In March 2020, I was on a call with 15 other nonprofit leaders. As the world was coming to grips with the reality of the pandemic, my peers and I were advised to expect a 40 percent revenue reduction to our organizations in the upcoming 12-24 months. It took years for many organizations to recover from the Great Recession in 2008; many folded altogether or merged with other organizations. Not knowing how exactly the pandemic would affect the economy or our donors, we prepared to cut expenses as our best hope of survival.
In a sector where it’s encouraged to spend over 80 percent of a nonprofit’s budget on direct program services, how do you prepare for such a significant revenue reduction without affecting those same services? As a leader of an anti-trafficking organization providing workforce development to the most vulnerable women and girls in India, Cambodia, and the U.S., it was not an option for me to cut programming. Our clients were severely affected by the pandemic and the lockdowns, which brought many of them to the brink of destitution. As the needs of our clients exploded overnight, everyone across the organization felt the pressure to do more with less.
My experience was not unique. The pandemic highlighted how unprotected nonprofits are from exogenous shocks. Last June, CEP released a report by Hannah Martin, Kate Gehling, and Ellie Buteau entitled “Persevering Through Crisis: The State of Nonprofits.” The organizations surveyed for the article reported a negative impact on programming, revenue, demand, and costs in 2020. More than three-fourths of nonprofit leaders reported increased demand for their services while also undergoing negative financial impacts.
Funders were flexible overall, but nonprofits led by women and nonprofits serving communities including Asian, Pacific Islander, Middle Eastern, and Native American communities experienced less flexibility, responsiveness, and communication than other nonprofits. A high percentage of respondents did not feel that donors had a sense of what they needed. As a female AAPI leader, in spite of many supportive donors, I do feel like sometimes I am trying to walk the fine line between appealing toward a donor’s funding interest versus what I feel the organization actually needs to thrive and reach the next level.
At Nomi Network, our executive team kicked into crisis preparation mode. As our teams on the ground were mounting a COVID-19 emergency response, at headquarters, we took the following steps to prepare our organization to operate on as lean a budget as possible. We cut HQ salaries by 15 percent across the board, with leadership taking a 20 percent cut. We gave hourly staff the option of cutting their hours and finding supplemental work elsewhere if they needed to. We froze hiring across the organization globally. We attempted to vacate our expensive NYC office lease and moved funds that would otherwise be spent on rent, travel, and office supplies to help equip our team to work remotely long-term. We were able to provide them with a stipend for office equipment and internet as well as another stipend for six months of mental health services. We didn’t remove a dollar from our programming budget, but with the tradeoff of asking our team to do the same – if not more – work for less pay. It pained me to make these cuts, and my leadership team and I resolved to do whatever we could to make this season of scarcity be as short as possible for the sake of our staff.
As indicated in CEP’s report, the flow of information from clients in need to nonprofits to donors can be a very fragmented process. I believe that we are at an inflection point in the nonprofit sector, where funders and nonprofits need to strive towards an economic term called “Pareto efficiency.” This is the concept of optimal frontier and efficient allocations, such that neither the funder nor the nonprofit is left in need. Pareto optimization will resonate most with donors who desire scalable impact and not placing a bandaid on market failures.
I believe that most funders simultaneously want nonprofits to be efficient, while also not wishing to place inefficient burdens on nonprofit leaders and staff. What this requires is stronger communication between funders and nonprofit leaders. (I want to caveat that some donors may not want to reach Pareto optimization and that is okay. Every donor has different motivations when writing a check and maximum impact may not be a driver on why all donors give.)
However, while donors have the ability to help the nonprofit sector reach Pareto efficiency, many do not due to a lack of transparency. For example, Nomi Network was six months into a proposal process with a very large foundation that was planning on deploying funds to nonprofits working in India. After several hours of calls on top of the many hours spent submitting a proposal, we were told that the foundation needed more time to strategize. Eighteen months later, this foundation is still consulting with advisors and we have not heard from them. Sometimes donors turn to high-level advisors from large agencies that do not have experience working in difficult to serve areas. During a crisis moment, it would be most impactful to ask frontline organizations where the resources are needed, because these organizations understand the local needs and those most desperate for assistance.
This past year has been challenging and we are still not out of the woods. As many of us in the U.S. began receiving vaccines and returning to some degree of normalcy, there was a surge of COVID-19 infections in India. Half of our India leadership team either contracted COVID-19 or were caring for family members in critical condition – all within a four-week period. Our frontline team was crippled as emergency needs rose in our program communities.
One of my strengths as a CEO is being a visionary – not being daunted by challenges while carrying unwavering optimism for the future for Nomi Network and the women and girls we serve. But I confess that there have been multiple times in the past year when I have felt hopeless.
Donors who have communicated frequently and stood in solidarity with our mission helped significantly alleviate organizational and leadership pressures. One of our major donors called me to show her genuine concern for our staff and sent a very large contribution on top of her annual commitment. Another family foundation that was not in a solid position decided to still issue funding months before the traditional timeline of disbursement. This donor also told me she was praying for me and the team, which meant a lot to me because I could feel her solidarity with the team and our clients.
Two years ago, Vodafone Americas Foundation had the prophetic insight to provide seed funding for the digitization of our curriculum, which allowed us to continue our training programs amidst pandemic lockdowns. They continued to provide us with general operating support during the pandemic, along with other major funders who allowed us to direct funding where it was most needed without an arduous reporting process. Long Family Foundation provided a multi-year general operating grant with the expressed encouragement to invest in our staff and capacity building; this allowed us to restore our HQ staff salaries, retroactively pay employees for gap in wages, and hire additional staff in 2021. PIMCO Foundation provided a 25% increase in their annual grant to us that allowed us to expand our program services in India during COVID-19.
I have seen examples of donors stepping up to strive for Pareto efficiency, especially during the pandemic. The challenge occurs when equality or social well-being are taken into account. For example, just because a nonprofit is operating at maximum efficiency and impact does not guarantee that organization will be funded or attract donors. Raise for Good, a strategy studio working with philanthropists and corporations to maximize social impact, had wonderful ideas to help organizations achieve Pareto. These include:
- A deeper commitment from funders to ensure that nonprofits were fundraising and growing sustainably, at times providing additional capacity-building support and funding wellbeing initiatives.
- Investing in ecosystems within under-resourced communities which have gained prominence.
- Making more introductions to other donors.
- Hosting webinars to raise more awareness about causes.
As COVID-19 continues to spread in many parts of the world, nonprofit leaders like me are hoping that the philanthropic community will invest in critical areas. I have hope that philanthropic leaders should and will deepen their relationships and trust with nonprofits that have taken a toll during the last 18 months. When these philanthropic leaders invest in the knowledge and experiences of nonprofit leaders, together we can lift up those who have been devastated by this pandemic.
Diana Mao is co-founder and president of Nomi Network. Follow Nomi Network on Twitter at @NomiNetwork.
