The Age of Austerity: What does that look like for non-profits?

I love to wake up on Sunday morning and watch the news shows. This past Sunday my favorite show — Meet the Press — hosted one of the Presidential debates for the Republican field. During that debate, one of the journalists or candidates used the phrase “Age of Austerity” in regards to government spending and programs.

I don’t know about you, but sometimes phrases just get stuck in my head, and I gnaw on them like a dog with a bone. This is what happened when I heard “Age of Austerity”. At first, I spent a lot of time processing what that looks like for government (e.g. more taxes to pay off accrued debt and reduction in services like police, fire and garbage). However, my mind quickly wandered to the non-profit sector and the questions started to snowball:

  • Could the non-profit sector be entering into an “Age of Austerity”?
  • What could this end up looking like for non-profits?
  • What could the societal consequences be when so many people rely upon non-profits to “fill the holes” in our social safety net (especially when government austerity likely means creating more holes in that safety net).
  • How many non-profits will tighten their belts to the point of going out of business because they can’t achieve their mission? And how many non-profits will look at merger opportunities?
  • Where will the cuts come from? Heck, most non-profits already stretch their resources too thin.

I believe that we might be on the brink of this “Age of Austerity” where donors demand more services, outcomes and impact with smaller and fewer contributions to pay for that demand. Consider the following few data points from Guidestar’s recent non-profit survey:

  • One-fifth [of survey respondents] projected decreases in operating budget for 2012 …
  • About half of survey respondents are facing declines in revenue from sources other than contributions (which includes government funding) or had less than three months of operating expenses in reserve. Similar percentages reported that their organizations rely on a limited number of funders, and more than half (52 percent), reported declining or flat philanthropic contributions.

Lots and lots of questions! LOL — Welcome to my world. However, the following¬†question is the one that I’ve been stuck on for a few days:

Are some austerity measures better than others when trying to fulfill
your non-profit organization’s mission and achieve community impact?

I believe the answer is probably obvious — YES. However,¬†I don’t believe there is any consensus around what cuts are better than others. For example, should an agency pull back on certain programs and focus more intentionally on core programming? Eliminate middle management and flatten the organization chart? Change executive leadership and hire a less experienced/less costly who might have more upside in the long-term? Reduce the size of the fundraising department?

In an effort to find some clarity, I’m going to ask my Tweeps and other social media friends to weigh-in with their thoughts. I’ll report back tomorrow on what I find out. Of course, you are very much encouraged to use the comment box (see below) and share your thoughts.

Here’s to your health!

Erik Anderson
Founder & President, The Healthy Non-Profit LLC!/eanderson847

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