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P u b l i s h e d b y MG I / S e r v i c e s a n d C o u n s e l i n f u n d - r a i s i n g a n d c ommun i c a t i o n s

It’s the Economy StupidAn Interview with John A. Martin, CFREThis issue of The Martin Letter is the second in a series of interviews with practitionersin the field of philanthropy. This commentary is from an interview between our Editorand John Martin, President and CEO, MGI Fund Raising Consulting, Inc., on the econo-my and the effects on fund raising.

he domestic and international econom-ic situation continues to fluctuate andmany indicators suggest that a reces-sionary environment is likely to contin-

ue for some time. The tightening of credit mar-kets has further compounded the levels at whichorganizations are absorbing the volatility. Thephilanthropic sector has successfully weatheredsignificant financial downturns in the last fiftyyears, yet trustees, institutional leaders, andfundraisers today are questioning whether or notthis time is “different” as so many financial andpolitical issues collide around the globe.

While we do not dismiss the current downturnnor the obvious and apparent impact it is havingtoday on organizations and their constituents, ourlong-term outlook remains positive and forward-thinking. Part of our optimism is rooted in his-torical fact; over the last 40 years, philanthropy inthe aggregate shows consistent year over yeargrowth and is not correlated to movements in thestock market.

Q. How is the economy affecting philanthro-py in North America?

A. It’s tough out there, no doubt about it. Non-profit organizations have been hit hard by an eco-nomic downturn, housing market crash, turbulentworld political climate, and state funding short-falls. Those charged with fundraising for non-profits in such uncertain times are facing a test ofmettle, creativity and skills like never before.

With state budgets anticipating deficits and severebelt-tightening, many charities have been prompt-

ed to rethink the way they operate. Some areincreasing their reliance on philanthropic sourceswhile other agencies are forced to seek supportfor the first time to augment the budget shortfalls.The relationship between philanthropy and eco-nomic circumstances has always been a closeone. In the 1975 recession, for example, founda-tion giving dropped 28%, and it did not recoverfor a decade. Consumer confidence has beenvolatile this year, with rising interest rates, highenergy prices and conflict in the Middle Eastweighing on the American consumer’s view ofhow the U.S. economy is doing. All of these vari-ables must be monitored and taken into accountas charities plan their fund raising campaigns.While official government source have officiallydeclared the U.S and Canada are in a recession,our giving totals might say that charitable givinghad not been negatively affected in 2008. We willhave to wait to find out for sure, but I do antici-pate that we will see some fall off in giving butbelieve that donors will support causes they arepassionate about – but perhaps not at the samelevel as in years past.

Q. What can we learn from history that willhelp us through this economic down turn?

A. The research suggests that charitable givingslows slightly during recessions. In the five reces-sions since the one lasting from 1973-1975, char-itable giving fell an average of 1.3 percent adjust-ed for inflation. In non-recession years from 1966through 2006, giving has increased an inflationadjusted average of 4.3 percent.

In two economic slumps, in 1973 and 2001,

donations failed to keep pace with the growth ininflation for three years. Giving also declinedafter the 1987 stock market collapse. It’s clearthat when Americans are not feeling buoyed by theeconomy, charitable giving is adversely affected.

Q. Are your clients receiving less charitablerevenue this year because of the economy?

A. Donations to our clients annual fund cam-paigns have shown slight growth for some, butmost have seen some decline from the 2008levels. Our capital campaign projects continue tomove forward – though at a slower pace – thanplanned or projected at the outset of the project.We have seen some fall-off on pledge fulfillment.

The overall slip in philanthropic support can becredited to the tribulations and volatility of boththe stock and housing market in 2009. Other cul-prits that contributed to the decline include worldevents, terrorism, declining state budgets and thenation’s political atmosphere.

Yet, there is some good news: individuals are con-tinuing to give even though they are not feeling aswealthy as they have in the past. Cautious opti-mism means they are taking longer to make deci-sions about where to direct their money and areopting for a longer pledge period.

We are seeing donors choosing between one ortwo charities that matter to them most, rather thanconsidering and supporting their top three orfour. The important question is how your causecan be number one in your donor’s minds andhearts – thus topping their charitable giving list.

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M G I / S e r v i c e s a n d C o u n s e l i n f u n d - r a i s i n g a n d c o m m u n i c a t i o n s

About the author…John Martin has more than 30 years experi-ence in the not-for profit field, on both the orga-nizational and consulting sides. Through his con-sulting work with clients seeking counsel formajor capital and endowment campaigns,Mr. Martin has earned a reputation as one of NorthAmerica's top strategists for the not-for-profitsector. His brash mix of social concern andaggressive business smarts has helped raised hun-dreds of millions of dollars for colleges, hospitals,human service organizations and arts and culturalgroups throughout North America. John Martinwas awarded the Association of Fund RaisingProfessionals (Minnesota Chapter), OutstandingProfessional Fund Raiser for 2007. He can bereached via email: martinmgi@cs.com

MGI is a full service fund-raising and communica-tions consulting firm operating across North America.We consult throughout the United States and Canadafor a wide range of not-for-profit clients:

• Hospitals and Health Care Organizations• Social Service Organizations• Private Schools, Colleges, Universities and Post-

Graduate Schools• Cultural and Arts Organizations• Churches, Synagogues and Religious Organizations

The experience and resources of the firm have beenused by a variety of clients from well-establishednational not-for-profit organizations looking to pre-pare themselves for the 21st century to first time start-up capital campaigns.

For more information about readiness studies, auditsand feasibility consultancy, please contact John at:martinmgi@cs.com or call our Toll Free Number:1-800-387-9840.

Publisher: John A.Martin, CFRE

Editor: Pamela Capriotti, CFRE

Contributing Editors:Elizabeth HamrickJohn Schwietz

Published by:MGI Fund RaisingConsulting, Inc.2925 Dean Parkway - Suite 300Minneapolis, Minnesota 55416

For information on our services,call toll-free 1.800.387.9840(U.S. or Canada)Visit our website:www.mgifundraising.com

Reproduction without permission isprohibited. Brief extracts may bemade with due acknowledgment.Additional copies are available freeof charge by contacting The Editor atour South East office.

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While overall giving typically slows down during arecession, not all types of recipients of charitablegifts show the same trends. Underlying shifts inthe nature of charitable giving – such as increas-es or decreases in visible need as seen during dis-asters; awareness of government funding for apurpose such as health care; or increased fundraising efforts among a large number of charities– can all have an impact larger than the impact ofthe overall economy.

Q. What are you and your clients doing tocounteract the effects of the sagging economy?

A. Savvy organizations focus on making donorsfeel extraordinarily special, a strategy it hopes willput its cause at the top of the list.

We have found that most organizations with soliddevelopment offices and strong financial develop-ment projects are going ahead with plans for cap-ital projects. But, planning for a campaign todayhas changed even in the last few years. We believethat an organization, no matter the size of the cap-ital campaign goal must anticipate a longer plan-ning phase and be prepared – as funding sourcesneed more time for decision-making – to extendthe pledge period an additional year.

The bottom line is that campaigns must move for-ward, while taking into account the indecisivemindset gripping both individuals and philan-thropic organizations. We must plan better, bemore patient, and extend both the pre-campaignphase and pledge redemption periods. Capitalcampaigns are always a challenge, but the chanceof success increases dramatically when they arebuilt on a foundation of structured planning andtake current economics into account.

Q. How important is the case statement andcommunications during these tumultuoustimes?

A. A powerful worthiness based case is even moreimportant than ever. Organizations must be pre-pared to address three critical case questions:Why this organization? Why these projects? andWhy now? With these message clearly articulated– communicating the importance of the mission,and the campaign to the donor communitybecomes the primary task.

Q. What advice do you have for local non-profits during this economic downturn?How do you survive the tough times?

A.There are no easy answers, no magic wand, andno special prayer to the funding gods. Whiningdoes not help! Still, the current volatility maycause some to feel a lack of control and questionwhether short-term or long-term plans should be

adjusted. We have no way to predict the length ordepth of this financial turmoil, but we are con-vinced that the best course for the nonprofit sec-tor is to focus on the activities that have alwaysserved it well: ensuring a compelling case forsupport, leading in ways that generate trust ininstitutional leadership, building and sustainingrelationships, inviting philanthropic support, andstewarding the donors who have made gifts inthe past.

Here are some positive steps, to consider:

• While we recognize that volatility in the capitalmarkets may slow down or stop many philan-thropic decisions, organizations should main-tain focus on their long-term objectives.

• It is critical to know your donors and be sensi-tive to their personal timing. Stay close to thosewho have supported you in the past andincrease your stewardship activities. Somedonors will continue to give, and most will re-engage when they are feeling more comfortable.It is particularly important at this time to assuredonors that their past support continues to haveimpact and is appreciated.

• Well-managed fundraising programs prevailamong and across many different economic andpolitical landscapes. Strong institutions aremaintaining their philanthropic activities, albeitwith sensitivity and a recognition that somedonors will defer a gift decision or delay apledge payment.

• Organizations planning major campaignsshould continue their strategic planning inorder to have ready a persuasive case for sup-port to test with potential donors in the future.

• Organizations planning a public announcementof a campaign in the near term should lookcarefully at the gifts and pledges in hand, andconsider the availability and potential timing ofthe gift support that will be needed to reach thegoal.

• Organizations engaged in the public phase oftheir campaigns should continue to ensure thatthe featured objectives of those campaignsremain urgent and important to the quality ofthe organization and relevant to the greatergood.

• Annual giving programs should take care tomonitor gifts from loyal donors and be certainthat those donors are asked to continue theirsupport. Annual fund officers should look care-fully at previous donors who have made leader-ship gifts of stock or from donor-advised funds,and should consider direct conversations withthose donors about how they will make theirgifts this year.

• Amid the clutter and noise and the bombard-ment of images and messages smart fund rais-ing strategies and effective communicationsbecomes even more important.