This is my yearly column of predictions and trends for nonprofits. I was pleased to speak with Jeffrey Moore, Chief Strategy Officer for Independent Sector, a national membership organization that promotes a healthy, equitable charitable sector through research, community building, and public policy, who shared insights and data from their research.
1) Staffing shortage
This will be the number one challenge facing nonprofit leaders in 2023. While the nonprofit sector is the third largest private employer in the U.S., the sector lost 1.6 million jobs during the pandemic. Many of those employees have not returned. To maintain a vibrant workforce, and compete for senior leadership positions, nonprofits must offer competitive salaries and ensure a healthy work environment. This will include a flexible work schedule, remote work, and making employee mental health an organizational priority.
2) Maintaining public trust
One of the most pressing issues impacting the health of the nonprofit sector is maintaining public trust. Research conducted for the past three years by Independent Sector and Edelman Data shows nonprofits are the most trusted of public institutions, however, this trend is on a downward slope. “Trust is our currency,” says Jeffrey Moore, and tantamount to success. Research indicates that when nonprofits are transparent and deeply engaged with their community, trust in those communities goes up.
3) Expect fewer grants
Foundations typically give 5% of their total annual assets to nonprofits each year. The amount available is directly related to the performance of the financial markets. In Forbes magazine, Joshua Pollard writes, “The market has been dismal in 2022. That means less money will be available for grants and donations”. Pollard predicts 2023 giving is going to reflect the 15% to 25% decline in their assets tied to the markets. This may lead to a financial crunch for nonprofits who can no longer rely on pandemic relief funds to sustain their work.
3) Fewer people will give to charity
Charitable giving is critical to the ability of nonprofits to meet community needs. Although there was an increase in the number of donors in 2020 and 2021, the number of donors giving to charity in the U.S. is narrowing. Jeffrey Moore says, “we have a donor pipeline problem in this country.” While fewer Americans are giving, current donors are getting older, and often do not reflect the diversity of the communities or people being served.
The need for cost-effective fundraising drives nonprofits to focus on major gifts from a handful of donors. This can lead to overdependence and inequities stemming from fewer small gifts coming from low to middle income donors. To address this issue, Independent Sector is advocating for the universal charitable deduction as a basic fairness issue. “It’s not OK that some people get private tax treatment because they itemize while others do not. We believe everyone who gives to charity should be treated equally,” Moore said. Over 77% of Americans support reinstating and expanding the charitable deduction for all taxpayers.
4) Donor retention will be critical to fundraising success
While finding new donors is essential, long-term sustainability will require making donor retention equally important. The average donor retention rate in the U.S. hovers between 40% to 45%. For first time donors, the retention rate is around 27%. Nonprofits who work to turn a first-time donor into a repeat donor will be more sustainable in 2023.
5) Need for easy, flexible ways to give
As personal budgets tighten, donors will look for flexible giving options to support their favorite causes. Nonprofits who offer monthly giving programs will enable donors to give small amounts over time rather than one lump sum. This method makes giving easy, supports short-term cash flow, and builds long-term sustainability.
6) Advocacy will be a priority for all nonprofits
Advancing the goals of local nonprofits and the charitable sector will require every nonprofit, not just public policy organizations, to make advocacy a priority. Boards of directors will need to prioritize advocacy in the strategic plan, educate directors on the dos and don’ts of advocacy work, and be prepared to engage your supporters. Let’s start by advocating for the true cost of providing services. Services delivered by nonprofits in 2022 will cost more to deliver in 2023. These costs must be reflected in grant requests and supported by funders and governmental agencies in the grants and contracts they award.
Independent Sector is working to advance the Nonprofit Sector Strength and Partnership Act to establish a White House office for Nonprofits, help government and nonprofit sector work together more effectively, and increase access to data about the nonprofit sector. This includes giving nonprofits a seat at the table when federal policies are being made.
Learn more at IndependentSector.org. Kelly Otte, founder of this column, and I have advocated for a similar effort in Florida’s Governor’s office. These topics and many more, plus your questions, will be addressed in future columns.
Notes on Nonprofits is produced by Alyce Lee Stansbury, CFRE, President of Stansbury Consulting. Please send your questions and feedback to firstname.lastname@example.org.