Innovation in a Tough Economy: Hope for the Nonprofit Sector

There’s been a lot of talk over the last year about the impacts of the current recession on the nonprofit sector, and I’ll be the first to admit that I’ve chimed in from time to time with my two cents through this eBulletin.  A great deal of this conversation has taken a “how to do more with less” approach to the current situation.  And although this conversation offers a lot of valuable lessons that nonprofits can use to help stay afloat in the current economy, it only tells part of the story.

As many nonprofits know, the picture is much more dynamic.  At the same time private foundations and governments are being forced to tighten their belts, the rough economy has, quite noticeably, created an increase in demand for certain services offered by nonprofits.  This increase in demand opens up new channels of charitable giving that may not have been open prior to the recession.  Whether it’s an individual donor who feels inspired to help neighbors who are forced to get by on less, or a corporate charitable giving program that steps up its philanthropic efforts in response to a tragedy, someone is making sure that these newfound needs do not go unmet.

The “how to do more with less” story also overlooks the fact that there is light at the end of the tunnel.  The current recession will not last forever, and it’s important to focus on the broader picture of how we are going to transition out of this recession and what the new landscape will look like for you and your organization.   The purpose of this Nonprofit Law eBulletin is to highlight some examples of opportunities and strategies that will help your organization thrive in both the short run and the long run.

Recession Rule Number One: Adaptation is Everything

It may seem as though grant money—whether through private foundations or through government support—is simply becoming increasingly scarce.   This is not entirely true.  Although some sources of funding are shrinking overall, many others are just reevaluating their grant making strategies in light of society’s changing needs.   We have recently seen many foundations emphasize funding to meet basic needs in light of the recession.

But let’s say your organization does not run a soup kitchen or a homeless shelter.  How do you compete for grants when foundations are shifting their attention to providing basic needs to those struggling in the current economy?

One solution might be to re-frame your organization mission in light of recent social and economic changes.  Take the field of animal advocacy, for instance.  With more grant money going to meet basic human needs—food, shelter, health care, etc.—it may seem increasingly difficult for an animal advocacy group to secure much needed funding.  But organizations such as have found a way to bridge the gap between helping animals find homes and helping people faced with economic uncertainty.  The website serves as an online forum where people facing foreclosure can find a home for their pet.

Even if your organization’s programming doesn’t have a direct link to the effects of the recession and its economic effects, there are still opportunities for you to tap into other pressing social needs such as the access to health care and environmental sustainability.  The bottom line is to find a way to meet society’s most urgent needs through your organization’s activities—a strategy that not only help you do more good for the communities you serve but will also open you up to more funding opportunities.

A Lesson in History

If you look back at the Great Depression of the 1930s and other economic recessions, you will see two very promising patterns that should offer encouragement not only for the nonprofit sector, but for the economy as a whole.

First, and most directly, there is the simple fact that when times are tough, the nonprofit sector has historically risen to the occasion and helped those in need.  According to a 2005 paper from the National Bureau of Economic Research, charitable giving by religious organizations appears to have risen during the Great Depression.

Second, research suggests that there is generally more innovation during recessions, which can be seen in an increase in startup companies.   According to a 2009 paper from Ewing Marion Kauffman Foundation, about half of future Fortune 500 companies were founded during a recession.  This historical fact not only suggests a brighter future for the economy in general ; it’s also a sign that we are likely to see increased innovation in the nonprofit sector as well.

The Way Forward?  It’s Innovation

When Bill Gates talks, people listen.  And for good reason: he has run one of the most successful technology companies and currently serves as co-chair at one of one of the largest private foundations.  The Microsoft founder and Co-Chair of the Bill & Melinda Gates Foundation recently issued his second annual letter.   In the letter, Gates argues that innovation argues that investments in science and technology are essential to achieving a wide variety of charitable ends ranging from global health to public education.  Gates argues that, in order to make private donations and government aid (both of which are often limited) more effective, we need to encourage new innovations and technologies that will facilitate the daily operations of nonprofit organizations.


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