In the last twelve months since the financial crisis rocked the world’s economy, nonprofit groups have cut budgets, laid off staff members and taken other steps to shore up their finans.  While opinions are mixed, many philanthropy experts  say that charities have been complacent in developing the radical thinking that is needed to maintain, and potentially strengthen the nonprofit world.  As the effects of the economic downturn continue to linger, nonprofits across the US are exploring new ways to raise money.  Many innovative approaches are now either being considered or implemented in nonprofit organizations across the US, and here in Louisiana:  

The for-profit with the non-profit soul.  Eighteen months ago, Vermont became the first state to pass a law to give for-profit entities providing social benefits their own legal designation, know as low-profit limited-liability companies of L3C.  Five other states have followed suit and now supporters are pressing Congress to pass legislation to help these companies succeed.  The plan was designed to make it easier for socially oriented businesses to attract investments from foundations and additional money from private investors.  Still nascent, this new business structure is being debated.  But the model provides intriguing opportunities for-profit social service providers to diversify their income sources and provide tax deductions to donors. 

The Social Impact Exchange.     Nonprofits, whose programs have demonstrated measurable results and efficacy, still struggle to raise funds.  These mixed result, with regard to focusing dollars on programs that are workin, has prompted interest in a capital marketplace – not unlike the stock market – where money would  flow naturally to charities offering the best programs.   A new online forum, through the Social Impact Exchange, will allow top-performing charities to pitch their strategic plans to foundations and donors interested in helping such groups expand throughout the country.  The exchange’s focus is on foundations and affluent donors who can write large checks to cover a meaningful portion of the charity’s growth plan. 

 Gutsy challenge matches.  A radical approach by the Baltimore Symphony Orchestra allowed employees to give up $1 million in pay and benefits this year – and challenged donors to match that amount.   Other organizations are using the same or similar approaches.  

Farming and the Arts.  Borrowing from a community-supported agriculture effort in upstate New York, the founder of a theatre company in Manhattan promoted “community-supported theatre” offering supporters a change to buy a stake in the theatre’s “creative harvest”.  The theatre recruited 75 people, each paying $110 to support the development of the theatre’s annual production.  In return for their investment, supporters are invited to monthly meetings that include live rehearsals, discussions with artists and directors and exhibits.  The process, while raising funding, develops an educated group of persons so familiar with the process that they have become community champions.  

Sharing Resources.  Nonprofits continue to seek ways to reduce administrative costs.  In some places, nonprofits have turned to providers such as Back Office in a Box (BOB).  BOB offers now-cost finance and accounting services to the members of an exchange, connecting them with professionals who can perform tasks like financial reports, invoices and tax filings for as low as $40 per hour.  Nonprofits pay for services as needed, rather than retaining professionals or assigning work to employees.  Organizations using BOB have saved hundreds of thousands of operating costs, pulled themselves out of debt, and have stabilized their financial picture to weather the economic downturn. 

Innovative Leadership.  To adapt to challenging times, the best leaders will change the rules of the game, restructure parts of their operations, and redefine the way people work.  Applying short-term solutions that have worked in the past will not work in the current climate.  Charity leaders are moving fast to fundamentally change how they manage their organizations including letting employees make key decisions,  focusing on essential programs, looking beyond obvious solutions, and collaborating with other agencies to deliver services and eliminate redundancy.  

            Finally, nonprofits are being extremely careful with how they embrace and use federal  stimulus windfall funds – knowing that if these funds are used now to grow substantially, growth must likely be sustained after stimulus funds are exhausted to meet social needs.   Additionally, such funds may be shielding organizations from economy’s true toll, providing a temporary cushion that may delay making important cost-saving decisions which will be inevitable in just a short time if the economy continues to lag.