Like the private sector, the nonprofit community is facing significant challenges over the next 5 years that are certain to reshape how organizations are set up and operate. I thought it may be useful to explore some of these trends and thinking through the potential implications. My purpose is to provide some ideas and concepts in the hopes they will help some nonprofits build and or validate that their strategic plans and properly account for these and other key strategic issues.
I have been helping nonprofits think through trends and future impacts for many years and have seen many trends come and go. Some of these nonprofits navigated the changing environment well, while others refused to transform to account for changing trends. Over the last few years I have noticed many new trends that are reshaping the nonprofit universe. So, with this blog I wanted to share five issues that seem to be common for each regardless of their mission or community differences:
- Changing demographics: Over the past five years there have been significant changes in demographics that will change who and how we serve communities in the future. With the growth of the middle classes in India, China and Central America we are seeing a significant increase in immigration from these areas with both skilled and non-skilled workers coming to the United States. Additionally, the increase in the Hispanic population has exploded and is projected to continue to increase in a significant way. This will affect the labor supply, but also affect the make-up of the communities that we serve. Nonprofits need to consider how these demographic changes will impact their communities and determine if there is a need to change either the mission or the way in which they engage the community. I had a recent nonprofit which supports adolescents have to reimagine how they will serve both rural and urban communities in terms of what challenges adolescents are facing and how to reach a much more diverse population with different cultures, and who participate in different activities or ways of connecting. This is just one example, but it may be that all nonprofits may have to go through a similar process to rethink the future effectiveness of their programming.
- Shrinking labor supply: This is a phenomenon that has actually been going on for quite some time as the baby boom population has been leaving the workforce in large numbers and the subsequent generations (Gen-X, Millennials, Centennials) are much smaller and are unable to fill the void that is being left behind. This of course could impact nonprofits who provide job services or other related programming to their communities (maybe even provide some earned revenue opportunities), but there is another more significant potential impact that could potentially rock the nonprofit sector. As skilled workers become scarcer in the private sector, the nonprofit sector could lose people if for no other reason than supply and demand! It may become so attractive as for traditional nonprofit focused workers to move to the private sector as companies increase pay, benefits, incentives, etc. to attract available workers. The implications for nonprofits may mean they need to compete better with pay and benefits and/or look for ways to reduce their labor needs either through improved efficiency or new technologies (Discussed further in #5 below).
- Changing funding supply: The aging baby-boom population will almost certainly affect where future revenues/donations will come from in the future. Over the past 50 years private donations have been a major part of the giving in the nonprofit sector and the baby-boom population has been widely called the “check-book” generation giving financial resources to all sorts of nonprofits. As this generation retires and continues to pass their wealth on to the next generation, there will most certainly be an impact on nonprofits who have relied on them for a major part of their support. The next generations for the most part like to give in different ways. They prefer to give their time and they prefer to give to causes with a personal connection and that have proven impact. The implications for nonprofits are that they must think through where their revenues/support of the future will come from and start building approaches/processes/capabilities appropriately. Whether it be corporate giving, earned revenue opportunities or potentially offering more outcome-based giving (scholarship programs, sponsorships, memberships, etc.), nonprofits will have to reimagine how they will ensure the long-term sustainability of their organizations.
- Change in Funder Requirements: Over the years the many corporate and private funders have been happy to give to nonprofits because of their mission and their focus on specific community needs. This has been changing over the last five years especially as funders have asked nonprofits to prove the impact that they are making on the community. They not only want to know how many people that are reached (leading indicators) but they also want to know the impact on the specific community need (lagging or outcome indicators). They also want nonprofits to participate with partners or other nonprofits in making a “collective impact.” So many nonprofits are out there doing the same things and coming to the same funders for support, that funders have started to ask that they get together and create common approaches/strategies to impact the communities’ needs to which they are focused. Getting funding for nonprofits is increasingly becoming more “competitive” and those nonprofits that have strong partnerships and are able to prove their impact will be the ones that are most supported in the future.
- Change in organizational capacity: Typically, when we talk about organizational capacity, we are referring to the workforce of the future and the information technology footprint within the nonprofit. As mentioned earlier, the shrinking labor supply could reduce the availability of full- time available staff and there must be a strategy in place to ensure that the work gets done in the future. This will mean that nonprofits must adopt some of the practices being employed in the private sector, from developing creative work environments to using new technologies such as Bots, AI, machine learning, etc. to reduce/eliminate manual activities so available staff can focus on more mission-centered activities. These technologies must also be adopted to better connect/interact with growing more diverse communities.
There are so many more trends that are impacting nonprofits, but these are some key areas that seem to be common for all. And the implications mentioned above are certainly not all inclusive as to how nonprofits could be affected. For instance, the changing demographics, technologies, labor, etc. will all affect how the Board of Directors is made up, developed and operated in the future to best support the changing needs of a nonprofit.
The key for nonprofits is to identify important trends and assumptions about the future and then spend some time thinking about how they must transform themselves accordingly. Those that are able to effectively envision a most probable future will be those that will be best able to create a path to long term sustainability.
