Tuesday, February 19, at noon U.S. Eastern time

The shaky economy has many charity leaders worried about how their organizations will carry out their missions and pay their bills. Some individual and corporate donors are already scaling back or canceling their gifts at a time when many charities are seeing increased demand for their services.

How can your organization weather the storm? Join two fund-raising and management experts to learn how charity leaders can guide their organizations through turbulent economic times.

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• Bracing for Tough Times(2/7/2008)

The Guest

Michael Seltzer, a philanthropy expert and consultant. Mr. Seltzer is the author of Securing Your Organization's Future, a book about how nonprofit groups can survive hard times.

Robert Sharpe, a planned-giving expert and president of the Sharpe Group, a fund-raising consulting firm in Memphis.

A transcript of the chat follows.

Peter Panepento (Moderator):
    It's hard to read the headlines these days and not worry about the economy. The stock market has been rocky. The housing market has experienced an unprecedented number of foreclosures. And many experts warn that the country is sliding into a recession. These factors undoubtedly worry many in the world of philanthropy -- since tough economic times squeeze budgets as the demand for services expands. But there is hope. Our experts today -- Michael Seltzer and Robert Sharpe -- have some great suggestions on how nonprofit groups can weather economic storms. And they are ready to take your questions on how to put these suggestions into practice. So let's get started -- and please feel welcome to submit your questions. We'd love to hear from you.

Question from Holly Hall, Chronicle of Philanthropy:
    Do you feel that the current economic downturn is different from past recessions? If so, how is it different?

Michael Seltzer:
    Dear Holly:

The current economic downturn seems to be producing more anxiety than previous periods (with the exception of the Reagan revolution, which was a fundamental realignment of the Great Society years). Americans are 'at sea' due to a variety of factors--e.g. a continuing war which is now longer than World War 2, greater economic uncertainty among the middle class. These trends will compound the challenges facing nonprofits. On the other hand, we do serve as a 'harbor for the soul'. Many will look more to nonprofits to give their lives meaning and satisfying opportunities for engagement.

Question from Holly Hall, Chronicle of Philanthropy:
    For Robert Sharpe: What signs do you see in the overall U.S. economy indicating that the current downturn is likely to be severe?

Robert Sharpe:
    No one really knows at this point how severe a downturn might be. There are indications,however, though, that there may be more debt default issues than in past recessions and declining demand for housing and other "big ticket" items that are normally financed as many borrowers are "tapped out."

Question from Peter Panepento -- The Chronicle of Philanthropy:
    Some sectors of the economy tend to do well during recessions. What are some of those areas -- and are companies in these industries likely to step up their charitable efforts?

Michael Seltzer:
    Dear Peter:

I can't with confidence now answer your query about which sectors tend to do well during recessions. Let me do some digging and get back to you.

In regards to your second question, I would not anticipate that in those sectors, companies would actually increase their giving. Overall, more corporations will continue to follow the larger trends that are dramatically changing the nature of corporate social responsibility and citizenship today around the globe.

Question from Bill Mengerink, semi-retired:
    I read Michael's book when he was in Cleveland years ago and have been a big fan. To what extent can consultants play during a recession in terms of assessing and, primarily, educating staff and board regarding positioning themselves for when things get better?

Michael Seltzer:
    Dear Bill:

Great to hear from you! Consultants can play a very important role during this period. We can bring comfort to organizations in a variety of ways; help groups feel less isolated from each other--'You are not alone';

share strategies from one organization to another;

helping npos identify and implement some new ideas to help them identify their core strengths and assets, and diversification tactics.

It is a time where innovation can occur, and in fact, is needed.

Question from Caroline Preston, staff writer, The Chronicle of Philanthropy:
    In talking with donors, should charities be upfront about financial problems they're experiencing? For example, if they've had to lay off staff members, should they tell donors? Or will that turn off donors, who might not want to support an organization that isn't as effective as it once was in delivering services?

Michael Seltzer:
    Dear Caroline:

The rules here don't change...be honest with your donors, but keep their 'eye on the prize'---they want to hear how you will continue to be able to advance your mission and succeed in spite of temporary setbacks. I would give some thought to how to most effectively communicate to them. Organizations would be advised to develop an FAQ for board and staff members, and three key message points as well.

Question from Alex, Community-based non-profit in Los Angeles County:
    Is this a good time to think about changing jobs, but staying within the non-profit world? I am contemplating a move out of state, but am not sure if leaving my current job is the best decision given the unpredictability of our jobs.

Michael Seltzer:
    dear Alex:

I would not be discouraged about changing jobs. If you are moving out-of-state, make sure that you have enough money in your savings account for at least 6 months. I do have some other ideas if you want to call me (917 913 1568).

Question from Peter Panepento:
    Robert -- What are some of the challenges for planned-giving officials during down economies?

Robert Sharpe:
    This depends on how you define "planned giving." Bequests are generally unaffected by economic downturns except in the case of larger bequests of remainders of estates where after a few years of lower stock market and real estate values this begins to depress the size of residuary estates. These are typically the larger estates. In the case of bequests of specific amounts, they are unaffected by economic downturns generally because deaths occur actuarially unrelated to the economy and a specific bequest of $10,000 or some other amount is generally unaffected.

Gift annuities that feature fixed income typically show growth during recessions. Gifts that feature variable income that depends on the underlying performance of assets such as charitable remainder unitrusts and pooled income funds tend to fall off somewhat if there are reductions in stock market values during a downturn.

Offsetting that is the tendency of wealthier people to engage in planned giving during bad economic times when they might otherwise have made an outright gift. This certainly was the case following the crash of 1987 and the recessionary period of the early 1990s. During that period it became more commonplace to credit bequests and other deferred gifts toward capital campaign goals.

Question from Annam, small nonprofit:
    Is it best right now to not try to change employers until the economy gets better? Or does it matter?

Michael Seltzer:
    Dear Annam:

You should not be hesitant to change jobs, but you might consider keeping your current job while you search. Also, you would be advised to do some more intelligence-gathering on your prospective new employer (e.g. check their 990 tax returns on GuideStar) to gauge their financial health.

Good Luck!

Question from Mary Malia, The Residential Care Consortium:
    Michael or Robert, please share some of your experience/expertise in the area of philanthropy. I am unfamiliar with both of you. Thank you.

Michael Seltzer:
    See www.sharpenet.com/resources

Peter Panepento (Moderator):
    Here is some additional background on Mr. Seltzer and Mr. Sharpe:

Mr. Seltzer is a former program officer for the Ford Foundation, where he was responsible for its efforts to strengthen the nonprofit sector and philanthropy worldwide. In May 1989, he received the first Terry McAdam award from the Nonprofit Management Association for his book, Securing Your Organization's Future, which was published by The Foundation Center in 1987. He is a past president of the Nonprofit Management Association and has been active as a consultant to foundations, corporations and nonprofits since 1974.

Peter Panepento (Moderator):
    Mr. Sharpe is a principal for The Sharpe Group and is one of the best-known gift planning experts in the country.

An honors graduate of Vanderbilt University and Cornell Law School, Mr. Sharpe formerly practiced law with a major firm specializing in income, gift, and estate taxation.

His remarks on charitable giving have been featured in publications and media including the Wall Street Journal, The New York Times, Newsweek, Forbes, Smart Money, CBS Market Watch, The Chronicle of Philanthropy, Trusts & Estates, and Kiplingerís.

He is a frequent speaker at gatherings across the country including Planned Giving Councils in New York, Washington, Chicago, and Los Angeles, the National Committee on Planned Giving (NCPG) National Conference, the Association of Fundraising Professionals (AFP) National Conference, and the American Bankers Association Trust Asset Management Conference. Robert also currently serves on the Advisory Council on Methodology for Giving USA.

Comment from Lisa Semple, Development Consultant:
    In support of Michael's excellent response to Caroline's question - a direct mail consultant with whom I work says that copy which features financial setbacks is never successful.Donors want to hear about goals and strategies for the future. All the Best to you, Michael from Lisa

Question from Alex:
    Is it probable that some people in the non-profit sector will be laid off? If so, which areas in particular (program, development, executive, etc.) How can one make himself/herself more desirable in this climate and avoid unemployment?

Michael Seltzer:
    Dear Alex:

Financial acumen is an important talent across the range of nonprofit positions. It is wise to both see how what economic efficiencies might be adopted in the area for which you are responsible, and if there are any new revenue-generating options that might be implemented. Be resourceful in these areas to the point that you might be viewed as an internal subject expert, and then, write about what you have done.

Peter Panepento (Moderator):
    We're approaching the half-way point of today's live discussion. Thank you to everyone who has submitted a question thus far. If our experts haven't yet responded to your query, please be patient. They will get to your questions as the chat unfolds. And we will have time for more -- so if you have questions that you would like to ask, please click on the "ask a question" link and fire away!

Question from Caroline Preston, staff writer, The Chronicle of Philanthropy:
    During a recession, are charities better off seeking gifts from donors with whom they have long-standing relationships? Or should charities make a big effort to acquire new donors who could help them make up for losses elsewhere?

Robert Sharpe:
    Let's suppose a person gives a total of $10,000 a year to 10 different organizations. One is their alma mater, one their religious affiliation, one a local hospital and seven other types of organizations. The person is still working but will not receive a bonus this year due to reduced profitability of her employer.

In these circumstances if a person decides to reduce their giving by 20% to $8,000 they normally do not decrease it across the board. They may not reduce their primary interests at all or even increase them while cutting their marginal interests entirely.

That is why it is important to first "dance with the ones that brought you to the party." It is a good idea to sort donors by cumulative top to bottom and longevity top to bottom and make sure as many people as possible on those lists are cultivated to the extent possible. This can help make sure you "make the cut" if people reduce their giving.

In bad economic times, it is more difficult to acquire new donors unless you have a compelling case that you are part of the "solution" for those who are suffering. To some extent people may stop support causes that they consider less important in bad times and switch. The latter point does not apply to that many organizations. Most are better off tending to long term relationships and then come out of the downturn with stronger relationships and ready to seek new supporters.

Question from Bill Mengerink, semi-retired:
    We continue to be encouraged by funders to collaborate, form partnerships. However, it seems that the tougher the economic times, the more we tend to contract. Are there models out there of successful collaborations that enhance fund raising in a win-win sort of way?

Michael Seltzer:
    Dear Bill:

Great question---Yes, there are successful models and it requires some digging in academic journals to find their stories. My favorite resource is the main librarian at the Indiana University Center on Philanthropy. Her name is Frances and she is a treasure.

My client--Women Moving Millions-is one exciting example of one such exciting collaboration. They have raised $80 million to date.

Question from Washington, DC:
    It seems to me that this impending recession means that it is more important now than ever to diversify funding sources. If an organization has not focused a lot on widening its support from individuals before, can it do so now?

Robert Sharpe:
    This question is similar to the one I just answered. If an organization has mainly relied on corporate, foundation, and events for support, a recessionary environment is not the best time to be seeking support from individuals who have not previously contributed. It can be done but the results are not generally as satisfactory as is the case during times of economic expansion and increasing discretionary income.

Question from Gail Perry, consultant and author of Fired Up Fundraising:
    What I have heard so far about recession proof fundraising is: go back to the basics of nurturing your core group of friends and supporters, communicate carefully but clearly about your finances and balance your fundraising program with diverse funding sources. These are great points, do you have any others?

Michael Seltzer:
    Dear Gail:

I am afraid that i have a list of around 50 ideas now, which I better publish in my column on the Foundation Center blog, PHILANTOPIC. I am concerned that people need to understand also the impact that the recession is having on their own employees. There is a higher level of anxiety and thoughtful employers need to put in place some mechanisms that help their staff cope with what they are experiencing.

P.S. I would recommend the Independent Sector publication, Fund Raising in Hard Times. I have contributed an essay.

Question from Peter Panepento:
    How does the economy affect patterns in major capital gifts? Are major donors more likely to hold back or back-load pledged gifts?

Michael Seltzer:
    Dear Peter:

In spite of the economic circumstances, my hunch is that the very wealthy will not make significant changes in their giving. My reason is that their accumulation of wealth has been so substantial and unrivaled in other economic periods. However, there will certainly be impact on lower levels of the gift table.

For example, my partner and I wanted to make a substantial gift (for us) of $10,000 to an organization that we have supported for a long time. We have made a ten-year pledge of $1k per year.

I also think that it is a good time to talk about bequests and planned giving options.

Comment from Bill Mengerink, semi-retired:
    To Michaelís point, a chapter in my book, Hand in Hand: Funding Strategies for Human Service Agencies, is titled, Burn, Burned, Burnt: The Conjugation of a Fund Raiser. It deals with how we can manage the stress of our demanding jobs.

Question from Bill Mengerink, semi-retired:
    How do you suspect that the boomers, the recipients of the trillion-dollar intergenerational transfer of their parents wealth, are likely to be influenced by the present downturn? Do they/we have our parentsí philanthropic values?

Robert Sharpe:
    A lot will depend on whether the baby boomers actually receive the funds in question. We have to first deal with longer life expectancies and cost of health care for parents, co pays for medicare possibly, etc. Assuming the baby boomers inherit substantial funds, indications are that they are charitable as their parents but maybe for not quite as long. They married later and are empty nesters in their late 50s and older in some cases and may only have a few "golden years" where philanthropy is affordable and priority. Then they move into the retirement planning crunch. Countering that is the fact that there are more childless baby boomers who have accumulated larger sums than their "childed" peers and indications are that they are quite generous in their retirement years.

Question from Pushpam, APLA:
    How does the recession affect Foundation giving? Will it become harder and harder to receive grants during this time? If so, how does an organization brace for this change?

Michael Seltzer:
    Dear Pushpan:

I can answer based on my own experience. Two weeks ago, I sat down in my capacity as a board member of an organization with our program officer at a very large foundation. We were seeking an additional grant above and beyond our annual general support grant. In the past, such a grant request would normally have received a positive response. While the response was the same, the option of a grant was problematic this time around--due to the downturn in the stock market, the foundation's assets and grantmaking budget took a hit, and they have less money to give out.

Question from Peter Panepento:
    When charities have to make decisions about where to cut back during tough times, which parts of their operations should get the most scrutiny? Which areas should be left alone?

Robert Sharpe:
    It depends on how "tough" the times are. During the years of the Great Depression capital campaigns were generally postponed. There were reports at the end of the Depression in 1939 that a number of Universities that raised more money during the Depression did so because of "sharp increases in bequest" while outright gifts dropped off significantly. This is in keeping with answer to earlier question when I pointed out that the worse the economy the more likely wealthier people may be to make gifts in the form of bequests and other deferred gifts. Most bequests that come to fruition are made within three to five years of death so the longer the downturn the more likely we actually see a shift to more income from planned gifts.

One other area some tend to cut during bad times is broad based speculative donor acquisition activities, especially testing new packages because if they don't work so well it is hard to tell whether it was the package or the economy. It is better to increase funding in efforts to retain existing donors and try to increase the priority donors have for the cause in preparation for better times.

Question from Stacy Palmer, The Chronicle of Philanthropy:
    Michael, you have a long history of working with foundations. What can they do to help nonprofit groups deal with the economic challenges ahead?

Michael Seltzer:
    Dear Stacy:

I want to write an article on this because there is much that they can do at such a time. They cannot be passive observers.

They can ratchet up their efforts to serve as resources to their grantees and other organizations in their fields of interest. They can use their convening power to bring organizations together to share their experiences and strategies; make subject experts available to their grantees; be more flexible in their menu of grant making options (e.g. if they are making a three year grant, consider giving the entire sum upfront so the organization can reap the interest from the entire sum). Foundations should invite their staff to spend more time sitting with their grantees--hearing their concerns, offering advice and counsel as needed. Those same foundations should in their annual employment appraisal of their staff evaluate the extent that their staff have done so, and reward their performance.

Here are just a few ideas. There are plenty more.

Question from Caroline Preston, Chronicle of Philanthropy:
    Is it more difficult for, say, arts groups to make their case for funding during a recession than it might be for social-services groups? How can arts-and-culture groups tailor their fund-raising appeals for tough economic times?

Michael Seltzer:
    Dear Caroline:

I think that it is harder if we begin to see more press attention given to the higher incidences of homelessness, poverty and hunger. It is stunning that the poverty rate is now higher than it was 30 years ago.

However, many arts organizations have 'imbedded' themselves in other fields--for example, arts education in public schools, art therapy in medical settings, and/or linked themselves to very vulnerable constituencies, such as serving homeless children in shelters or working with seniors in day centers, or creating employment opportunities for low income youth and adults (e.g. the katrina Furniture Project and YaYa in New Orleans)

Peter Panepento (Moderator):
    Our time here is up. Thanks to our guests, Michael Seltzer and Robert Sharpe. I also want to thank everyone who took some time to join the discussion through questions or comments. We'll be back next Tuesday at noon Eastern time to address a similar topic -- job searching during a tight market. We hope to see you then.

Michael Seltzer:
    Dear Folks: This has been great fun for me. Please keep in mind that we are not alone during this period and that we will prevail. It is an opportunity for creativity in spite of our well-placed fears. Keep the lights burning!

All my best wishes for success, Michael Seltzer