2020 1/2  In the Time of the Virus, Ten Trends for Significant Survival

 2020 1/2 In the Time of the Virus, Ten Trends for Significant Survival

Essay By Jim Toscano with additions by Dania Miwa.

As we typically do, we released our 2020 predictions in December of last year.  Then, in March all bets were suddenly off, as the infection and death rates started climbing and we began to realize the implications of the Covid-19 pandemic for nonprofits. This is our attempt to re-forecast based on what we are telling clients, experiencing first hand and as we are seeing some national trends emerge.

Leap Year 2020 did occur in February as did so many more events. We celebrated many of the anniversaries:100 years of women having the right to vote, 75 years since the end of World War II, 50 years of Earth Day although none paralleled the day to day closures, working at home, layoffs, postponements, social distancing, facial masks, stock markets tanking and rebounding, toilet paper shortages, virtual this and virtual that and other “New Normal” aspects of the pandemic.

The ever-changing New Normal will not be short-term but will be with us well after the vaccines and drugs controlling and perhaps eliminating the virus are developed and widely used.

What does this mean for the nonprofit sector? At one level, with health, educational, environmental, arts, social and economic disruptions, our work is needed even more by society. Yet, many of us are in the same boat of closures and layoffs as other community organizations, while over half of nonprofits, especially those in healthcare and education, continue to operate at partial or full staffing levels, many in the red to provide essential services.  What trends do we see emerging to ensure a healthy and vigorous sector long-term?

The Current Reality

Winners, losers and in-betweens. Most of the  “big” nonprofits will ride this out and survive. It will be 60-40 in the middle ranks. The small agencies will struggle. Twenty percent of nonprofits worldwide  have already furloughed or laid off all staff, 50% are serving those affected by the virus in some fashion and the rest are holding on to whatever they can.  Almost three quarters of nonprofits worldwide report donations are down by an average of 20%. In the US, the percent of those households making a charitable gift has sunk to record lows (71%), with the percentage drop paralleling annual income, with families making $40,000 reporting the largest drop. If and when these percentages rise is anybody’s guess. After the decline in 2009 to 79%, it took a few years for restoration and serious growth. It may take longer this time. Current estimates predict that the economy will not fully recover until first quarter 2022.

Stopgap Measures The actions of government, especially the federal government, the foundation sector, select for-profits and a few affluent individuals have stayed off worse disruptions in the sector short-term. The Disaster Loans and the PPP payments, along with the increase in unemployment payments have eased the situation for some nonprofits and some of their employees. Private response has been lifesaving in many instances. The current political standoff will resolve into an additional, but probably final round of federal aid later in the summer.

2020 and Beyond: Longer Term

  1. The number of nonprofit organizations will decrease. One third of all existing nonprofits had little reserves on hand, often less than a month or two, and once closed, it will be difficult or impossible for some to reopen. Of those nonprofits that are totally closed, 10% will not reopen in any significant way. This will constitute a major loss in creativity, initiative and service to the community. Furthermore, efforts at rationalization, efficiency, impact and refocus of function by funders and other societal and government groups will seek to reduce the number of nonprofits even more, perhaps by another 10%.
  2. Mergers Will Become a More Important Method to Survive. Given the current reliance for significant portions of their operating budgets on government contracts funded largely by federal and state grants, now burdened by debt and deficits, the pullback by these government units in such funding will result in the necessity for agencies to seek partnerships, acquisitions and mergers to survive. The use of for-profit subsidiaries, impact investments and conversions to B Corps will increase.
  3. Societal Restoration: A Marshall Plan for Nonprofits. The nonprofit economy will need massive injections of private and public funds for the mere survival of essential services. The SBA disaster loans, the PPP, the joint Foundation and private business Covid-19 funds are just the start of what will be needed. Far-sighted politicians, business leaders, affluent individuals and foundation heads will attempt to build this restoration fund. It may not happen.
  4. The Necessity to Renew, Restore and Reimagine Our Work. Those nonprofits resolving to emerge stronger will understand that the new normal is very different from before the lockdown of society. Only some elements of the previous methods of operation will work and may be restored. The rest of our work will involve realization that changes will be necessary for significant service to our constituencies.
  5. Digital interaction and direct delivery of goods and services will be much more important. We will hear more from our constituents, and a significant amount of this traffic will be digital. Expectations for positive response will also grow as well as the need for rapidity in that response. This will require nonprofits to increase their investment, training and personnel in digital service and delivery.
  6. Increased interaction will require better understanding of constituencies. Such interactions will bring large amounts of information about constituents to our organizations requiring additional capacity to understand and better serve the needs and values of these individuals and groups. Segmentation will play a major role in the ability to improve this service. Many organizations already have  some or most the information to be able to appropriately segment, now it’s a matter of putting it in to practice.
  7. Analytics and AI will Play a More Prominent Role. Beyond segmentation, analytics and the use of AI to combine disparate elements of this data will enable nonprofits to increase their impact in, perhaps, not only helping deal with problems but actually solving them. Good data will continue to be critical, and in fact it is our recommendation to invest time to clean lists, survey donors and invest in good data practices.
  8. Continuous Upskilling of Personnel will be a Necessity. The above complexity will demand continuous training of our staffs, reskilling and upskilling them to enable the services that will be required for desired results and impact. Credentials, skills, and learning will be highly valued.
  9. Lifetime Value of Donors will Guide Development. The increasing levels of information, digitization of this information, analytics, use of AI and segmentation will result in better understanding and prediction of lifetime value of donors. This will be the major focus of increased funding for the development department, along with the building of new constituencies using the same techniques. Again, we strongly suggest putting in place a solid donor stewardship program and really investing staff and volunteer time to doing it well while meeting the needs of the individual organizations. There are many best practices, but no “one size fits all”.
  10. Reorganization will be From the Bottom Up. Combining and crossing skills and expertise will result in what are called “agile tribes”, those groups of the varied talents needed to produce the high impact areas that attract additional resources and lead to growth and stability. Informal leaders will often replace chain of command in this world of digital communication and virtual services. Organizations will flatten out and aspire to have as few levels of organization as possible. Results, impact will rule.

What did we miss? What are you seeing? What trend do you want us to go deeper in to?

Leave a Reply

Your email address will not be published. Required fields are marked *