My fourth scenario focused on a long-overdue renewal. There is nothing like a crisis to focus attention on needed improvement. Mergers and acquisitions can be a sign of desperation or a way to strengthen performance, while downsizing can be a last gasp or a first step toward higher productivity.
My third scenario centered on a winnowing of the sector. At one point last fall, I predicted that as many as 100,000 mostly smaller nonprofits would disappear during the recession. This number was based on a simple extrapolation of small-business failure rates during the past two recessions. During the relatively mild 2001-2003 economic downturn, for example, roughly 10 percent of small businesses failed. Although the failures were almost entirely offset by the creation of new small businesses that were created by unemployed workers, there is little reason to believe that the nonprofit sect
My second scenario focused on a steady withering of the sector’s general capacity to meet its mission. Virtually every data point from the sector shows this scenario is coming true. It is not clear just how many nonprofit employees are now out of work, but surely the sector accounts for some percentage of the nation’s 9.7 percent unemployment rate. With revenues in steep decline, the probability for continued withering is 100 percent.
As the recession deepened following the collapse of Lehman Brothers in September 2008, I outlined four scenarios facing the sector. There is now enough anecdotal evidence to assign tentative probabilities to each one.
The deepest economic recession of the century may be technically over, at least according to Federal Reserve Board chairman Ben Bernanke, but the jobless recovery it has produced continues take its toll on the nonprofit sector. The good news is that there appears to be less damage thus far than anticipated. There is still plenty of anxiety about balance sheets, a double-dip recession, and inflation, but the anecdotes suggest that most nonprofits are still holding on despite the odds.
