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What Does 2011 Hold for Nonprofits?

By Susan Carey Dempsey on January 19, 2011One Comment

The business of making predictions is always chancy, and many of us are reeling from the news that the daily horoscopes we’ve lived by – admit it – are based on zodiac signs that were not what we’d been led to believe. Stunned to learn that I am actually an Ophiuchus, the new sign associated with wisdom and knowledge, I think I would do well to turn to some expert sources for a serious look at what the year 2011 will hold for the nonprofit sector. It will primarily, but not exclusively, be a function of the battered, slowly recovering economy. It will also reflect some of the trends we here at onPhilanthropy have seen unfolding among key players: philanthropists – more and more hands-on; nonprofit executives — increasingly integrating accountability and measurement into their programs; individual citizens – employing the tools of social media to enhance their own efforts and obtain a more personal connection to the causes they care about. Below, we channel some of the leading analysts who’ve shared with our readers their forecasts for the year ahead in philanthropy:

Susan U. Raymond, Ph.D. Executive Vice President, Changing Our World, Inc.; Chief Analyst, onPhilanthropy:

Dr. Susan Raymond

Dr. Susan Raymond's 2011 predictions

The “end of the recession” threatens to be a chimera for the nonprofit sector.

With 8 million jobs lost, a current track record of 100,000 created per month at best, and three graduating classes of college seniors still under-employed, we are looking at 2013-2014 before employment rates drop below 8%.  Unemployment is a major correlate to individual giving.  So, whatever plans nonprofits have put in place to weather the last three years should be re-examined and reinforced. 

Of perhaps greater importance, if that is possible, the period 2011-2012 will see even more serious fiscal crisis at the state level.  Over the last three decades, nonprofits have become more dependent on public funding for service provision, much of that from states.  State budget crises are going to intensify, and that will magnify at the level of nonprofits.  A second consequence will increase that pressure.  Looking for resources wherever they can be found, states will also look in the nonprofit sock drawer.  They will be coming after nonprofit status itself.  The entire question of “nonprofitability” will be on the table, and the tax status of nonprofit revenues is likely to become an issue in many state houses. 

All of these trends will (and should) lead nonprofits to carefully examine revenue strategy and look for ways to diversify programs, services, and revenue streams.  If we are not already, we soon will be in a period of mergers in the sector.  Nearly every nonprofit should be asking critical questions about its viability, and about the merits of program collaboration (at least) and merger (perhaps) with others in the sector.

For philanthropies, rebuilding assets will proceed apace with markets, with periodic shivers as the economy bounces from cool to warm to cold and back again.  Philanthropies will become more committed to experimentation with improved ways to use their funding to address societal priorities.  There will be greater focus on program related investments, social enterprise, entrepreneurship, and other areas that forcefully drive toward the combination of solutions and sustainability.  The tendency of the past decade – funding for solutions, not for problems – will intensify as the economic weight of a slow recovery buckles the service knees of the sector.

 Good will come from all of this because all of that pressure will place a premium on innovation.  Better ideas, better ways of organizing, better ways of achieving efficiency, better ways of collaborating, leaner operations, re-engineered programs, a new generation of leaders – all will emerge from the crucible of crisis and change.  These are exciting times.  They are times of extraordinary opportunity for change and evolution.  The future will belong to those who move forward with aggressive strategies for innovation.  In 2020, the nonprofit sector will look nothing like it did in 2005.  It will be leaner, stronger, more muscled, and prepared to be more nimble in, and hence more meaningful in, a changed world.

Matthew Bishop, author Philanthrocapitalism:

The good news is that private giving by the wealthy is going to continue to surge, helped by billionaire arm-twisting under the auspices of the Giving Pledge. One tycoon who has signed the pledge that we expect to get serious about fulfilling it this year is David Rubenstein of the private-equity firm Carlyle. At least as significant will be a new cohort of philanthrocapitalists in India – a country where wealth creation has raced ahead of government’s ability to deliver basic services like health and education to those at the bottom of the pyramid. Quality of giving will become just important an issue as quantity for the Pledgers. So far most of the focus has been on how much is given; now there will be more and more questions about how the new super-donors will put their money to work in a thoughtful, impactful way. About time too.

In the US the ‘hot topic’ for philanthropy is going to be school reform and globally it will be maternal and child health. Even the act of picking hot topics has critics and supporters. ”Global solutions don’t lend themselves to “annual hot lists”, protests Lucy Bernholz, whereas Steve Goldberg thinks that philanthrocapitalism should be ready to take on even the biggest challenges, given the twin crises of resources and effectiveness faced by government. Anyway. Why these two ‘hot topics’ for 2011? The debate about US school reform, and philanthropy’s role in that reform, has been hotting up in 2010 and, frankly, isn’t going to go away. America’s failing schools are, for many philanthrocapitalists, the big strategic threat to the nation’s future so they aren’t going to give up on trying to improve them, even as the protests of their critics grow more shrill. Globally, malaria was the top cause of 2010 and will remain a high priority for Gates and others in 2011. Critics of the Gates Foundation approach say that it is too reliant on technological solutions, which is a criticism of its initial approach to communicable diseases that the foundation broadly accepts, as we discuss in the book. Yet Gates has started to swim deeper into the complexities of health system reform in developing countries as part of its expanded work on maternal and child health. Watch this space.

Patrick M. Rooney, Ph.D. Executive Director
The Center on Philanthropy at Indiana University:

 1)      Changes in wealthy donors’ giving

One major trend is that wealthy donors are changing their giving behaviors in response to economic conditions, and we expect that to continue. In a 2010 study of high net worth philanthropy the Center on Philanthropy at Indiana University conducted for Bank of America Merrill Lynch, we found that the economy is prompting a shift in donors’ decision making and behavior. Wealthy donors also are seeking information about nonprofits and the causes they support so they can be more strategic in their giving. The expectation that nonprofits clearly demonstrate results is increasing, further intensifying the trend toward demand for impact that we’ve seen in recent years. The top motivations cited were: being moved by how their gift can make a difference (72 percent), feeling financially secure (71 percent), and giving to an organization that will use their donation efficiently (71 percent), indicating that maximizing the impact of their giving is a higher priority than ever for these donors now.

2)      Some positive signs, with a strong dose of reality 

Nonprofits have seen some signs of a turnaround in giving. However, the improvements may not be adequate given that 68 percent of nonprofits still face higher demand for services. Charities reported a slight turnaround in giving through the first nine months of 2010 in a survey by the Nonprofit Research Collaborative, which includes the Center on Philanthropy at Indiana University and five other national nonprofit service organizations. About 36 percent of charities saw donations increase during that period, versus just 23 percent in the same period in 2009, while 37 percent reported a decrease in giving, a significant change from the 51 percent in 2009. Most charities indicated cautious optimism about 2011: 47 percent anticipated budget increases and 33 percent planned to stay at their current expenditure level. Still, the main reasons cited for declines in giving were fewer individual donations and smaller amounts. Individual giving is contingent on factors such as employment, wealth and income, which will in turn depend on the strength of the economic recovery. Evidence from Giving USA Foundation reports indicates that, at least historically, individual giving generally has taken three to four years to return to pre-recession levels once a recession ends. 

 Philip Coltoff, former Executive Director and CEO of The Children’s Aid Society and author of “At the Crossroads: Not-for-Profit Leadership Strategies for Executives and Boards” (Wiley): 

In my view, the major issues facing the nonprofit sector can be described as follows:

1.) Our capacity to effectively be part of the social safety net needed to serve our most vulnerable populations. While government provides the major economic thrust (i.e. healthcare, social security, food stamps, housing subsidy), the not-for-profits must provide the “wrap-around” services that are vitally important. These services include employment training, especially for disadvantaged youth, crisis management services for those who have been marginalized and in despair, and mental health services for parents and children, especially those victimized by the economic recession and exposed to abuse, neglect, or domestic violence. Many agencies are not now effectively geared up to address these major issues. With redirection,
training and capacity building, nonprofits can become part of our nation’s essential social safety net.

2.) Our sector must find better ways to reach the public and capture a larger share of our nation’s philanthropic dollars. While over $300 billion is contributed annually by Americans for charitable purposes, the social service community receives the smallest share of the pie. Universities, other educational institutions, religious organizations, and large cultural programs claim the lion’s share. We must do better to market and brand what we do and the positive results that accrue to the public.

3.) Areas of greatest need which must be given concentrated attention include minority unemployment (especially African-American youth, where unemployment figures are upwards of 38%), newly arrived families including those that are
undocumented, and the reemergence of youth gangs in our central cities. These are historical obligations that have been assumed by nonprofits and deserve greater attention today.

 Conclusion – from Susan Carey Dempsey, Editor-in-Chief, onPhilanthropy:

I, too,  have great concerns about the increasing demand for services from already hard-pressed social service NGOs, as the numbers of unemployed, working poor and homeless grow. State government contracts will shrink at the same time, putting further pressure on nonprofits who have been coping with long delays for reimbursements as well as outright cuts. This is the outlook facing nonprofits amid an overall decline in giving, where long-awaited improvement in the economy is only beginning to offer a glimmer of hope.

If hope is to be kindled, it will probably emerge earliest among philanthropists from the financial sector, the first to enjoy a recovery, and executive directors and development officers are setting their sights on donors of affluence in those corners.

Continuing that thought, one area I think we may look to with interest is a “changing of the guard.” Numerous nonprofits I have counseled in the last couple of years have had to face the reality that many of their longstanding board members began their tenure with the explicit understanding that they need neither give nor raise money. In the fiscal straits of the past few years, some attrition has taken place, as board members were asked to help fill the gap, and in many cases took this as their cue to bow out if they could not contribute, under the now widely accepted practice of “give, get or get off.”

So a number of nonprofits have activated or re-activated their nominating committees, and are recruiting young professionals who may have bright futures and growing incomes. This is also an opportunity to add to the leadership of nonprofits energetic individuals from diverse backgrounds, who will bring the perspectives of multiple cultural traditions to enrich and enliven the dialogue in the boardroom. It’s a change that has been called for in the nonprofit sector for far too long without meaningful results, but I do believe, and certainly hope, that we will see signs this year of very positive change in the governance of our nation’s nonprofits.

Being a newly minted Ophiuchus, I’ll continue to seek out wisdom and knowledge to ensure that onPhilanthropy will be a helpful resource for our readers. Don’t hesitate to share your insights with your peers: comment on our articles or drop me a line with ideas and questions. Happy New Year!

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One Comment »

  • I have been hearing from my larger corporate clients that they want a more focused ‘local’ appeal to what I call the “new local” community. Local was somewhat ambiguous in the past in my mind anyway. Did it mean anywhere the sponsoring corporation does business or everywhere they do business? The answer now is clear; it means “our backyard”. I think we will see facilitators making it possible for Lager Corporation to partner with smaller nonprofits making greater impact on very local causes. What is also emerging is a desire to have the employees on board with the cause and see volunteers from the corporation step up. Some companies give a certain amount of paid time to volunteering and I think we will see lot’s more of this ‘civic marketing’ taking place in 2011.

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