their overall operating budget. Donated funds are leveraged in almost countless ways. Social work students from VCU and University of Richmond train under the tutelage of Bonnie B. Dowdy, a Ph.D., who guides the life skills training aspect of Boaz & Ruth—the heart of the soul restoration enterprise.

If you would like to visit Boaz & Ruth, you may wish to join us when The Community Foundation schedules a site visit in the near future. This on-site experience will be the perfect way to kick off the 2009-2010 season of the Richmond Donors Forum, where we will feature four speakers who are in some way engaged in what we call “The New Business of Philanthropy.” Richmond is rich with nationally recognized social entrepreneurs, including our lead-off speaker in October, Michael Pirron of Impact Makers, and June’s concluding speaker, Jon Lugbill of Richmond Sports Backers. Like Martha’s story, each of these sessions will open our eyes to the intersection of entrepreneurship and eleemosynary pursuit.

Simply email me if you are interested in attending the tour and/or the Richmond Donors Forum. We will do our best to accommodate everyone.

In closing, whatever your faith, may this season be one of cleansing and renewal. And, may the coming year be one of good health, good fortune and service to the greater community of which we are all a part.