3 Lessons from the Great Recession

By Josh Jacobson

Hello Charlotte, how is everyone doing? No, I mean it. Are you doing okay? I hope you are.

This post is meant to make you feel better, so I’m going to state that on the front end. All of us at Next Stage remain bullish on where our community is going long-term and want to shed some light on what is happening right now.

The downward trend of the stock market in recent weeks gave me a funny feeling in my stomach that reminded me of another time in my life. I moved to the Charlotte area and found myself working for a local consulting firm for nonprofits in my fourth month on the job when February 2009 hit. The stock market crash that month sent our community hurtling. By April of that year Wachvoia was acquired by Wells Fargo and it felt like the end of the Charlotte world. It was the start of the Great Recession, and it was my introduction to crisis management for nonprofits. My current career really started then.

The next few months were sort of crazy. Nonprofit organizations went into full-on freak out mode. Most organizations ceased any sort of strategic planning or capital campaign activity. Some moved quickly to lay off employees deemed non-essential. Others took a “wait-and-see” approach that included dramatically curtailing programming, operations and fundraising activities. As the Great Recession dragged on, many of us in the consulting space learned the basics of nonprofit mergers and integrations. I remember a local leader at the time predicting that fully one-third of nonprofits would need to merge with a stronger organization in order to survive.

Fast forward a few years and… what? Did nonprofits fold in record numbers? Did the Great Recession set Charlotte back from a social good perspective by a decade or more? Was it the bloodbath that was predicted?

No. None of those things happened. In fact, Charlotte’s system of nonprofits largely rebounded and quickly. And yet, there were still nonprofit leaders in 2011 and 2012 blaming the Great Recession for their organization’s lack of recent success. It became a convenient excuse years after the worst of the Recession had ended.

Working for another firm at the time, I wanted to understand how we had survived such a rocky time in history. It was clear some organizations had fared better than others and my assumption was that innovation must have played a role. I called it the Charlotte Nonprofit Innovation Study, a grandiose completely unfunded and under-resourced investigation into WTF happened. We got some graduate students from UNCC Charlotte to help us and I enlisted my colleague Ally Yusuf to dig through the 990 forms of a representative sample of 150 local nonprofits. We studied 60 data points across five years of 990s (2007-2011) to identify organizations that fared best during the Great Recession and those that underperformed.

Here are the key takeaways:

  • Charlotte kept giving. One of the bigger findings was that charitable giving in Charlotte did not take a very big hit in 2009. There was a modest dip in giving (less than .5%) in 2009 over 2008. But in 2010, there was more giving than in 2007, a year that was considered by most the gold standard for giving in our community. And by 2011, our representative sampling of organizations was raising millions more than they had in 2007.This was a particularly interesting data point as we deliberately included the United Way of Central Carolinas (UWCC) in our data set. For those who were not around then, UWCC had fared the worst as the Great Recession set in, raising 50% less than they had in their largest years. Having taken a $20 million loss into our assessment, it was amazing to see the generosity exhibited by our community.
  • The organizations that fared best were those with strong marketing and fundraising engines. The organizations that cut back on their resource development teams fared worst. The organizations that were still complaining about the Great Recession in 2012 tended to be the organizations that had temporarily laid off the only staff members focused on constituency growth and revenue development. And that trend included safety net and other organizations alike.
  • Best practices work. We hoped to find a smoking gun of innovation that suggested survivability was linked to fresh, new ideas that would lead to a set of dramatic new learnings for our community. I mean, we called it the Innovation Study for gosh sakes. And instead? Boring old best practices. The organizations that thrived invested in marketing and relational fundraising when others pulled back, fearful of being out-of-step with the community.

The data suggests that the organizations that thrived essentially took market share from the organizations that did not. While there was more charitable support put forward in the years after the Great Recession hit, the organizations that thrived grew substantially. It became a very clear “haves” and “have-nots” situation. The data was sort of stunning.

It is said that insanity is doing the same thing over and over and expecting a different result.

So here we are in 2020 facing a similar and yet quite different event. Unlike the Great Recession, which took months to slowly reveal itself, we have all been dramatically introduced to the new normal in spectacular fashion. We are having a moment. Pundits suggest that the stock market will roar back to life once we tame this virus, and I certainly want to fan the flames of that sort of thinking. But while we hunker down in our homes, I see people struggling and in need. I’m observing people trying to figure out how this disruption will play out in real time. Main Street is struggling as Wall Street yo-yos. It’s that funny feeling in my stomach again.

As a firm, we have jumped in the deep end on community response because we feel it is our duty to do so. We want to be a stabilizing force, sharing our insights and working shoulder-to-shoulder with our partner organizations who were mid-stroke on moving forward ambitious agendas. We also understand the crisis leaders are struggling with and aim to make sense of the chaos with them.

Looking back to the Great Recession, we think there are some important learnings there. I hope we can learn from our past mistakes.

Image Copyright : solarseven

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