Posted November 1st, 2008

Navigating Troubling Times

This month, Give & Take talks with Margaret Holman, president of Holman Consulting in New York, about what she has learned from past economic downturns, and how to approach fund raising in today’s climate.

Give & Take: As someone who has worked in fund development for a number of years, you have experienced the economic disclocations of the early 1980s, the late 1980s, the early 1990s, the tech bubble burst of 1998, the aftermath of 9/11, and the recession of 2001. What did you learn from these recessions and other crises of the past?

Holman: Keep focused and move forward. We can’t luxuriate in reviewing the past and wishing it was back. It was very clear in 1987 when the market fell that a lot of people were adversely affected in their market portfolios and business matters in general. The economy eventually recovered. We did see a momentary downturn with major donors who were making big gifts then and had to stretch out the timing of the gift or make a smaller gift with the promise of a larger gift later.

In any event, spending endless time wringing one’s hands and saying, ‘Oh, woe is me’ is a fruitless exercise.

G&T: How do you think this downturn is the same as before? How is it different?

Holman: Many of the other downturns were focused to a large extent on one particular industry. In the ’90s it was the dot.com explosion and then the dot.com failure, and Silicon Valley was inordinately affected. And now it is primarily the financial and real estate industries.

Not everybody is affected in the same way. For instance, I was at a luncheon the other day and the head of a major New York-based organization said he had been told that 185,000 jobs will be lost in New York City alone. That has a big ripple effect.

On the other hand, in talking with a friend of mine who works at a university in the Midwest, she said that they were not feeling the economic downturn as directly because their area is not a large financial center like NYC, and it benefits from a broader economic base.

A client in Vermont is also not experiencing the immediate downturn that we are experiencing in New York and other financial centers. So fundraisers in some of the metropolitan areas feel particular pressure right now. Fundraisers in smaller metro areas are going to face similar challenges, just not to the same extent.

The key to surviving all of this—one that has indeed been the same every time that I have gone through it—is having a diverse fund-raising program. The same thing happened after 9/11. Organizations that relied heavily on special events were very close to closing at that time because they had ‘all their eggs in one basket.’ Organizations with a broader fundraising base survived and a lot of them did better because oftentimes it is a crisis that pulls people together.

A colleague who works at a food bank here in New York said, ‘What we are seeing right now is that our smaller donors—those who give less than $250—are making smaller gifts, but we are getting gifts from more people. More people are worried that others are losing their jobs who can’t afford food.’ So people are also giving to those organizations where they feel the need is greatest.

G&T: What kinds of questions are you getting from your clients and what advice are you giving them?

Holman: My clients are very concerned about capital campaigning right now. And they are very concerned about their major donors. I tell them, much like Barlow Mann says, to be ‘near, dear, and clear’ to their donors during times like these.

I have a client in a $16.5 million capital campaign. They have already raised $10 million in cash and pledges. Some people had pledge payments that were due at the end of October. So they took a deep breath, wrote a nice pledge reminder letter, and sent it out.

They asked one of the donors, who had pledged $1 million to the campaign, to fulfill the portion of his pledge that was due at the end of the month. The donor called the head of the organization and told him that he was writing the check for his campaign gift and sending it over. When they received the check, it was written for the entire $1 million amount. The head of the organization immediately called the donor to thank him, and said he didn’t realize he was going to send the entire amount. The donor said that it was better that the organization have it now than he should lose it in the market.

Organizations won’t be successful in this environment if they say, ‘We can’t ask John Doe for money right now because the market is bad.’ This is the time to pick up the phone and thank your most committed donors, and ask for their advice and help.

G&T: From past experience, what gift plans have shown to be more ‘recession-proof’? Do you think these same plans will be attractive to donors in today’s turbulent times?

Holman: Charitable bequests and other gifts through estates will continue to be planned for and received regardless of economic fluctuations. During challenging economic times people may even pay more attention to updating their long-term plans, and gifts that may have been made on an outright basis by older donors may instead be included in a will, remainder of retirement plan, or other testamentary plan.

I also think that charitable gift annuities will remain strong. They have been the #2 planned gift since the early 1980s when I started in this field. With interest rates in the basement, ACGA rates look even more attractive now. Especially for those donors who say, ‘I didn’t diversify my holdings quickly enough and now I have experienced losses,’ why not suggest that they give your organization stock that is still appreciated, or cash proceeds from the sale of other stock to fund gifts that will provide them with income and other benefits? This is the reason that gift annuities and other gifts that feature income continue to be popular in times of economic downturn.

For older Baby Boomers who may have just seen their 401(k)s turn into 201(k)s, you may want to suggest deferred gift annuities as a giving option. They can sock the assets away now at the ACGA rates, let someone else manage the assets given, receive a charitable deduction, get payments in the future, and still make the kind of gift they have been wanting to make but can’t afford to give out of cash now.

G&T: What would you to say to fundraisers who may be especially concerned that donors may cut back on their giving this year-end?

Holman: Many are anticipating that. The thing to remember is that Giving USA statistics show inflation-adjusted giving seems to go down only 1% during times of recession (see page 1.) Because a disproportionate amount of giving is done in the fourth quarter, that means there can’t be too great an impact on that quarter in relation to others. Now more than ever, development officers need to realize that many donors still have money to give and those who are charitably inclined will still give it.

Just as my friend at the food bank said, you may be getting smaller gifts, but you could be receiving gifts from more people and additional gifts from some who may have already given this year but want to give again in response to what they see as increased need. Be sure to tell your story compellingly this year-end.

G&T: Any final words of wisdom you can offer to those fundraisers who are experiencing their first economic downturn?

Holman: First, take a deep breath. Second, don’t panic. Third, realize that for now this is the new normal and those who do well will be the ones who adapt the fastest. Fourth, keep in close touch with the inner circle of your donors—your board, your top 100 donors, etc. Really keep them close. Fifth, be optimistic. If you are dooming and glooming, people will pick up on that vibe. Nobody wants to write a check just to keep the lights on and the doors open.

Remember that overall giving doesn’t appear to decline much during recessionary periods, but that is the net result of some increasing—and some decreasing—their gifts.

People want to support those organizations that are forwardthinking and positive, and where they know their gifts will make a difference. You may also want to seek out a colleague who has been through tough economic times of the past and ask him/her to share some tips and techniques.

The publisher of Give & Take is not engaged in rendering legal or tax advisory service. For advice and assistance in specific cases, the services of your own counsel should be obtained. Articles in Give & Take may generally be reprinted for distribution to board members and staff of nonprofit institutions and other non-donor groups. Proper credit must be given. Call for details.

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