January 10, 2008 | Read Time: 8 minutes
Last year, Internet blogs, social networks, and discussion lists sparked a wave of discussion, analysis, and information sharing about the philanthropic world more vibrant than at any time in recent memory. Driven by a predominantly younger audience, these online dialogues portend an exciting year, one in which we can harness the energy and talent of people who are working to bridge the gaps between rich and poor in the United States.
That said, for all there is to be excited about, I see just as many things that aren’t working in the nonprofit and philanthropic arenas. Recently I was speaking with a young activist who said working for a nonprofit group was “passé.”
We suffer from a serious image crisis. And if we don’t address it head on, we will be overlooked by a population of young people who believe they can make a greater impact in the for-profit world. Nonprofit leaders must use 2008 to tap into the unfettered energy of our youth to reinvigorate our sector and develop new ways to meet our responsibility to society.
As we look to the new year, here are 10 predictions for the nonprofit world, all of which require our profound consideration as we stand at the doorway to a new year and a crossroads for philanthropy.
- Donors will overcome their own self-interest in supporting elite causes and do more to curb poverty in America and around the world.
Donors are waking up to how much of their giving goes to individuals of similar race and class, and how much is based on promoting their own self-interest or the interests of those in their social networks. Fear of recession abounds, but as the gap between rich and poor grows wider, many affluent Americans feel compelled to express gratitude for such a long stretch of prosperity. It is quite amazing to see how much has been accumulated by a small number of people at the top of the economic ladder. In 2008, more people will awaken to the larger needs of society beyond those in their own social circles.
- Nonprofit leaders and donors will persuade Independent Sector, the Council on Foundations, and other coalitions of nonprofit groups to call on Congress to make changes in the tax code, to both add new giving incentives and assure that wealthy people are paying for a fair share of government programs to benefit needy people.
In the past 50 years, giving levels in America have remained at roughly 2 percent of personal income, and today some estimates suggest that 8 percent of Americans have made bequests to nonprofit groups. At the same time, taxes on the wealthiest Americans have been reduced sharply. As the United States faces persistent challenges to the social welfare of its citizens, it is time for well-to-do Americans to pay a greater share of their incomes in taxes. What are taxes for, after all, if not to uplift all citizens?
Those who are the wealthiest have yet, with rare exception, to show their capacity to give to charity in proportion to their wealth. In 1960, my dad made more than $100,000, and he was taxed at 90 cents on the dollar. Since gifts were tax-deductible, and taxes were so high, he had a serious motivation to give a lot of money to charity. I am not advocating that stringent a change, but the federal government needs more money to improve education, expand access to health care for everyone, and take other steps to strengthen the social safety net. And the government needs to find ways to make it more financially savvy to give money away than to accumulate it.
- Women will lead the push for greater attention to ethics and serious diversity throughout the nonprofit world.
Sixty-six percent of nonprofit organizations are now led by women. To build upon this change from just a few decades ago, when the nonprofit world was ruled by men (most of whom were white), donors, nonprofit leaders, and consultants who advise them will increasingly seek ways to build fund-raising partnerships that cut across class, race, and gender lines. These multicultural efforts must become part of everyday practice in the nonprofit world, where people of many backgrounds often share a common vision but too often work separately to achieve their goals.
- Social investing will become a priority for all foundations as they seek more-effective ways to carry out their missions.
With the markets moving up and down, foundations, endowments, and cash-reserve funds of wealthy organizations are accumulating large sums that can be better used to promote the public welfare. Foundations and other organizations should be expected to put 1 percent to 5 percent of their investment portfolio into businesses or other projects that work to achieve the same goals as their grant-making or other programs. Those organizations that are not investing at least that much in social enterprises will soon find themselves behind the times.
- Cutting-edge foundations and major nonprofit groups will make it a priority to focus on ways to educate donors and show them how their dollars can be used to transform society.
To nurture great donors, established philanthropists must serve as mentors and make efforts to reach out to diverse parts of society to tap new leaders. Instead of simply making a solicitation to an affluent potential donor, nonprofit groups will focus on helping donors achieve their goals in a community and show them how to develop healthy partnerships with organizations that serve society. The savvy nonprofit organization will help donors realize how their money can be used to improve the lives of others who are in greater need, showing them how to go far beyond simply paying for a new building or financing an endowed professorship.
- The next generation will engage their parents and relatives in more discussions about increasing their giving and living more simply.
Inspired by these conversations, mature donors will realize they can afford to increase their giving, both while they are alive and through their bequests. The ultimate result will be stronger integration among donors’ philanthropic, financial, and end-of-life planning. Furthermore, baby boomers will seek advisers who understand that giving away money to achieve specific social results is a central part of a well-considered financial plan.
- Responding to their boomer clients, financial, tax, and legal advisers will be more aggressive in eliciting philanthropic goals and aspirations.
Advisers will increasingly think beyond tax and money management and help their clients live more fulfilled lives and leave more significant legacies. Advisers will help their clients pass on not only their valuables, but also their values. Preparing heirs to inherit money will bring the family together around shared philanthropic projects and volunteer work in the community. Families will engage community advisers more for guidance, partnership, and shared decision-making in grant making and program-related investments. Advisers will increasingly recommend and facilitate such cross-generational communication and mentoring.
- “Community based” philanthropy will emerge as the wave of the future.
When donors, nonprofit groups, and community leaders work together to determine the problems facing their cities and towns, they come up with more-effective solutions than when donors work in isolation from those they seek to aid. At least 250 efforts in the United States and elsewhere are channeling money to projects that were explicitly designed based on suggestions from all three players. Still, too many donor-advised funds and family foundations fail to solicit ideas from community leaders and nonprofit groups that are working every day to solve a region’s problems. Until the idea of listening to people on the front lines becomes a part of the rule book for all donors, American philanthropy will never be as effective as it could be.
- Families and foundations will wake up to the business at hand: vigorously moving money wisely to those in greatest need or to those who can make the greatest impact. More foundations will give up the idea of spending 5 percent a year, as required by law, and seek to give all their money away in a set number of years to meet critical needs or at least to step up their giving and social investing.
As wealth changes hands from one generation to the next as part of an unprecedented intergenerational transfer, family foundations will take the time to learn how best to effect desired change. They’ll realize that planning the family vacation should not take away from grant making that might change society for the better. Some 60,000 family foundations and another 20,000 small philanthropies are responsible for at least 25 percent of all foundation giving in the United States. Yet with hundreds, if not thousands, of organizations seeking them out, the majority of foundations are understaffed for such critical civic engagement and opportunities for shifting society.
- The leadership crisis will grow more serious because too few older nonprofit leaders are doing enough to welcome and support the next generation.
The intergenerational transfer of wealth expected to unfold over the next few decades is a big deal. But the bigger deal is the transfer of leadership — the chasm that separates the giving behavior of the next generation and that of today’s nonprofit leaders. Today’s kids live and give online, creating a giving culture through iterated online conversations, while the “oldsters” are becoming increasingly isolated and cut off from the emerging networked culture.
How many boards and organizations have taken steps to seek next-generation replacements for their employees, managers, or board members? How many nonprofit leaders are fully and consciously doing a great job of serving as mentors to members of the talented next generation, or working with younger people as full partners? From what I have seen, not many.
As more leaders wake up to the critical need for transferring leadership, they need to encourage greater crossover between online and offline giving, and make deliberate efforts to include people from all generations on boards, volunteer networks, committees, and other decision-making settings.
Tracy Gary, who has founded or co-founded 18 nonprofit organizations, is the author of Inspired Philanthropy: Creating a Giving Plan and Leaving a Legacy, whose third edition was published by Jossey-Bass last year.
