(This part 1 of a series on how COVID-19 is affecting Nonprofits)
COVID-19 has been a perfect storm for traditionally-run nonprofits. The way this pandemic has necessitated altering our society as a whole is directly and profoundly impacting the way nonprofits must consider strategy and operations. To understand how this impact is playing out, it’s important to gain an understanding of how most nonprofits operate. It’s a topic that, until I joined Astra Labs, I didn’t have much insight into.
Having spent time in the biotech startup world, the stark contrast in the assumptions made by nonprofits, and how those assumptions play out in the management of resources, have been jarring to me.
Six Assumptions Made By Traditional Nonprofits, and how COVID-19 has dismantled each of them.
The First Assumption nonprofits operate on is that whenever tragedy strikes, or there is a significant issue which causes harm, they will be able to quickly quickly leverage donations as an integral factor of their response. Naturally, this relies on areas not hit by a tragedy or natural event to have money or resources they can spare in order to be able to raise funds that can be used to deliver aid to areas that are strongly affected.
However, when something truly goes global, like this pandemic has, raising money or acquiring resources and donations from unaffected areas becomes almost impossible. Since each area is affected, many turn inward trying to do whatever they can to support their own communities first in an effort to facilitate reaching out and help others from a position of strength later. Unfortunately, due to the pace of spread, most people are currently working to strengthen their local communities and areas right now, and therefore outside aid in the form of donations and resources become disproportionately more difficult to acquire in impoverished communities. Many lack the tests and resources to contain and control these problems, leading to more suffering down the line.
The Second Assumption is that many resources do not need to be stockpiled and the small supply of critical stockpile resources that exist are usually reserved for immediate use. For example, initial food and shelter that could be provided to a hurricane-stuck area will fill the gap until further supplies can be sent into the region. Or a small cache of first aid supplies could be used quickly in the event of a disaster until medical supplies can be flown in.
This depends on there being an available capability in the market for people to manufacture critical supplies in short notice and a workforce to spin up these types of manufacturing quickly enough that a meaningful response to the demand can be created. However, this is difficult when manufacturing is centralized in one or two regions of the world, when those regions are hit hard, are impacted early that result in disrupting the middle of the supply chain, and affecting everyone else’s ability to adequately prepare for the coming storm. This is then compounded by further supply chain interruptions as the virus hits different regions — causing intermittent shutdowns on raw material extraction, manufacturing of special parts, or even disruptions in shipping lanes — preventing the flow of critical supplies that global distributed stockpiles might have alleviated.
Naturally then, a Third Assumption unfolds. We have all come to collectively rely upon the dependability of global manufacturing capabilities and the infallibility of Just-In-Time (JIT) manufacturing and logistics to get things where they need to go. Nonprofits have bought into that assumption, too. Naturally, these systems far outstrip most organization’s capabilities to stockpile resources in the first place. The thought here is that in whatever situation arises that those stockpiles will be insufficient, it’s a simple idea to quickly order whatever else is needed with funds on-hand.
A supply chain with zero surplus or stockpiles anywhere along the way is inherently an efficient one. However, it’s also the least capable of weathering interruptions. When random interruptions are thrown into the mix, delays happen quickly, and cascade through a system without any buffer zones. As these cascades create shortages, everyone is trying to acquire supplies they need and near-term tension causes exhaustion and price spikes, leading to further waste and ineffective use of funds. Therefore, when dealing with disaster situations, and other unpredictable events, one shouldn’t discount the incredible strategic advantage of stockpiling critical supplies and resources, around the globe, and using them as an additional pool to weather the storm.
The Fourth Assumption made by traditional nonprofits is that their responses will only be needed for a short amount of time — granting that most disasters are short-lived — and humanity has a handle on how to deal with the most commonly occurring ones; floods, hurricanes, tornadoes, famine, hunger, and disease outbreaks. That is what is needed for a nonprofit to fill in the gaps before our lumbering systems kick in and provide aid and support.
Covid-19 and its isolation procedures have dragged on for quite some time already. While there is now talk of re-opening in a few months, some experts are saying we are not in the clear just yet. People fear that we might experience another wave, or there may be continually recurring resurgences unless and until we get a handle on this thing. There is also talk about how vaccine development may take another 12 months from where we are today and afterwards we will need to manufacture and distribute those vaccines. A vaccine seems to also be one of the few permanent solutions to this pandemic. It will take a gargantuan effort to distribute them globally. In the meantime, People will be apprehensive and it will take time for the economy to regain the lost momentum. Nonprofits still have much work ahead of them as we repair the damage to all our systems, and people struggle to make up for missed payments, shrinking savings, and more.
The Fifth Assumption made by traditional nonprofits is that they do not need large cash reserves or a significant runway built into the budget. The general sentiment is money should be spent quickly to provide immediate aid / relief. And, if there is a need, donors will rise to the occasion in providing more cash flow. This has *generally* been true, but isn’t always true. However, more than 80% of nonprofits operate with only 6-12 months of cash reserves on hand, much of which is already allocated according to their budget.
Due to the isolation and shutdown measures taken by governments, Global GDP’s have taken a massive hit. This has rippled through all parts of the economy and many people who would ordinarily happily donate to relief efforts are now cash-strapped and unable to help out. As a result nonprofits who’s strategies depended on this influx of cash are now met with a difficult choice: do they scale back efforts in order to maintain funding through an uncertain timeline, continue to operate until they run out of cash and be paralyzed, or increase their fundraising efforts in an attempt to get ahead of the problem? None of the choices are particularly appealing, and all of them are risky.
The Sixth Asssumption made by nonprofits is the that conducting operations on the basis of the inherent availability of volunteer time and volunteer manpower is an easy way to cut cost and add flexibility. Relying on volunteers allows them to scale their activities to the occasion at hand or keep volunteers in reserve. As a result, many of their capabilities are tied to the the availability of volunteer time and those volunteers’ ability to do ground-work where and when it is needed. This is a decidedly low-tech approach that has allowed nonprofits to scale some things that do not scale well, but their workforce is also vulnerable to economic conditions.
This approach collapses when the entire world switches to working from home, staying in physical isolation, and sometimes even being mandated from not being outdoors. Furthermore, many nonprofits are weak in their implementation of digital strategies, or don’t appropriately adapt to the digital world well, and therefore are cut off from their most successful efforts to give aid to others. This can be frustrating because funds cannot be used in the most effective ways, and new funds cannot be raised in traditional ways that previously worked well. Once again, it leads to an inability to be maximally effective at a time when the world needs it most.
So Where Do We Go From Here?
One of the tragic things about this pandemic is how quickly many medium sized nonprofits went from providing aid to absolutely struggling to stay alive and operational. As this pandemic drags on, we keep seeing wonderful and historically effective organizations fold under the pressures, or remain alive only in name, rendered immobile due to their diminished ability to raise funds. This is truly a tragedy because many of the medium size nonprofits are an excellent blend of being quick to respond to problems and run in an efficient manner. I truly think the world is worse off with their loss and I fear that many others will be heavily affected before this is over.
Covid-19 is truly the most perfect storm for many of these organization. It has systematically eroded away the assumptions built into the models of most nonprofits because of the measures we have needed to take in order to flatten the curve and slow down the spread of this virus.
At Astra, we saw these problems coming from a distance. We have always operated digitally and remotely. One of the reasons I joined the organization is to help craft our strategy for the coming decade and ensure that disasters on a global scale would not prevent us from carrying out our mission. In subsequent parts of this series, I will elaborate on the advantages of nonprofits moving to the digital world, outline some of the strategies required, and what assumptions may not apply anymore.
(In Part 2, I will talk about why traditional nonprofits are struggling to go digital, even though doing so will allows them circumvent some of these problems…)