“A good hockey player plays where the puck is.

A great hockey player plays where the puck is going to be.”

– Wayne Gretsky

Over the past 18 months we have been tracking the impact of two competing forces; reduced revenues
and increasing need on those responsible for leading Southern California’s nonprofit organizations. Our
plan, given these extraordinary times, has been to respond to changing training and consulting needs of
impacted nonprofit organizations while keeping an eye on what could come next to help them better
navigate a very difficult course.

We now have a unique opportunity to translate what thousands of our customers have been telling us in
real time together with our survey findings, and share this knowledge with our colleagues who tell us
they are also struggling to “play where the puck is, while watching where it is going.”

We believe the enclosed report tells an important story, and we hope you find it helpful. We think it
provides a current snapshot of the changes underway throughout the sector during the 2008 economic
meltdown. It reflects the tough choices nonprofit leaders made throughout 2009 and the strategies
they are ready to explore in 2010. It is clear that nonprofits will continue to work hard to change lives
throughout our community, despite growing demand, shrinking paychecks, and no relief in sight as the
uncertain stock market and stubborn unemployment numbers make news every day.

We will maintain our tracking of conditions throughout the nonprofit sector as a means of providing
tools and timely support for organizations throughout Los Angeles. We will keep you posted on what
we learn. In the meantime, look out for that puck!

Best regards,

Marilyn Flynn, Ph.D. Regina Birdsell

Dean, USC School of Social Work President
Board Chair
 Challenges Facing LA’s Nonprofit Sector

The Impact of Economic Downturn 2009-2010 and beyond

The Southern California Center for Nonprofit Management began to survey nonprofit leaders in the Fall
of 2008 in the midst of the state budget delay and the stock market crash. Our goal was to explore how
we might best address the training and consulting needs facing nonprofit leaders and board members
representing organizations throughout the LA region during this extraordinary time.

By the Spring of 2009, as the local unemployment rate hit 12%, trends started to emerge that influenced
how we are responding to the capacity building needs of those we serve. As the jobless numbers
continued to climb, the demand of social services exploded. According to survey respondents need
grew, in some cases, by as much as 150% while income plunged by as much as 50% for some
organizations throughout the region. Layoffs, salary cuts, benefit cuts, tapping reserves or lines of
credit, and finally, program cuts followed. Given those changes and challenges, throughout 2009, many
of our clients told us that they could no longer invest the time or money to take advantage of the
training or skill building they needed more effectively.

Our most recent survey begins to tell a new, sometimes sobering story that challenges the sustainability
of diverse service organizations across every community.

We have included a summary of our findings conducted between Fall 2008 through Spring 2010. On
average, 95.25 nonprofits participated in the online survey equally representing large and small budgets
sizes.

As a sector leader, and stakeholder interested in the vitality of our community, we hope you find the
information useful and informative.

Changing Revenue and Evolving Responses to the Economic Crisis

Organizations were asked how funding levels had changed and what impact those changes had on their
nonprofit.

As noted in the figure 1 below, there are consistent declines in financial support from individuals,
corporations, foundations, and government entities.

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Figure 1. Biggest cuts by funding source

Winter 09 Summer 09 Fall 09 Spring 10

100%

80%

60%

40%

20%

0%
Corporate Foundations County/State Federal Special Events Individual
donors

• On average, 54% report a decline in support from county and state.

• On average, 60% report a decline in support from foundations.
• On average, 56% report a decline in support from corporations.
• On average, 40%-50% report cuts in funding from special events and individual donors. The
largest cuts in special events were cited in Fall 09 with 70% reporting a decline.

Response to Funding Cuts

Participants were asked to identify the most notable changes in the past year were.

The most common solutions in early 2009 were budget cuts, reduction in staff, and the hope that board
members would become more active fundraisers

By late 2009 other common solutions were: eliminating programs, salary and benefit cuts, and tapping
in the organization’s reserve or line of credit.

By early 2010 41% continued to make staff reductions and are less optimistic that board members will
help with fundraising. Instead, board members are considering how to use volunteers to cover the

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Figure 2. Most common organizational changes

Budget Cuts Staff reduction Program cuts

100%

80%

60%

40%

20%

0%
Winter 2009 Summer 2009 Fall 2009 Spring 2010

Simultaneously, by the end of 2009, 24% of respondents stated that demand for their services had
grown by more than 40% over the past year.

Impact on Nonprofits’ Capacity to Serve our Community

Organizations were asked how they responded to the decline in available funds over the past 18 months:
• 57% delayed new initiatives
• 41% planned to increase board fundraising, and cancelled special events
• 27% programs were cancelled
• 26% client services were reduced
• 24% created new, strategic partnerships

Organizational Changes Under Discussion in 2010

In addition to the implemented changes mentioned above, we asked organizations to describe potential
changes board members were considering this year.

The top changes expected to occur were:

• Engage board members to meet current challenges, increase their fundraising, and create
strategic partnerships (By Spring 2010, pessimism emerged that this was a viable solution given
economic reset.)
• Secure pro-bono loaned executives from the corporate sector. (Growing interest in social
enterprise emerged by Spring 2010)
• Invest in professional training (Training and consulting budgets are scarce, funds have been
redirected toward programs)
• Recruit volunteers to staff core operations

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Looking Ahead to More Permanent Solutions

CNM asked nonprofit leaders what information would be the most helpful to them.

On average, respondents reported that they wanted to learn about strategic, effective fundraising
(72%), and board development (58%). Although fundraising has always been a common interest area
among nonprofit organizations, respondents now seem to be interested in more permanent, sustainable
solutions given the longer term economic realities.

Capacity Building and the Economic Reset

In Winter 2009, organizations (N=106) were asked what type of information would be of most value to
them in the coming months.

Respondents ranked marketing (92%), organizational effectiveness (91%), fundraising (90%), and
planning (89%) as most valuable for them. In Spring 2010, respondents felt that the most likely persons
in their organization needing access to training or coaching would be higher level staff including
managers (53%) and executive directors (49%). They (61%) stated that their budgets for the current
fiscal year included small amounts for training and or consulting.

After 18 months of reductions and cost cutting, according to our survey findings and our program
participation attention seems to be moving toward an appetite for rebuilding a sustainable
infrastructure.

Essential Support Services

Figure 5. Services that would be the most helpful

Summer 2009 (N=99)
“Conversations with the
1 Grantmakers” sessions (48%,
N=47)
Practical, interactive training
2
sessions at CNM (42%, N=42)
Meetings and facilitated
3 networking with peers to share
information (39%, N=39)
Leadership/Management
4
coaching (36%, N=36)
Hourly appointment with experts
5 in finance, management, board
development, etc. (36%, N=36)
Fall 2009 (N=92)
Meeting with peers from the same
field (93%, N=79)
“Conversations with the
Grantmakers” sessions (87%, N=78)
Meeting with peers from the same
community (83%, N=70)
Leadership/Management coaching
(83%, N=71)
Webinars (80%, N=67)
Spring 2010 (N=80)
Meeting with peers in the same
field (89%, N=64)
Leadership/Management
coaching (84%, N=61)
“Conversations with the
Grantmakers” sessions (83%,
N=59)
Meeting with peers from the
same community (82%, N=56)
Webinars (82%, N=59)

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Summary of What We Have Seen

Following the stock market crash in Fall 2008 / Winter 2009, organizations reported a range of changes
in response to the economic crisis; nearly all (93%) who responded turned to their boards for support,
and more than 75% were beginning to look for ways to secure pro bono services.

A year later, by Fall 2009, there were even deeper budget/program cuts (80% reported new cuts) and
further staff reductions (reported by more than 50%).

In Spring 2010, following a series of staff and program cuts, relying on volunteers to cover operations
topped the list (57%) and pro bono support (57%), but at lower rates. Approximately one quarter began
to cite building revenue opportunities through social enterprise as a strategy toward building
sustainability.

Looking for Board Support:

• From our vantage point, working with thousands of nonprofit staff and volunteers over the past
2 years, we have seen nonprofit senior staff first look to their boards for support and then for
more active fundraising, but by the end of 2009 they had given up. These strategies fell off the
list of the top five strategies.

Partnerships and Mergers:

• Creating strategic partnerships was an initial interest but fell as the economic impact continued
throughout 2009-10, with a resurgence by the end of the calendar year. By spring 2010,
however, expectations of creating these partnerships dropped dramatically (from 89% to 31%).

Emerging Opportunities:
• Individuals representing large and small organizations are dealing with sobering choices and
very little time available due to smaller staffs and growing responsibilities. Regardless of their
years of experience, they have been coming to the Center this year looking for guidance and
tools. They are interested in:
o Meeting with peers either based in their geographic service area or focus area
o Increasing their impact as an organization, (i.e.; program evaluation, scenario planning)
o Accessing 1:1 coaching to borrow from business principles in some cases, but familiar
with effective nonprofit strategies in all cases
• Board members representing a diverse pool of organizations are coming to the Center to better
understand their roles and responsibilities. They are interested in:
o Meeting with their peers
o Learning about effective governance practices
o Learning practical fundraising strategies

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We would not be providing an accurate picture of CNM’s experience over the past two years if we did
not include two awe inspiring findings
findings. Hundreds of organizations we have worked with throughout the
past 18 months have been energized and inspired
inspired, in spite of the economic challenges, when they had
access to the right tools and when they kept their mission front and center. Their futures look bright
and their communities will reap the benefit of their hard work.

Given the unprecedented challenges facing LA’s social sector, tthere is an enormous demand for access
to relevant, affordable, quality information in the form of training, coaching,, and consulting.
Fortunately, we have an extraordinary supply of talent throughout our region to provide management
support to those focused on helping others. The diagram below begins to reflect some of the resources
we have availablele throughout this market. Letting people know what relevant help is available is a
constructive, cost effective, and timely first step.

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