No one can predict the future (at least not very accurately).
As simple as that fact sounds, it’s probably the single most critical takeaway we learned over the course of more than 80 conversations with a diverse group of nonprofit leaders, foundation executives, and other experts about managing through the Covid crisis.
Even so, nonprofits and foundations nevertheless still plan and operate with a single “expected” or “official” future in mind. At most, they might do financial contingency planning focused on best- and worst-case scenarios for revenue projections.
That can leave organizations extremely vulnerable when the future — inevitably — doesn’t play out the way they expect. Operating with a fixed view of the future can be a challenge for organizations in the best of times, but amid the hyper-uncertainty of Covid, it may be even more dangerous.
And Covid isn’t playing out in isolation either. It is increasingly not only a lead story, but also the background setting in which other intersecting and compounding crises are playing out. Racial-justice protests, the November election, hurricanes, and wildfires are all occurring alongside the health and economic crises caused by the pandemic.
In the midst of so much uncertainty, it’s important to consider and prepare for a wide range of possible futures that might unfold. The report based on our interviews and other research, “An Event or an Era? Resources for Social Sector Decision-Making in the Context of Covid-19,” offers up four provocative but realistic scenarios that could emerge in the next 12 to 18 months as a way to help people begin to unstick themselves from any single expected future.
We also identified a set of other critical lessons that we believe nonprofit leaders will need to confront to navigate the Covid crisis.
Katherine Fulton, Monitor Institute’s former director and a key adviser on our project, likened the moment to the period when the internet began to threaten the fundamentals of the newspaper industry. Online options began to cut into long-established revenue models, but many of the industry’s leaders were unsure how to respond to the uncertainty of the new realities. As a result, they lost a critical window when they could innovate and seize their future.
This cautionary tale pushes us to think about two real imperatives for the nonprofit world in the midst of Covid: urgency and agency. Urgency — because there’s a real need and opportunity for nonprofits and foundations to step up in this country’s moment of need. It’s not enough to sit back and wait to see how the future will play out. At that point, organizations may have missed the chance to make critical investments or to take advantage of potential opportunities that emerge — much like the newspaper industry did back in the late 1990s. Simply put, there’s an urgency to act and not be paralyzed by the uncertainty of the moment.
And agency — because even if we can’t control the future, we can influence or nudge it in one way or another. There are lots of actions that foundations and nonprofits can take that use the disruption of the status quo in the current moment as a way to try to rethink and reset long-established systems. Many of the leaders we spoke with talked about the crisis — despite all the pain and suffering that comes with it — as a once-in-a-generation chance to really influence deeply entrenched and inequitable systems.
While we’ve all heard the Winston Churchill quote that you “never let a good crisis go to waste” used a few too many times over the last few months, it’s still true that when things are in flux and current systems may not be working, we truly have an opportunity to reinvent them. Take, for example, the likely challenges coming for the commercial real-estate market, as businesses recognize that remote work is a feasible option and many employees prove reluctant to return quickly to the office. It’s a real concern — but the looming glut of vacant office space, when turned on its head, could also represent an exciting opportunity, as housing advocates explore whether it could potentially be converted to be used for affordable housing.
To get to a place where nonprofit leaders can effectively respond to the crisis with real urgency and agency, we believe they must first reckon with and internalize at least three critical new realities:
The need for nonprofit services will dwarf available capacity and resources. Philanthropy always filled gaps that governments or markets have not. And limits on federal stimulus relief, combined with sizable budget cuts, are likely to drastically impair the ability of state and local governments to provide health, education, and other social services. If government agencies are forced to retrench, it will leave enormous pockets of need that nonprofits, donors, and foundations will be asked to fill — even though they do not have anything close to sufficient resources to cover the gap.
Even if the pandemic miraculously ended tomorrow, communities will still be facing daunting resource gaps in dealing with the economic and health fallout of the last few months. And as Anders Holm of the Hempel Foundation observed to us, “You cannot do more with less. You can only do less with less.” Nonprofits will face real limits and have difficult choices to make about whose needs get prioritized, what services they can provide, and whether to focus on immediate need or more systemic causes.
Resources will likely be in short supply. In fact, it’s now clear that a significant number of nonprofits will be forced to consolidate or close their doors. Early estimates suggest that 10 percent to 40 percent of nonprofits will close because of the pandemic and recession. Nonprofits that rely on tuition, fees, and other earned income as well as government contracts are likely to be among the hardest hit. And given the scale of the mismatch between need and available resources, many organizations will have to grapple with more than just figuring out how to shift in-person models online or modestly adjusting their scope of services; they’ll need to truly challenge their fundamental assumptions and innovate their strategies to address increasingly pressing community issues.
Foundations may be insulated from the worst impacts of the crisis, but how they respond to challenging circumstances will be critical to the health and well-being of our nonprofits and communities. Although nonprofits and foundations live in the same context, they experience it in fundamentally different ways. Some grant makers may experience setbacks if markets turn downward, but most are in a strong position to manage through the crisis, given endowments and influxes of resources from living donors. Most grant makers have the option to simply continue business as usual.
But the pandemic will create far greater, often existential, financial, and operational distress for many nonprofits. And this disparity has the potential to significantly exacerbate already imbalanced power dynamics between grant makers and grantees. As our Monitor Institute colleague Allan Ludgate explained to us, “All in all, philanthropy may be the safest haven in the American economy right now. I think the contrast between that and the day-to-day reality for grantees will be weird at best and dystopian at worst.”
Nevertheless, if earned revenue, individual donations, and government contracts to nonprofits dry up, foundations will often be the last backstop for many nonprofits. And this will increasingly put grant makers in the awkward position of picking “winners” and “losers” in their communities.
In response, some foundations are adopting a “no regrets” mentality, taking unprecedented measures to increase spending to keep nonprofits afloat over the next one to two years (such as the social bonds issued by the Ford Foundation and other major grant makers) to allow them to significantly increase their payout rates over the next few years.
Others are thinking about how to redirect funds from their strategic goals toward immediate relief for basic needs in the communities where they operate. And still others argue that philanthropy doesn’t have the resources to meet all of the needs that will emerge from the crisis, and that with new opportunities for change emerging in the crisis and additional crises (such as climate change) on the horizon, they need to instead focus more on long-term policy advocacy and systems change.
Grant makers will need to find the right balance across these very different — and often competing — types of societal needs, and their choices will have increasingly important consequences for their grantees, partners, and communities.
The impact from the crisis will continue to fall disproportionately on communities of color and other marginalized populations. Heightened risk of exposure of frontline workers, less access to health care, and elevated chances of job and business loss all hit marginalized groups harder. This has exacerbated already existing inequities. And community-based nonprofits led by people of color, which typically have less access to capital, will likely be at greater risk for insolvency. Additionally, other cross sections of the population will bear an outsized share of the consequences of the crisis, including the elderly, immigrants, families with children, and low-wage workers.
Conversations about V-shaped, U-shaped, and even W-shaped recoveries have given way in recent weeks to talk of a K-shaped recovery, where some people and some parts of the economy begin to prosper and grow, while others continue to struggle or decline. Children from families of means, for example, can consider private-schooling options that are equipped to navigate a blend of online and in-person instruction, while many low-income students find themselves unable to reliably access online learning and may fall through the cracks.
As Tulaine Montgomery of the venture philanthropy organization New Profit explained, “We’re all facing the same storm, but we’re not all in the same boat. Some of us are in duct-taped rafts and others are in reinforced cruiser ships, and there’s really no comparing the vessels.”
Unless philanthropy makes an active effort to help the people at the bottom leg of the K, our communities will emerge from the pandemic with highly divergent outcomes and widened inequities.
The future will inevitably twist and turn in ways we can’t predict. But we do know that the most resilient organizations will be the ones that have prepared to respond to an array of options and are ready to shift quickly. It’s essential to our communities for nonprofit and foundation leaders to think through how they can adapt to the possibilities ahead.
Jennifer Holk and Gabriel Kasper were part of a team that produced the report “An Event or an Era? Resources for Social Sector Decision-Making in the Context of Covid-19.”