The Year Ahead: Trends that Will Shape the Nonprofit World

The new year promises to be a pivotal one in the world of philanthropy. A hotly contested presidential election, a turbulent economy, heightened concerns about charities among government leaders, rapidly evolving technology, and shifting demographics are all expected to shape the way nonprofit groups and foundations will operate in 2008 and beyond.

As a result, many organizations will face significant fund-raising and investment challenges. Others will confront strains in the way they deliver services.

Despite all of the potential challenges, however, charities and foundations will also have opportunities. Many nonprofit leaders see the arrival of a new president as a chance to press for key changes. They see technology as a way to reach out to volunteers and donors in different and exciting ways. And as a growing number of baby boomers reach their 60s, nonprofit groups will face new opportunities to gain the support of a highly skilled group of volunteers and donors.

To better understand what is ahead, The Chronicle interviewed numerous charity officials and experts. Readers can discuss these issues and more in an online discussion on January 8. For more details, go to http://philanthropy.com/live.

On the presidential front: Obama wins, public service becomes cool. Or Clinton wins, Bill becomes Philanthropist in Chief, and philanthropy becomes cool. Or Bloomberg wins, public service and philanthropy become cool.

On Congress: Democratic leaders test the waters with the same themes Republicans have over the past four years, but nothing big passes until 2009.

The IRA [individual retirement account] charitable rollover remains on a one-year extension cycle, meaning charities and foundations will be defending themselves before Congress again in 2008 and annually for years to come. Broad-brush trashing of the sector becomes passé, and self-regulation advocates and politicians learn from [Sen. Charles] Grassley [Republican of Iowa] that it’s most productive to do targeted scrutiny (like of televangelists and veterans organizations).

Recession rears up, and the traditional theories of economics reassert themselves (deficit, price of oil, etc.), making it an uncertain year for charities.

Certain innovations continue to gain traction, like metrics, social enterprise, youth giving, and online giving, but a “back to the basics” movement gains strength in philanthropy: Reputation counts, older people control most of the money and know a lot, and personal experience with a grantee is invaluable.

One thing that really worries me is the growth of the nonprofit sector and the proliferation of organizations all trying to solve the same issue. Over the course of a six-month period, I’ll probably meet with 10 or 15 young people who are in college or recently out of college, and many of them say that what they want to do then — or perhaps some day — is start their own nonprofit.

In most cases, there are already groups working on “their” issue, but they’re often not interested in learning about them. And that has big ramifications for the nonprofit sector, in part because we can have a really charismatic, inspiring young social entrepreneur who comes with an idea and there’s almost a blind allegiance that often follows some of them, without any kind of needs assessment or accountability check. It’s the responsibility of everyone in philanthropy to make sure that the group really is building a better widget, and that it’s not just the groups that have the marketing or communications savvy that are getting the dollars.

If the problem is that what already exists isn’t doing a good job, what’s the better answer: to invest capital in ideas and solutions that might be having incremental success — as opposed to immediate, exponential success — or to bring yet another organization into the sector?

For instance, here in Boston, there are 30-some organizations that are providing home health care to seniors. Do we need that many? All these questions were asked a great deal more in the sector, say, 15 years ago, than they are today, and they need to be in the future.

Three issues loom large as we look out onto the philanthropic horizon of 2008: the undercapitalization of nonprofit organizations, the effects of housing foreclosures on urban neighborhoods, and the consequences of climate change for vulnerable communities.

Although the undercapitalization of nonprofits has been a seemingly intractable reality for a very long time, that reality is increasingly untenable in times like the present when nonprofits are the first line of defense against the cruelties and inequities of a deteriorating economy.

Nonprofit organizations, often working against impossible odds, are stretching their already limited resources and personnel to the breaking point just to meet the press of day-to-day demands. At a time they most need to be planning for and managing thoughtful, strategic growth, they are least equipped to do so.

The housing foreclosure crisis is heartbreaking. It is destroying the dreams of millions of American families. It threatens to unravel decades of progress in building healthy, stable urban neighborhoods. The crisis in unnervingly complex, and the responses maddening in their limited effectiveness. The New Year begs for intensified efforts on the part of philanthropy to build new alliances that will attack the causes and effects of the crisis — among the public, private, nonprofit, and philanthropic sectors; between national, regional, and local funders.

The New Year promises intensified national interest in understanding how communities can contribute to the mitigation of climate change and to the adaptation to its long-term effects. It is important that foundations remember that climate change is a social-justice issue as well as an environmental and economic one. Everyone is affected, but it is often the most vulnerable populations who stand to lose the most.

Successful nonprofit players in the new media space will be those who figure out how to interface with the broad platforms like YouTube or Facebook by implementing campaigns that have both personal and organizational resonance. They’re going to have to make hard calls about benefits versus costs and how much buzz you can take to the bank. They’re also going to have to figure out how to attract and retain and develop work forces of digital natives.

Nonprofit leaders can’t afford to be clueless about this new turf, but they can’t really afford to get sucked into the mind-set of “The Web’s the answer.” What’s the question? They have to understand the opportunity without being seduced by it.

So much of what is happening on the Web now is happening because it can, not because it necessarily should. It’s exciting, but it can be distracting. Consider the drive toward nonprofit transparency under the mantra of instilling donor confidence.

Transparency is a virtue, but it isn’t an end in itself, which is how some of its advocates make it sound, as if transparency creates a glow of donor confidence, which automatically spawns dollars. But it’s only an assumption that donors are more driven by access to 990s than by access to vision and passion.

So it comes back to being open enough, and also investing enough, to grasp the potential of Web-enabled social activism, and then judicious enough to craft an approach that is driven by mission, not by buzz.

In 2008, the nation will make important progress on key issues touching philanthropy:

• A quantum leap in community and national service that will come to fruition with the passage of major legislation in Congress and signature by the president before September 11, 2009.
• An organic movement in hundreds of communities in all 50 states that will address head-on the nation’s dropout crisis on the 25th anniversary of the path-breaking report “A Nation at Risk,” which highlighted our educational challenges.
• An awakening by America to the fact that malaria is killing more than one million people on the African continent and that all the tools exist to stop it. Five-year plans to make malaria no more will galvanize the international community.

What will be interesting about these big challenges is that foundations and nonprofits, not government, will lead the way on each of them.

One of the biggest challenges we face right now is climate change and its many devastating effects, particularly on human health. Whatever variable you examine — drinking water, floods, crop yields, nutrition, malaria — the effects of climate change on human health are expected to devastate poor countries and tip countries at the margin into poverty.

With rising seas, salt will become a new reality to deal with in agriculture as sea waters flood agricultural lands, leading to diminished harvests. The climate crisis is predicted to contribute to a doubling of the number of people without adequate food and water, with the highest burden on the most vulnerable amongst us.

Tackling the health effects of climate change will take courageous investors and nonprofits focused on clean energy, desalinization technologies, malaria vaccines, better pesticides, and childhood-vaccination programs.

As foundations and nonprofits pay greater attention to global issues, there might be a new conversation about how U.S.-based foundations and nonprofits ought to balance their giving and activities domestically with their aspirations to work globally.

The reason for a tax subsidy [to encourage giving], ostensibly, has something to do with the citizens of the United States finding a benefit in there being forgone tax revenue. But if the benefit is offered globally, there’s an interesting tension that arises. When charitable organizations and foundations make global gifts, they’re doing it in the interests of those who are most disadvantaged, but, of course, they’re not U.S. citizens, so why should U.S. citizens effectively forgo tax revenue for global giving?

That’s an interesting question that poses a real dilemma, because on the one hand Hurricane Katrina victims might expect some tiny fraction of tax revenue to be directed to their benefit, and the subsidies are stimulating the giving of people globally.

Giving toward the global needy, you might argue, is even more necessary than giving toward the domestic needy, because the global needy typically are even worse off, but nevertheless, the issue of the tax subsidy poses this issue about whether the benefit is toward U.S. citizens or not.

The sector is going to be competing big time for great talent, and there’s a big labor shortage coming in the country, in general, as the baby boomers start to retire.

It’s somewhat unrealistic for nonprofit leaders to think we’re going to have a giant wave of young people coming to work in the sector. Instead we need to look to the older demographic — aging baby boomers — but we need to be prepared to meet their needs and think about different kinds of flexibility in the sector, in terms of on-site versus off-site working, human-resource policies, episodic employees, job sharing, and so on. The private sector is going to do this, and that’s who we’re going to be competing with. There’s a lot of interest among retiring baby boomers in working in the social-purpose sector, but it’s hard for them to break in, there’s rigor mortis in human-resource policies, and we have to free those policies up, or they’re going to go work for Home Depot.

This is not a list of what will happen. It is a list of what could happen, and just might, with a little bit of luck.

1. The chief executive of a large nonprofit will launch a blog that quickly becomes the most widely read philanthropy blog. Fund raising at the nonprofit will exceed expectations on the back of a huge number of small, online donations.

2. A foundation will decide to start publishing online the rationale for why it makes each of its grants. Its grantees will see increased donations from individuals who tell them they first heard of their organization on the foundation’s Web site.

3. Network for Good will partner with a national bank to enable the bank’s customers to make donations from their online bill-pay accounts.

4. Google will bring its mission to “organize the world’s information” to the nonprofit sector. Working in conjunction with Google.org, Google will engineer the acquisition of a recognizable nonprofit data provider. The “buyout” target will be a nonprofit.

5. A billionaire philanthropist with non-U.S. citizenship will establish a U.S.-based private foundation. Using the foundation to establish a global philanthropy brand, the donor will join Bill Gates and Bono on the celebrity-philanthropist list.

6. Two large private foundations will merge. Citing the advantage of combining the expertise of their program staff and lowering operating expenses, the merger will create the second-largest private foundation in the country.

7. A United Way-created outcome-measurement template will be adopted by the sector as the standard format for nonprofit organizations to report on their effectiveness. The narrative-driven form will soon be available for download from the home pages of many nonprofits.

8. A no-minimum, national donor-advised fund will be launched in partnership with a bank.

9. After a major retailer’s cause-related-marketing promotion receives bad press for misleading advertising, a significant backlash against “embedded giving” will occur among young consumers.

10. After Facebook’s Causes application is believed to have played a significant role in the increased voter turnout for the 2008 presidential election among 18- to 24-year-olds, charities will recognize the potential of social-media tools and finally get serious about integrated online strategies.

In the lead-up to this election, the country will need to join together in a grass-roots movement to make informed election and policy decisions. Nonprofits will need the financial support of individuals to spearhead this movement. The American public and nonprofits need to hold whoever does become president accountable for declaring and implementing a new war on poverty.

Nonprofit organizations need to spend as much time and energy lobbying public officials on social issues as they do fund raising to keep their organizations afloat.

With every passing year, the founding generation of artists and managers who helped create the nonprofit performing-arts sector in the 60s and 70s is retiring and moving on. As more and more young people come into those leadership roles, it’s a great invitation for some radical and important change.

In conversations we did around the country with young people, there was no shortage of interest when it came to working for an arts group focused on live performance. However, participants said they were disappointed that so many arts groups simply wanted them to be custodians, and not innovators. They said, “If basically you want us to caretake what you have already done, then we are not interested.”

The issue is less about the number of potential successors than it is about raising real questions about organizational capacity for change and the degree to which performing-arts organizations want to allow this new energy in.

If organizations are willing to take this journey, they will not find a shortage of people stepping up and saying, “Let me take the reins.” But if groups are saying, “We need you to preserve what we have built at this point in time,” they are going to have a harder search for a leader.

Hospitals need to make a significant effort to communicate the importance of their services and the growing need for philanthropic support. The average hospital receives less than 1 percent of its total operating revenue from philanthropic gifts. By comparison, the average college or university receives seven times that amount.

No area of fund-raising practice is more dependent on the public’s perception of an industry than health care. To be successful in the current environment, community hospitals must consider fund raising as a core business strategy. While in the past, philanthropy was considered a minor source for nonprofit community hospitals, it is now gaining traction as a viable and alternative source of much-needed capital.

Hospital leaders recognize that every dollar raised through philanthropy goes directly to their most urgent needs, making those philanthropic dollars well worth chasing. Philanthropy appears to be rising on the executive agenda at hospitals; however, it still must compete for dollars and attention with other hospital priorities, many of which appear more pressing and patient-focused at the moment.

There is the potential for bumping up hospital philanthropic donations twelvefold if hospital leaders could convince the community that since their hospital is saving lives every day, it deserves at least as much support as their alma mater.

One thing I’ve seen more than any other time is a desire for givers, particularly some of our more-substantial donors, to get their hands dirty before they get more involved. Folks want to really get involved, understand what you’re doing, and be thoughtful about it.

We had an individual who we talked to for 18 months, who kept learning and learning about the organization, and now has gotten heavily involved. That relationship was all about him really trying to understand what we were doing and why we were doing it. You read a lot about the trend toward deeper involvement, and that’s spot on.

Maybe that means that donors will give in a more focused way and won’t spread their support around among many organizations. That might be something we’ll see. We may be seeing folks who get involved with us choose to get more involved with us and less with other organizations. We’ll also probably see folks who used to be involved with us and now aren’t at all, and they’ve probably found another nonprofit that more accurately matched with what they wanted to support and how they wanted to support it.

My plan of action for the coming year is to reach out to children. They are the hidden philanthropists of the future. Many of us underestimate their influence on their parents and aunts and uncles, and we don’t want to wait to create with children a tradition of philanthropy of their own. That’s why we are relaunching a program called Mitzvah of Love, which encourages kids to plan an event that raises money for kids.

It’s not only a fund-raising endeavor, though, it’s an educational program. We are instilling in young people from an early age the concept that we all bear responsibility for each other. And the kids learn how to plan something, work from an idea, see it through, and help other people along the way.

There are so many schools now that have community-service requirements, and in the Jewish world there is the concept of doing mitzvahs, good deeds, and kids have to do some kind of community project for their bar or bat mitzvahs.

The other generations we have covered. We know what we can expect from them, more or less. Young people are untapped. We are not thinking about this in an exploitative way. The kids are raising money, and they are getting a great experience in return.

People who panic when they look at the forecast for 2008 — and the economy doesn’t look like it will be too strong — are the people who are dependent on a lot of large donors. Maybe the end run around that is not to ignore these big donors, but to look at the age-old idea that Unicef had when they sent kids out with cans. You are reaching out to a broader base with your message.

The year 2008 presents myriad options for philanthropy, charities, and foundations to focus on, including the presidential elections, climate change, AIDS in Africa, etc.

However, focus on a single issue is a recipe for sliding backward. Each time a step is taken forward at the local level, the negative political environment usually drags us at least two steps back, erasing the gains.

For example, support for many nongovernmental organizations in Mexico to work with small farmers to develop sustainable agriculture practices has seen modest yield increases wiped out by post-Nafta [North American Free Trade Agreement] trade policies.

The current focus on climate change resulting in financing for solutions like carbon offsetting, carbon trading for forests, and agrofuels will hamper real solutions to the climate crisis — solutions avoided by our political leaders under corporate pressure to maintain the status quo. These real solutions, based on changing the political environment, would include reduced consumption, sustainable farming, recognition of food and energy sovereignty for all, and investing in safe, clean and community-led renewable energy like solar, wind, and biomass.

The progressive foundations seeking to effect real change need to invest in change along the entire continuum as the right has very successfully done: financing policy tanks where the intellectual framework for social transformation and specific policy proposals are developed, and implementation groups that are using effective communications strategy to bring these proposals into the political marketplace and eventually to consumers.

Once again, the presidential election will create a whole new group of online donors and online engaged people. Once again, we’ll turn a corner in the use of technology, and the presidential elections will ferret out for us the couple of things that will last for a few years. They’ll try lots of things, and some of those things will work and will become part of all of our library of strategies and tactics.

For advocacy and political-oriented organizations, it does pull some money from those organizations as everybody becomes focused on presidential elections. That sort of thing, I assume, has been going on forever. It’s especially the case, though, for online fund raising just because it is so easy to do for the presidential elections. People are still more likely to give their e-mail address to a presidential campaign than to a nonprofit.

I’ve been really disappointed at how much fund raising happened early in the presidential election. It’s embarrassing that so much money is put into these campaigns when there’s so much pain and suffering all around the world. Spending huge volumes of money on these campaigns two years before the election is ridiculous.

Compiled by Debra E. Blum, Brennen Jensen, Nicole Lewis, Marty Michaels, Peter Panepento, Caroline Preston, Nicole Wallace, and Ian Wilhelm.