Five Key Opportunities and What They Mean to You!
As we review the first half of 2018, some impactful philanthropic trends have emerged. We are witnessing fast-paced evolution, including significant demographic changes, increased use of technology, and more comprehensive donor engagement that will continue into 2018 and beyond. Constant political upheaval, trust issues and a spotlight on social inequity is shaping how non-profits seek and obtain support. We are watching a sector that is changing before our eyes. It’s an exciting time to be in philanthropy, yet challenging to adapt so rapidly. Below, I share five key trends worth paying attention to in order to stay ahead of the curve.
Trend # 1: Data Collection becoming a huge priority
If you have to pay attention to only one thing, this is it: it’s all about the data. The easy availability of technology, including increasingly sophisticated data platforms for non-profits, is making informed data analysis the norm. And as data-informed decision making becomes an ever-stronger standard, funders are also demanding data collection, analysis, and dissemination methods that promote inclusivity and take cultural differences into account. Formal funders have driven the trend but individual donors are following fast. Forty-one percent of individual donors say they have changed their giving due to increased knowledge about nonprofit effectiveness. Twenty-seven percent of donors say their approach to giving has changed due to technological advances that provide convenient tools for researching and funding charitable projects and organizations. Implications: Plan on your desired outcomes and how to measure success well in advance, and be proactive on reporting the impact of your programs. The days of promises without measurement, or unclear results, are over.
Trend #2: The top income tiers narrows
In 2017 giving exceeded $400 billion for the first time, increasing 5.2%. And fully 70% of giving came from individuals. And what are these individuals giving to? Specific programs with measurable outcomes (again, it’s all about the data). In fact, unrestricted giving declined $2.24 billion in 2017. And capital giving has already been declining for over a decade. Wealthy individuals and families are using more sophisticated techniques to make their gifts, such as personal foundations and donor advised funds. There is more organized family giving and a generational transfer of philanthropic funds. Charles Schwabb reported the number of new donor advised funds doubled in the second half of 2017 over the comparable period in 2016. This trend continues in 2018. There has also been a clear acceleration in the number of private foundations during the last decade. As a result, even the biggest national non-profits are re-aligning their development strategies to focus more on individual giving, making them less dependent on foundation and government grants. Implications: Greater concentration of wealth requires investment in major gift programs and stewardship. Serious fundraising requires professional training for staff and board members to deal with a more informed donor audience. As in other consumer markets, sophistication has increased and those who don't respond are being left behind.
Trend # 3: Commitment to building non-profit capacity
More funders are including capacity building as a budget line within their grant making. Driving this trend is a desire for a more diverse and inclusive sector, the desire for increased professionalism, and an overall eagerness to create more understanding around the true costs of nonprofit work. As national funders set the trend, individual donors and local foundations are following. This tendency is also fueling support for more public-private partnerships as more likely to achieve sustainable solutions. There is a stronger focus on collaboration across non-profits, and/or with other funders – such as government, individuals, corporations and foundations. Implications: This is good news. Donors increasingly recognize that creating impact without the infrastructure necessary to sustain programs, does not work. And that non-profits can deliver results more effectively than government, especially when working together. Include your operational needs transparently when requesting support, and look for others that you can work with to provide credibility and strength.
Trend # 4: Millennials' Increased Impact on Giving
Millennials will inherit over $30 trillion in the next 30 years. The group is already beginning to fuel the biggest boom in philanthropy ever because of vast fortunes being made, an extraordinary transfer of wealth, and interest in transformational philanthropy. There is a growing interest in social justice philanthropy and a commitment to diversity, equity, and inclusion. This group also wants to “go all in” through time and talent - not just money. Younger generations are giving less out of obligation and expressing decreasing interest in donating to traditional charities. Implications: Millennials are data driven and want to address long standing social challenges and inequities, not just apply band-aids. This trend is having an effect on older generations who used to give out of obligation but are now increasingly interested in how their gifts have furthered an organization's mission. Make sure you are addressing these issues or you risk not only losing the new generations, but also the experienced baby-boomer donor class.
Trend # 5: Increased Stewardship vs Mistrust
Studies show a steady decline in trust in all institutions, and non-profits are no exception. More than 8 in 10 donors say they have concerns about how their donations will be used or if their gift will make a difference. New digital and social tools are now the standard, and training of staff in communications is a key to credibility. As these expectations become the norm, there is a greater focus on stewarding relationships—as donors are accustomed to the sophistication of the consumer buying experience. Transparency, technology and evolving attitudes toward wealth are reshaping donors' attitudes about giving. Implications: Proactive transparency is key: what, why and how the funds will be spent must be clear. Don’t wait for the question, assume doubt is already there. How do you feel when you can’t reach a customer service line for a service you've bought? The same now holds true of non-profits. Stewardship must provide feedback and the ability to communicate easily in order to assure that donors continue to believe in the cause they are investing in.
Philanthropists are becoming more active, demanding, and introspective as data becomes available and millennials demand involvement. There is less patience for amateurishness, and more emphasis on what’s meaningful and impactful. The quest for inclusiveness and fairness of opportunity continues to drive donor interest. The generational transfer of wealth is fueling more giving, but also creating greater sophistication as professional advisors provide more alternatives to traditional philanthropy. And it’s all about the data. The best news is that giving continues to go up and up. By paying careful attention to social trends, clearly reporting on outcomes and communicating effectively with your donors, your opportunity to attract philanthropy will be at a level greater than ever before.