Nonprofits 2013: The First State of the Sector

YAegGCLhvo0aJugTGHimYcWBFvZBeakoqI8_Avwh8p8-1 A Post from Jim Toscano

As the end of year approaches and before our annual predictions for next year, it might be useful to summarize the current status of the nonprofit sector.

Where are we, the near-million current nonprofits in the nation? Clearly all over the lot, but are there reportable milestones and trends that may characterize nonprofits? Twelve complex factors comprise major parameters that are prominent in 2013, part of the constant change that we all experience.

Over the years, our nonprofit sector has attributed our strong societal standing to American exceptionalism, while we have also heard from various critics that nonprofits are under-managed, under-financed and under-valued by the communities in which we operate.

The under-managed claim usually is tied to criticisms that we need to be more business-like, that we are not professional in our systems, etc. The under-financed comes from the sector itself and has no real solution other than as a claim on the larger society. The final one comes from insiders and outside friends of the sector, often with a cry for more recognition, increased financial support and increased use of marketing and communications.

These are not new and will continue as a backdrop to more specific and dominant characteristics and emerging trends (See my post Threats and Distractions in Pollen). Overall, the sector continues to be of enormous societal benefit, indispensable in an ordered society. What then are we also  experiencing and to what endpoints are we moving as a sector?

Twelve Major Characteristics of 2013

1.  An emphasis on measurement and metrics. Outcomes, results, and impact, as measured empirically, dominate the current scene. Funders are asking for metrics beyond anecdotes. We are wondering who will pay and everyone is beginning to realize that the only useful measurements are comparative.

2.  Increased efficiency and effectiveness in program output, results and impact. Related to 1 above, given greater talent in the sector, professionalism and better training in evaluation and metrics, nonprofits are experiencing increased productivity and constituent satisfaction. Logic models now incorporate findings in empirical research, neurobiology and other scientific endeavors. Continuous quality improvement is more that a cliché.

3.  Increased diversity in board, staff and constituency. As our nation grows in diversity, nonprofits are becoming more diverse, first in constituency, then staffing, now boards. Cultural competency is a major need, with both formal and informal training offered to larger groups of employees. New focus on immigrant groups adds another significant dimension to this work.

4.  Increasing digital emphasis.   Understanding ways to communicate with constituency is leading more and more to digital communications.  In 2015, half the workforce will be Millenials, so nonprofits now understand the need to add digital, in all of its manifestations, to its communications repertoire.

5.  Increased employee engagement. Nonprofits are learning that a majority of employees are not fully engaged in their work, leading to low productivity, morale and efficiency. More and more programs to re-engage workers are being given priority throughout the sectors, with annual surveys of employees to determine progress.

6.  Increased staff turnover and competition for qualified candidates. Competition for highly talented workers has hit the highest levels since 2008. Compensation is also rising and equals some comparable levels in the two other sectors of the economy. Certain troubled areas, e,g, development, are showing high turnover for dysfunctional reasons.

7.  Trouble in development. Fewer major gifts, decreased donor retention, focus giving, high turnover of donors, low donor retention are all influencing the dysfunction mentioned in 6. above. Combined with unclear understanding by Boards and Executive Directors of their development responsibilities, this is one of the most serious problems confronting the sector.

8.  Greater reliance on volunteers. With boomers retiring, young college graduates not finding work and interning instead and the general increase in skill needs, nonprofits are engaging additional volunteers to meet their labor needs. This will continue to grow.

9.  Greater use of technology. As demonstrated by MAP for Nonprofits, more and more reliance on technology is helping nonprofits improve outcomes and better serve their constituencies. The increased use of technology will inevitably result in our ability to use and analyze data for program assessment and improvement. The era of Big Data is upon us.

10.   Increased pressure from taxing authorities.  Nonprofit service payment to local and county government, decreases in donor tax deductibility and increased taxes on high income individuals and businesses are affecting us all. This will continue to exert pressure on nonprofits.

11.  Blurring of lines between for profit and nonprofit. Ranging from greater focus on cause marketing to societal impact investing to new social impact funds granting, loaning and investing, new patterns are emerging, especially in areas of low hanging fruit. When a major aeronautical corporation wins a contract to deliver social services, as happened this year, it is a new day.

12.  Increased scrutiny. Donors, other funders, media, government at all levels, even the IRS, have increased scrutiny of nonprofit activities and operations over the year. This will also continue and intensify, as seen in recent new proposals in Congress.

See  also July Alnes’ perceptive and discerning parallel piece.

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