Philanthropic trends for 2022 that nonprofits should know

Last year dropped one bombshell after another, including multiple COVID-19 variants and record deaths, runaway inflation that reached a 39-year high, and record-setting-yet-volatile stock market performance.

Now, let’s look forward to 2022. Michael and I chat about what the new year might bring in this Q&A.

Q:  Will 2022 be another year of uncertainty for nonprofits?

A:  Yes. 2021 was a year of surprises. For example, just when we thought we were emerging from the COVID-19 pandemic, we were hit with the Omicron variant. Unfortunately, it looks like 2022 will be another year of instability.

While successful nonprofits will carefully map out a plan for the year, they will remain flexible and regularly refine that plan as circumstances change, which they will. Change is pretty much the only guarantee we have for 2022.

Q:  What economic trends will affect philanthropy in 2022?
 
A:  In 2021, we heard that there was no inflation, then that inflation was transitory, then that inflation has reached a 39-year high. As the year ended, we heard from some economists that inflation might be around through 2023. Former U.S. Treasury Secretary Larry Summers has even expressed concern that the economy could plunge into a recession resulting from Federal Reserve efforts to tame inflation.

While wages have grown, they have not kept pace with inflation. That will likely continue into 2022 and means that purchasing power is declining. This could have a profound effect on charitable giving. Historically, individuals contribute approximately two percent of personal income. However, if individuals see they have less disposable income, some will likely donate less. This will likely be less of an issue for wealthy individuals, since they find themselves better positioned to cope with inflationary challenges.

Fortunately, philanthropy usually increases year over year. However, it does not always keep pace with inflation. As always, individual disposable income and Gross Domestic Product correlate with philanthropy. Regarding both, 2022 promises to be an uncertain year.

To mitigate risk, nonprofit organizations need to maintain and build strong relationships, and continue to ask for the support they need. Those who seek support with an inspiring case will do the best in the new year even if their bottom line falls short of ideal.

Q:  What other economic issues will likely affect philanthropy?

A:  The stock and real estate markets have been robust, even if volatile. Unfortunately, we do not know how long this will continue. As long as both remain strong, there is a great opportunity to acquire gifts of appreciated stock and real estate. In a volatile stock market, individual donors might be particularly anxious to gift appreciated stocks and reset their cost basis while easing their tax burden.

Q:  How will the ongoing pandemic affect the way organizations work?

A:  The pandemic will definitely affect nonprofit operations in at least two ways: 1) how they deliver services, and 2) how they raise money. For example, when the Carnegie Museums of Pittsburgh were shut down due to COVID-19, they created a variety of virtual experiences. When the Museums were able to reopen, they continued to offer virtual programs as well, reports "The Pittsburgh Post-Gazette."

Just as nonprofits have entered a dual-mode of operation with virtual and in-person programming, fundraising will also remain in hybrid mode in 2022. For example, Amy Rayman, Development Director at Ronald McDonald House, told the Post-Gazette, “Fortunately, the charity was able to host its annual golf outing as it took place outside.” However, the organization  transitioned its Red Shoe Ball, traditionally held indoors, to a virtual event.  

Many nonprofits continue to see their internal operations affected by the pandemic. For example, The Associated Services for the Blind offers programs exclusively in a virtual setting as we enter 2022. Furthermore, their staff continues to work remotely. Nonprofits are also using Zoom to hold board meetings. Moving forward, we’re likely to find that nonprofits maintain internal operations by working in a hybrid or flexible environment.

To overcome the risk of virtual fatigue, organizations will need to think creatively about their programs, events, fundraising, and operations. The key will continue to be finding ways to build connections with people. Virtual will not permanently replace in-person events, programming, and fundraising. However, the hybrid environment is here to stay.

On the upside, the hybrid environment may allow nonprofit organizations to reach new audiences, both for service and fundraising. For example, the Holocaust Awareness Museum and Education Center is a very small nonprofit in Philadelphia. Among other things, it offers school children an opportunity to interact with Holocaust survivors. Because of the pandemic, HAMEC shifted its in-person programs to online only. Now, rather than just providing interactions locally, the organization reaches school children around the world. They also offer virtual tours of the museum’s collection.

Fortunately, where COVID-19 is concerned, there is a silver lining. The Omicron variant has followed the typical evolutionary pattern of viruses. They tend to become more transmissible and less lethal. In addition, as 2021 ended multiple effective treatment options were approved. Taking together vaccines, treatments, and the evolving virus, we may see a shift from pandemic to endemic mode in 2022. For example, chickenpox is an endemic disease that is predictable, avoidable with vaccination, and manageable. We may get there with COVID-19 as well.

Q:  How will the “Great Resignation” affect nonprofit organizations?

A:  To put this issue in context, I want to point out that the “Great Resignation” is nothing new. Anthony Klotz, a management professor at Texas A&M University, coined the term in 2019 to describe workers who are reassessing their values and seeking new employment opportunities that better align with those values and provide them the flexibility to meet other priorities (i.e., more family time). That’s not to say this isn’t still an issue for workers and employers. If anything, the COVID-19 era has intensified the issue in the overall economy, the nonprofit sector included. My point is, we’ve been facing, sometimes ignoring, this issue for at least a few years now, and the causes and solutions are complex.

Even the specific nature of the problem is complex. For example, Guy Berger, Ph.D., LinkedIn’s Chief Economist, writes that maybe the term “Great Resignation” should be substituted with “Great Reshuffling.” His point is that most workers are not leaving the workforce, they are simply changing jobs. In the nonprofit sector, that may mean migrating to a new nonprofit organization, or it might mean leaving the sector altogether for a better paying job in the for-profit sector.

To look at how the problem is affecting the nonprofit sector, the National Council of Nonprofits studied the issue in the early autumn of 2021. They found that 47% of the 900+ nonprofit respondents to their survey had job vacancies of 0-9%. About 15% of nonprofits reported a vacancy rate of 10-19%. More alarmingly, 26% of respondents reported vacancies of 20-29%.

In other words, some nonprofit organizations are fully staffed while others are hurting because they cannot fill vital positions. The reasons why workers left and the reasons why the nonprofits cannot fill those positions are varied. Just some of the reasons uncovered by the study include salary competition, lack of childcare, and vaccination policies.

Staffing challenges affect nonprofits in a number of ways, including the capacity to deliver services and the ability to maintain fundraising continuity. The NCN study found that 27% of responding nonprofits said their wait lists for client services increased to more than one month due to staffing shortfalls. That’s a big problem especially as many organizations are seeing an increased demand for services.

Another problem is that the loss of fundraising staff can end the relationships that are so vital to successful fundraising, especially where major donors are concerned. Furthermore, the loss of fundraising staff can result in a lack of fundraising continuity, and delayed appeals and funding proposals.

While we do not have the space here to fully examine the problem and offer solutions, I do want to stress that it is important for nonprofit boards and C-suite staff to be aware of the problem and explore opportunities to mitigate it. Having strong, open communications with staff will help nonprofits understand the situation, including staff needs.

I’ll also point out that funders and government contracting agencies are also part of the solution. Expecting nonprofits to underpay staff and do more with the same or less resources is not only unfair, it’s unreasonable and dangerous.

Q:  Given the economic uncertainty, where are the fundraising opportunities for nonprofits?

A:  During economically uncertain times or times of real economic stress, legacy giving will remain popular with donors. For example, including a nonprofit in one’s will or as a beneficiary are great ways for individuals to support an important mission without the need for a present financial sacrifice. In other words, people can still fulfill their philanthropic ambitions even if they do not have cash to donate or want to preserve their cash given economic uncertainty.

Other gift planning options such as trusts, charitable gift annuities, or gifts to or through a donor-advised fund can also help donors meet tax planning or income goals while supporting a favorite cause. As I’ve already mentioned, seeking gifts of appreciated stock and property represent another valuable opportunity. To be successful, fundraisers need to approach planned giving conversations with great care, as this is a stressful environment for donors. 

Q: What advice would you give our foundation/endowment audience for growing their fundraising efforts in 2022?

A:  Keep moving forward. Write an inspiring case for support, engage prospects and donors, and ask for support. The surest way to fail is to stop asking. Major donors will continue to give. As long as the stock market remains strong, foundations will continue to support nonprofits robustly. While some corporations have been suffering, others have seen strong profit growth. Looking at the corporate sector in a granular way will allow organizations to successfully approach businesses with win-win propositions.

Keep in mind that the expression of gratitude (the thank-you process) is an integral part of fundraising. Therefore, be sure to thank supporters properly. Don’t just thank donors for their generous gifts, thank them for being generous people—for being kind, thoughtful, and caring. In other words, use a meaningful, heartfelt adjective to highlight the donor rather than the donation. Be sure to let donors know the impact they have had through their giving. A strong thank-you process can set the stage for an effective fundraising appeal to individuals, foundations, and corporations. Building strong relationships is essential to the fundraising process.

Q:  What impact will diversity, equity, and inclusion efforts have on philanthropy?

A:  In 2021, there were two ways diversity, equity, and inclusion (DEI) efforts affected philanthropy. First, some donors chose to increase or shift their philanthropy to organizations that focus their mission on DEI and social justice. Second, some donors looked to nonprofits to see if they have embraced DEI values, even when that was not a core part of the organization’s mission (e.g., animal shelters, certain environmental organizations, botanical gardens, or house museums).

Even organizations not directly involved in social justice can still adopt DEI values. For example, an animal shelter could actively seek to diversify its staff and board. Some donors will look for that. The key for organizations is not to be performative when embracing DEI but, instead, to implement meaningful steps. That might appeal to some donors.

Conversely, embracing DEI might risk triggering negative backlash, so exercising care is important. A recent survey  of 301 corporate executives released by Brunswick Insights in November 2021 found while 63% of corporate executives “agree unequivocally that companies should speak out on social issues” only 36% of voters want companies to do so. While the survey involved for-profit corporations, it nevertheless has implications for charitable organizations. For example, The Wall Street Journal reports “Cornell University asked a California real-estate developer and longtime donor for a seven-figure contribution. Carl Neuss didn’t write the check immediately, saying he was worried about what he saw as liberal indoctrination on campus and declining tolerance toward competing viewpoints.” After evaluating the situation on campus, he ultimately withheld and redirected the donation. 

A majority of donors will likely continue to be driven by a nonprofit organization’s core mission. Donors may care about DEI, but they will give according to their own philanthropic values. If I’m most passionate about fighting cancer, I’ll be more likely to support a cancer research organization than a social justice organization. I will likely also care more about the cancer research they fund rather than the diversity of the organization’s board. That’s not to say that I don’t care at all about DEI, just that it’s not my top priority when choosing a nonprofit organization to support.

A word of caution: Nonprofit organizations need to avoid merely paying lip service to DEI without implementing actual measurable plans to embrace those values. Conversely, they need to make sure that DEI does not lead to mission drift. For example, in the spirit of equity, the ACLU recently called for the forgiveness of student-loan debt, leading many to question what that has to do with safeguarding civil liberties. If an organization’s mission is legitimately tied up with DEI, then the organization better develop strong plans, create a vibrant case for support, and demonstrate the measurable results it has and intends to achieve.

Q:  What is most important for nonprofits to know in 2022?

A:  The nonprofit organizations that will benefit most will continue to creatively cultivate relationships, make strong cases for support by highlighting donor impact and, then, actually ask for contributions. Another key is for nonprofits to remain nimble and imaginative in what promises to be an uncertain 2022.

Buckle up!
 
Michael J. Rosen, President of the fundraising consulting firm ML Innovations, has been named one of “America's Top 25 Fundraising Experts.” He is the author of the bestselling book, "Donor-Centered Planned Gift Marketing," and the publisher of "Michael Rosen Says...," recognized as a top fundraising blog. Contact Michael at mrosen@mlinnovations.com.

This information is provided by SEI Investments Management Corporation (SIMC), a registered investment adviser and wholly owned subsidiary of SEI Investments Company (SEI). Statements that are not factual in nature, including opinions, projections and estimates, assume certain economic conditions and industry developments and constitute only current opinions that are subject to change without notice. Nothing herein is intended to be a forecast of future events, or a guarantee of future results. This presentation should not be relied upon by the reader as research or investment advice (unless SIMC has otherwise separately entered into a written agreement for the provision of investment advice).

The opinions and views expressed herein are those of Michael J. Rosen. SEI cannot guarantee the accuracy or completeness of the information and assumes no responsibility or liability for its incompleteness or inaccuracy. Michael Rosen and ML Innovations are not affiliated with SEI or its subsidiaries.

Investing involves risk including possible loss of principal.

Neither SEI nor its subsidiaries provide tax advice. Please note that (i) any discussion of U.S. tax matters contained in this communication cannot be used by you for the purpose of avoiding tax penalties; (ii) this communication was written to support the promotion or marketing of the matters addressed herein; and (iii) you should seek advice based on your particular circumstances from an independent tax advisor.