What an Economic Downturn Means for Mission-Driven Organizations

Potential decreased funding, increased social need and instability will pose opportunities and threats for your mission.

I asked a handful of organizational leaders this week whether or not they have not had an intentional conversation with their teams about the impact of a likely recession on their mission. I wrote an introductory article on the topic here but would like to elaborate more in depth now. 

Please, share this article with others that may benefit from the topic. 

We know that an economic downturn will be bad for the economy (at least in the short run). But what does an economic downturn good or bad for your mission? It depends.

Learning to look at both the opportunities and the threats is vital to sustaining our missions through an economic downturn even though the news of an impending economic downturn can be anxiety inducing. 

Opportunities

On the opportunities side during an economic downturn the demand for support from mission-driven organizations particularly those supporting economically disadvantaged people is likely to increase not decrease. A contracted labor market during a recession may also mean it becomes easier to hire and retain good staff than in the past two years. 

Threats

On the threats side organizations need but do not always have the capacity to meet this surge in demand. What happens to funding during an economic downturn? The results are mixed but in general it does seem as though individual and institutional giving decreases. 

“Overall, for the last 64 years total giving has grown at an average annual rate of 3.3% adjusted for inflation. But the picture changes if you compare what’s happened when the economy has grown versus when it has contracted. During years with economic growth, average giving has increased by 4.7%. During the years marked by economic downturns, average giving has actually decreased by 0.5%.

During economic downturns, more people are out of work and need a hand. But individuals, along with other sources of philanthropy including foundations, typically are making less income and have reduced wealth available, and so they decrease their giving accordingly.

The Great Recession was an extreme example. Total giving dropped by 7.2% in 2008, and then decreased by another 8% in 2009.””

Link: https://theconversation.com/what-happens-to-charitable-giving-when-the-economy-falters-133903

So an economic downturn is likely to increase the need but decrease the amount of funding support available to meet this need. All of this speaks to the need for organizations to prepare now for what may be to come. 

I think preparation is about thinking strategically, being agile and responsive. 

Make sure that you are subscribed to this Substack. I’ll be sharing practical suggestions in the coming weeks on how to prepare your organization and initiative for an economic downturn.