BC Business
Three local organizations, struggling through an economic downturn, offer words of wisdom from the philanthropy trenches.
WHEN THE ECONOMY is slammed by recession, individuals, businesses and governments all start considering (and reconsidering) every single spending decision they make. For B.C.’s charitable organizations, the challenges are daunting. Companies are shrinking and individuals are being laid off, and yet they still have to be approached and asked for selfless contributions. A charity’s very survival depends on it. At the same time, charitable organizations are watching their investment incomes plummet alongside everyone else’s.
Hard numbers on exactly how the current economic climate is affecting B.C.’s charities won’t be available for many months, but reports from individual organizations reveal some interesting stories. While charities everywhere agree the recession is a threat to operations and have begun cutting expenses wherever they can, some report that revenues have remained more or less on track while others say they’re falling behind.
This is partly a reflection of the diverse nature of the charitable world: some charities depend predominantly on grassroots support from many thousands of small donors, while others rely on a few well-placed cheques from local millionaires – many of whom have seen a dramatic drop in their net worth thanks to plunging real estate and stock markets.
In this package, we take a look at three local charities – a community organization, an institutional foundation and an arts group – and find out how they’re surviving this economic crisis. Each has its own strategy to make it through with operations intact, and each tells us a little something different about ourselves, the givers – about what we are, and are not, doing to help.
The Community Organization UNITED WAY OF THE LOWER MAINLAND
2008 Revenues: $38.2 million 35% Donations from individuals (more than $1,000 per year) 27% Donations from individuals (less than $1,000 per year) 25% Corporate donations 7% Contributions from foundations 6% Fundraising events
THE CRUEL TRUTH of funding social services via philanthropy is that the money disappears when you need it most. Recessions have that twin effect: they hurt the most vulnerable in society as they hammer the bank accounts of those who would otherwise help.
The United Way of the Lower Mainland didn’t meet its fundraising target this year, says CEO Michael McKnight, falling 11 per cent shy of its $32.9-million goal and coming in $3.4 million under last year’s total. Nearly 80 per cent of the United Way’s funding comes from its workplace fundraising campaigns, which it runs in about 1,200 B.C. companies starting in September each year. The shortfall in donations was most noticeable from givers in the resources, finance and construction sectors – not surprising given what’s going on in the economy. And yet the calls come in from neighbourhood houses, mental health centres, job training services and other front-line social support groups, McKnight says, now more than ever.
The United Way will meet its existing commitments this year by dipping into a contingency fund, which is large enough to sustain current operations this year and possibly into part of next year. But if fundraising doesn’t improve beyond that, the organization will be forced to make tough decisions about cuts to existing programs. In the meantime, plans to expand certain promising projects are being put off, McKnight says, including a program designed to help at-risk kids avoid potentially damaging life choices, such as getting involved with drugs and gangs.
While this year’s funding crunch is an unforgiving dilemma, it ultimately pales in comparison to the United Way’s long-term challenge: how to stay relevant with donors in a changing society. The United Way’s workplace fundraising campaign, for instance, is geared toward large organizations, and B.C.’s business landscape is increasingly populated by small- and medium-sized companies and increasingly devoid of major head offices. This presents a major organizing challenge for the United Way: it can take dozens of workplace campaigns in small offices to raise the funds the charity could get from just a handful of events at two or three major headquarters.
Demographics are another pressing issue, according to McKnight. Today the United Way’s typical donor is aged 35 to 50 and likely already has connections to some kind of social service. But the organization needs to reach donors now in their 20s, McKnight insists – donors who don’t necessarily respond to the same bake sales and neighbourhood drives as their parents. Younger people are generous, he says, but they’re not as interested in decades-spanning commitments, which organizations such as the United Way have relied on for so long; they’re much more interested in a quick online credit-card gift. The United Way designed its Community in Crisis website to deliver exactly these capabilities.
The site – launched in March – is clearly focused on quick and easy giving, sporting a big central button labelled “Give 10 bucks.” While the site had logged a relatively modest 632 donations as of press time, McKnight says, “What it will do is help us build some knowledge and expertise as a charitable organization in how to access particularly younger donors, who we don’t necessarily have a historic relationship with.”
The United Way has been active in the Lower Mainland for 75 years, McKnight says, and is steeped in tradition. But it can’t afford to be static as the community changes. While these social shifts might not start affecting the bottom line for another five or 10 years, now is the time to start working on new strategies. By the next recession, it might be too late.
[pagebreak] The Arts Organization VANCOUVER OPERA ASSOCIATION
2008 Revenues: $8.8 million 40% Ticket sales 24% Donations from individuals (more than $1,000 per year) 15% Government grants 10% Fundraising events 6% Donations from individuals (less than $1,000 per year) 5% Corporate donations
THE CHALLENGE OF being an arts organization in a down market is that, while other charities can count on sympathy for sufferers to draw donations, the arts must appeal to the less tangible importance of culture in our society. To a certain extent, what such organizations lose in broad appeal can be made up for in other areas, including ticket sales, concession revenues and other retailing opportunities. But when a recession eats into the public’s entertainment budgets, a gallery or symphony is lucky if it can keep its regular audience, which is why fostering the loyalty of tried-and-true supporters – the companies and individuals who validate the importance of culture through donations made and time volunteered – becomes so critical.
For the Vancouver Opera, the biggest hit during this recession has been the drop in corporate donations, according to managing director Christopher Libby. And his impression from conversations with colleagues in the arts-administration scene is that a 20 to 40 per cent drop in corporate contributions is being felt across the board. While not enough to kill an organization, it’s a dangerous ding to the revenue column, especially if combined with a coinciding loss of ticket buyers and private donors.
So how do you protect your base? Libby is adamant about the first step: put on good shows. When it comes to blows to the box office bottom line, a recession is nothing next to a bad review. “If we do a production and it gets roundly panned by all the critics, it doesn’t matter what the market is like; people aren’t going to show up,” he says. “You have to put a quality product on stage . . . that matters more than anything else.”
And in this area, B.C. producers have a distinct advantage over their other Canadian counterparts: windfall revenues from the VANOC-funded Cultural Olympiad, a $20-million investment in arts events in the years leading up to the 2010 Games. Libby doesn’t divulge how much his organization is getting, but says the Olympiad is one key reason why big shows are opening in Vancouver rather than out east between 2008 and 2010.
As far as the opera is concerned, after playing to 90 per cent capacity crowds last season and with a comfortable level of awareness and excitement over its upcoming lineup, Libby says there’s probably not much new revenue to come from box office sales. He estimates that 40 per cent of the opera’s revenues are “earned” at the ticket counter, about as high a proportion as can be hoped for in his business. “That tends to be a standard in the opera business,” he says. “Opera is probably the most expensive performing art.”
And so donations from individuals make up the biggest and most flexible chunk of the revenue bracket. That is why the organization spends so much time and effort securing regular funding from big contributors; now is not the time, Libby insists, to start soliciting support from people who don’t already have a relationship with you. But even among the faithful donors, Libby is finding that they’re more discriminating than in past years – wanting reasons to give and wanting to know where their money is going. Libby plies the gamut of social media – blogging, Facebook, Flickr, Twitter and YouTube – to promote shows and fundraising events, describing it as a tremendously cost-effective way to stay in touch with the faithful.
Libby says the relationship the opera has with its biggest benefactors is the product of decades of steadfast effort and that the work of maintaining those crucial relationships doesn’t necessarily change during a recession. It’s just that now, with the tide going out, one can clearly see how good a job has been done.
[pagebreak] The Institutional Organization VGH & UBC HOSPITAL FOUNDATION
2008 Revenues: $53.2 million 63% Donations from individuals (more than $1,000 per year) 12% Interest and investment income 11% Other charities 6% Government 3% Other revenue 1% Donations from individuals (less than $1,000 per year)
THE CHARITY WORLD is much like the business world: there are a lot of small operators and a few big players. While some operations go door to door or flip through the phone book dialing for donors, the VGH & UBC Hospital Foundation gets to treat its supporters more grandly. In February, for instance, the organization hosted a dinner for 550 of its dearest (read: wealthiest) friends at the Fairmont Hotel Vancouver, who were serenaded through supper by Diana Krall, Elton John, Elvis Costello and other artists. The take: a cool $2.3 million to fund research in blood-related cancers.
The rule of thumb for the charitable sector is that 80 per cent of your revenue comes from 20 per cent of your donors. Hospital foundation president and CEO Ron Dumouchelle concedes that, at his organization, the ratio is closer to 90-10. But with a mission to buy expensive medical equipment, fund medical research and support special programs at five Lower Mainland medical institutions, the foundation certainly has the big-ticket projects worthy of big-dollar donors. Relying on the wealthy giver has its good points and bad points. As long as they stay motivated, they’ll carry you through any recession. But drops in the stock market are going to affect this crowd more than any other, putting at risk any discretionary spending they might have for charities.
Dumouchelle says it looks like his foundation will meet or surpass its 2009 fundraising target of more than $37 million. Still, he adds, many donors are delaying their contributions by a number of months as they grapple with their own financial situations. He also notes that the returns from gifts of stocks – which have become a significant source of revenue for many charities since capital-gains taxes were removed from such donations in 2006 – are dropping alongside the stock market. These revenue drops make planning a challenge, Dumouchelle says, and the foundation is currently cutting down some discretionary spending, holding off on hiring new staff and delaying some of its fundraising events.
Key for the foundation is to ensure the relationships that have been built up with donors survive the economic downturn. That means hosting parties and giving hospital tours, where philanthropists can meet the doctors and patients their contributions are meant to help. It also means providing detailed information – via newsletters, online and in person – about the foundation’s goals and operations, demonstrating that there’s a real and present need for funding and that any money given will be responsibly spent. “Our donors oftentimes are very inquisitive about all aspects of what they’re going to be making a donation to,” Dumouchelle says. “We’re able to be quite specific and detailed from a business-case point of view.”
Wealthy donors are also becoming increasingly interested in putting their money toward their own chosen causes as opposed to allowing charities to do what it will with their cash – which, in effect, decreases the control a charity has over how to spend its revenues. In March, for example, the foundation received a $15-million donation from West Vancouver philanthropist Robert Ho – a contribution, Dumouchelle says, that was built on several months of work ironing out financial details, as well as several years of relationship building. Ho was personally interested in supporting several health areas, but Dumouchelle says the hospitals had identified another area in dire need of funding where Ho had little personal experience: hip health and mobility.
Fortunately, hospital leaders were able to sell Ho on the demands doctors were facing in mobility, and he decided to contribute to this area as well as to his personal interests. Construction of the Robert H.N. Ho Research Centre, a 700,000-square-foot, $41.5-million facility that will house the Centre for Hip Health and Mobility, is planned to begin this summer and finish in 2011.
“I think that sends a message,” Dumouchelle says, “that although the economy is down and people are affected, people still believe that this is an important investment to make.”