Nonprofits that suffer a financial crisis have a particularly hefty burden to bear. Reputation recovery is especially tough for them because their “investors” are their donors. And financial crises make those donors very skittish.
Think of it this way: fundraising for a non-profit is about attracting financial support from people and organizations that care about the mission. Donors are like investors for non-profits. But, instead of looking for financial returns on their investments, they are looking for returns on the mission. That’s how they want their investments to pay off. “If the donor doesn’t feel that their money is furthering that mission, then they could be reluctant to give it away at that time,” says Sophia Shaw, the co-founder and managing partner of Acorn Advisors, which advises nonprofits. She was recently quoted in a New York Times piece about a fundraising crisis at Memorial Sloan Kettering Cancer Center.
What does this mean for non-profits that have recently gone through a financial crisis? To recover their reputation and their traction with donors they need to:
- Focus on the good work they continue to do that makes the most of those donations. In other words: proving they are good stewards of the funds donors provide.
- Realize that those donors may be concerned that the current crisis is only the tip of the iceberg and that there could be more bad news down the road. That means these nonprofits need to step up their transparency about the steps they have taken to regain trust.
- Emphasize what they learned from the crisis and what concrete changes they have made in how they do business to protect the organization against it happening again.
Nonprofits, like all businesses, involve people. Most of these people are mission- driven; often because they have personal connections to the cause. And when one of those people takes financial advantage of the trust that donors and staff put in the organization, it hurts. It’s personal and the violation of that trust is often more difficult to recover from.
But, as organizations from the Livestrong Foundation to the American Red Cross have learned, recovery can happen. And those organizations that learn from their crises are often stronger than they were before them.
The key to recovery is running back to mission to reenergize staff, volunteers and donors. And then using that energy to get back to the good work that gave birth to the nonprofit in the first place.
A version of this post appeared in the July 9, 2018 edition of the Hartford Business Journal