How Nonprofits Can Fight Inflation and Economic Downturns at the Same Time

  • Impacts of financial decisions
  • 12/23/2022
Colleagues talking at large desk while working on laptops

Key insights

  • Diversifying funding sources can help reduce the risk of being impacted by changes.
  • Increase efficiency and effectiveness with strategies centered on assessment, collaboration, and engagement.
  • Embrace data-driven management philosophies to help reduce waste and assess program effectiveness.
  • Engage in advocacy and policy work to help address the root causes of inflation and economic downturns.

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Inflation — a general increase in prices and fall in the purchasing value of money — and economic downturns can affect organizations regardless of industry, size, or location. During these times, nonprofits may face increased challenges in maintaining operations and achieving their missions. Organizations can use several strategies to combat these economic hardships.

Diversify funding sources

Seek out a variety of funding streams — such as grants, donations, and earned income — rather than relying on a single source. Diversifying can reduce the risk of being impacted by changes in any one funding stream.

Increase efficiency and effectiveness

Work to increase efficiency and effectiveness to help stretch resources and do more with less. Consider the following tactics:

Implement cost-saving measures

Reduce administrative expenses by streamlining operations, using technology to automate processes, and negotiating better rates with vendors and service providers.

Assess programs and services

Improve the impact of programs and services by conducting regular evaluations to assess their effectiveness — and using the results of these evaluations to make evidence-based changes.

Collaborate with other organizations

Join forces with other organizations to share resources and knowledge, which can help reduce duplication of efforts and achieve more with less.

Engage with stakeholders

Build stronger relationships with stakeholders — such as donors, volunteers, and beneficiaries — to better understand their needs and concerns, and to incorporate their feedback into decision-making processes.

Embrace data-driven decision-making

Data analytics is the process of examining data to draw insights and make better decisions. Nonprofits that shift their focus on data are likely to be more successful in their efforts to reduce costs and increase program effectiveness.

Studying data helps nonprofits have a better understanding of their operations, clients, industries, and the markets. This enhanced understanding can help reduce costly errors, identify process bottlenecks and inefficiencies, increase productivity, and identify opportunities for automation and streamlining. In short, data-centric operational philosophies can lead to cost savings by reducing the resources needed to complete tasks.

Real-time collection and analysis of data on program outcomes is key in assessing program impact. For example, tracking and measuring key program results — such as the number of clients served, the impact on participants’ lives, and the overall impact on the community — can help nonprofits understand the impact of their programs and identify areas for improvement.

Identifying data trends and patterns, such as changes over time or correlations, could increase nonprofits’ understanding of the factors that contribute to successful program outcomes. Comparing the performance of different initiatives to determine which are most effective and efficient helps improve resource allocation and gives nonprofits the opportunity to focus on programs that have the greatest impact.

To make this shift, leaders need to take a proactive approach and model the behaviors they want to see in their teams. Desired behaviors include communicating the importance of data, encouraging data literacy across the organization, encouraging data-driven thinking, and rewarding and recognizing those exhibiting such behavior.

Engage in advocacy and policy work

Nonprofits can engage in advocacy and policy work to address the root causes of inflation and downturns. For example, nonprofits can advocate for policies that promote economic stability and growth — such as investments in education and infrastructure — and help create a more favorable economic environment for themselves and their communities. Note that nonprofits are allowed to engage in lobbying provided it is not a substantial part of their activities.

Seek the advice of consultants

While nonprofits are often capable of addressing many challenges on their own, there may be times when it is beneficial to seek the services of a consultant. A consultant can provide valuable knowledge and experience the organization may not have in-house and can help develop and implement strategies to overcome challenges and achieve goals.

A consultant can also provide support for communications and stakeholder engagement, helping to build stronger relationships with donors, volunteers, and beneficiaries.

How we can help

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