Nonprofit Crisis Case Studies: Tips for Crisis Planning

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When it comes to crisis communications, nonprofits must be just as prepared as any for-profit company. A nonprofit and its success rely entirely on the trust its target audience has in its mission and work. In an article from Generocity, Laura Otten, the executive director of the Nonprofit Center at LaSalle University, wrote, “If nonprofits can’t win back their trust and respect, then they’re not going to remain in existence.”

In order to protect their hard-earned reputation, nonprofits must prepare for a range of crises. We consider a crisis any event that has the potential to threaten people or property, disrupt your organization’s activity, injure your reputation, or harm your finances. When a crisis occurs, the consequences can damage a nonprofit substantially, as demonstrated by one recent example of an otherwise respected institution that became embroiled in a national sexual abuse scandal.

MIT Media Lab Connections to Jeffrey Epstein Trigger Firestorm of Backlash

MIT Media Lab is an interdisciplinary research laboratory at the Massachusetts Institute of Technology, focused on encouraging “the unconventional mixing and matching of seemingly disparate research areas.” But in early August 2019, it was revealed that the nonprofit had accepted donations over the years from sexual offender Jeffrey Epstein. Media Lab director Joi Ito and MIT President L. Rafael Reif initially apologized for the donor relationship in separate letters to the university community.

In September, a whistleblower and MIT employees went on the record with New Yorker contributing writer Ronan Farrow in “How an Elite University Research Center Concealed its Relationship with Jeffrey Epstein.” Published on Sept. 6, Farrow’s investigation revealed that Epstein was responsible for large amounts of funding, exceeding the original amounts reported in August, to MIT’s Media Lab despite his “disqualified” status in its donor database. Farrow’s reporting included damning internal documents including emails between Ito and Peter Cohen, the MIT Media Lab’s Director of Development.

The MIT Media Lab example is a crisis of reputation. Ito’s acceptance of Epstein’s money and connections created internal and external mistrust that damaged the organization’s credibility and sustainability moving forward.

Ito resigned less than 24 hours after Farrow’s story was published, and MIT announced an independent investigation and new leadership at Media Lab to address the scandal. However, two researchers already had announced their intention to resign from Media Lab, citing Ito’s relationship with Epstein as the reason for their departure. It is important to note that MIT was not the only respected institution discovered to have a donor relationship with Epstein. Harvard University also accepted donations from him.

This crisis is recent and the ramifications are still unfolding. However, Media Lab appears to have continued business as usual, at least on its external platforms. It has posted positive updates on its website such as awards, positive media coverage, and hiring news, likely in an effort to maintain a healthy online reputation and discourage interested parties from looking at the negative coverage.

Wounded Warrior Lavish Spending Wounds Reputation

Another example of a nonprofit crisis is the case of the Wounded Warrior Project. In 2016, CBS News and The New York Times published stories levying accusations that the nonprofit was wasting donor money. “It has spent millions a year on travel, dinners, hotels and conferences that often seemed more lavish than appropriate, more than four dozen current and former employees said in interviews,” the Times wrote. “Former workers recounted buying business-class seats and regularly jetting around the country for minor meetings, or staying in $500-per-night hotel rooms.”

Employees specifically questioned the organization’s spending to take hundreds of the organization’s employees to a conference at a Colorado resort. They alleged that the nonprofit spent nearly $3 million, describing a party with excessive food, drink, and fun all fueled by donor funds.

The nonprofit first denied the allegations and demanded a retraction from the media. But the organization soon fired several key leaders, two of whom had been making $473,015 and $369,030, according to tax documents. According to the Washington Post, the Better Business Bureau’s Wise Giving Alliance suspended the charity’s seal designation, and donations plummeted. In September 2016, about 85 employees were laid off.

While donations continued their precipitous decline in 2017, Wounded Warrior set about righting its ship. It brought on new leadership and started to rebuild and grow in 2018 under the helm of new Chief Executive Officer Mike Linnington. A retired general, Linnington pledged that Wounded Warrior Project would no longer hold lavish events and would increase scrutiny on spending for travel and all expenses. In addition, his salary was set at $280,000, far less than his predecessors. After an investigation, the Better Business Bureau again gave the organization its seal of approval, finding that “its spending has been consistent with its programs and mission.”

Lessons Learned: Nonprofits Must Be Ready for Crises

The case studies of MIT Media Lab and Wounded Warrior Project are two examples of high-profile crises that affected nonprofits, but there are several more possibilities for which organizations must be ready:

  • Company financial woes, such as layoffs and bankruptcy
  • Employee wronging, such as sexual harassment claims
  • Natural disasters, such as floods, fires and hurricanes
  • Violence, such as active shooters, hostage situations, and terrorism
  • Forced closures due to an owner’s illness or death
  • Cybersecurity issues, such as stolen data and a cyber breach
  • Community dissatisfaction, such as protests
  • Reputation issues, such as rumors, scandals, and threats

When we work with nonprofit organizations to create a crisis response plan, we recommend following the 6rs:

Recognize

  • Recognize and identify the issue.
  • Mobilize your crisis response team – be sure to have cell and home phones, personal and business email addresses, and social media profile URLs in your plan.

Restrict

  • Conduct a crisis response team call or meeting.
  • Contain: draft and post a holding statement (if necessary).
  • Communicate to critical audiences.

Remove 

  • Provide all necessary tools for experts to eradicate the issue.
  • Communicate about the issue with key audiences.
  • Monitor and evaluate responses by keeping an eye on social media sites.

Recover

  • Implement your small business recovery plan.
  • Draft a resolution statement.

Resolve

  • Use the resolution statement to alert audiences that the issue has been addressed including through social media.
  • Provide necessary information to important audiences (what happened, how it may have happened, what was done to rectify it, and what is being done moving forward).
  • Follow up with affected parties directly.

Refine

  • Conduct a post-mortem review.
  • Evaluate the effectiveness of the crisis response team.
  • Evaluate the effectiveness of your response tactics.
  • Update your small business crisis scenarios and response tactics in the crisis management plan.
  • Update your contact lists (crisis response team, media, etc.).
  • Re-train the crisis response team.

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