BIG’s Blog: Cyclical versus Structural Downturn in Donations

We are all seeing that donations are down. On that we all can agree. Now The Nonprofit Finance Fund just released its annual State of the Sector survey results detailing the decline in funding sources and actually stating that “Nonprofits need new funding sources and models.”

That last word, “models,” is key.

In the coming days I will address the above report in a whole blog, but today I want to address the separate beliefs as to what is behind the drop in donations.

Development professionals fall into two camps. The first camp believes that the downturn in donations is cyclical, while the second camp believes something structural has changed and donations will not come back unless we address this structural change that is keeping donations declining.

The argument mirrors what is going on with economists as they attempt to figure out why unemployment remains intractably high.

One camp of economists believes that the prolonged stagnant economy is keeping unemployment numbers close to 8%. Their argument is simple: When the economy begins to grow again, unemployment will decline. This is the cyclical camp.

The other camp of economists believes that something else is at play. When they look across all sectors of the economy, they see half of the businesses in the sector growing while the other half are badly lagging. This camp believes that something structural is holding back the performance of one group, while at the same time allowing the other group to grow. So what is this structural “thing” that divides the performance of the two groups? On this point there is an almost universal consensus. It is the Internet and the digital revolution it has wrought.

As fundraisers, if you fall into the cyclical camp, you believe that you can bolt on digital tools, yet still overwhelmingly continue to base your strategy on direct mail appeals. When the economy comes back, so, too, will our direct mail responses.

But if you are a fundraiser who is starting to believe that “the internet changes everything” … and everything includes how you practice fundraising … actually changing your fundraising model. You fall into the structural camp, and I am right there with you along with the folks at The Nonprofit Finance Fund.

Join us.

-Mike

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