5 Trends Driving the Future of Philanthropy
When 2018 came to a close, many fundraisers breathed a sigh of relief as the predicted shortfalls in giving due to changes in the tax code did not materialize in the numbers forecast. A June 2018 report by the American Enterprise Institute had forecast a 4% drop in giving overall, while a similar study by the Indiana University Lilly Family School of Philanthropy study estimated that charitable giving could drop by $11 billion to $13 billion in 2018.
Recently released figures showed a slight increase for charitable giving in 2018 overall—good news indeed, but the details around who is giving and to where could spell trouble ahead. Blackbaud reported a 1.5% increase in 2018, while the Fundraising Effectiveness Project (FEP), a collaboration of the Association of Fundraising Professionals and the Urban Institute, reported a 1.6% increase.
Both FEP and Blackbaud reports identified trends that may forecast changes in the philanthropic landscape:
- The 2018 gains were driven exclusively by gifts over $1,000. (FEP)
- Large organizations (budgets more than $10 million) gained the most, with 2.3% overall increases, while small nonprofits (budgets under $1 million) lost ground, with giving decreasing by 2.3% as compared to 2017. Those in the middle showed gains of 2%. (Blackbaud)
- The total number of donors dropped by 4.5%, and the overall retention rate (the percentage of donors making gifts last year and this year) dropped to 45.5%, which is 2% lower than the 2017 rate. (FEP)
- New donors making gifts over $1,000 increased by more than 37%, which may indicate that some donors are making larger gifts to be able to itemize their deductions. (FEP)
- K–12 giving was down by 0.1%, after showing years of gain, which may suggest that small schools are feeling the pain from tax reform. (Blackbaud)
Rough Waters Ahead?
Elizabeth Boris, chair of the Growth in Giving Initiative—a set of charitable giving-related research projects—noted that there are some serious long-term trends we must watch carefully: “Giving is increasing because of larger gifts from richer donors. Smaller and midlevel donors are slowly but surely disappearing—across the board, among all organizations. Philanthropy should not and cannot be just the domain of the wealthy, and the entire sector needs to look at how we reach out to and engage these donors.”
In a December 2018 Time magazine article, author Martha C. White identified five trends that will shape giving in 2019, and perhaps beyond. Each of these trends may call on school advancement professionals to rethink some of their approaches to fundraising. Here is how a variety of forecasters are already seeing these trends play out.
Trend 1: Giving bigger donations but less frequently
The 2018 data is already showing this trend, and many think this will be more apparent in 2019 as donors start to alter behaviors when they understand the impact tax reform has on their particular situation. Advancement professionals need to plan now for how they will deal with what could be the new normal of gift bundling from a budgetary and communications perspective.
Trend 2: Using technology to mobilize support
The past decade has spawned an explosion in giving channels, changing the patterns of how people give. Online giving has shown steady increases, growing from 6.4% of all giving in 2013 to 8.5% in 2018, according to Blackbaud. Smaller institutions are seeing even bigger increases, with Blackbaud reporting that those with budgets under $1 million are now receiving 13.4% of their gifts through online giving. Crowdfunding (using social networks to bring communities together around a single cause) and peer funding (often seen as a type of crowdfunding, in which loyal supporters are called to fundraise on the nonprofit’s behalf) are also growing in importance. According to Blackbaud, crowdfunding is growing dramatically, particularly among millennials and Generation Z, with nearly 50% from each of these segments noting that they have given via crowdfunding in 2018. Even baby boomers are participating in crowdfunding in greater numbers. Given this growth, school advancement professionals need to explore how these new channels can be used to maximize giving. This will be even more important as baby boomers pass the giving mantle to younger generations.
Trend 3: Growing clout of big donors
As the number of low dollar and midlevel givers declines, giving way to fewer, much wealthier donors accounting for a larger share of charitable giving in the United States, a number of watchdog organizations are suggesting that nonprofits have to understand the impact of this change and be prepared with new policies. Although large gifts can be transformative and allow nonprofits to effect very positive changes, these gifts also can be accompanied by large strings.
Editor of The New Education Philanthropy Politics, Policy, and Reform Jeffrey R. Henig suggests that the rise of very large gifts may indicate a change in philanthropic approach: “The more strategic philanthropy that we’re seeing now…combines research and advocacy with a deliberate attempt to use their donations to change public policy.” Invoking the term “wicked generosity,” coined during the time of Julius Caesar, Dean of the Lilly Family School of Philanthropy Amir Pasic notes that we must be aware of the manipulative side of gifts, even small ones. Nonprofit Quarterly Editor-in-Chief Ruth McCambridge suggests: “If we believe that we need a sustainable nonprofit economy that is broad-based and accurately reflective of the needs and ideas and dreams of the whole of our population, we need to consider how to maintain and build that bond with our many donors, in pursuit of a real democratic future.”
Trend 4: Investing with a social conscience
Young donors today are looking to do double-duty with their dollars or receive a return on investment while doing good. According to an article on WealthManagement.com, millennials aren’t as interested in writing a check for a good cause: “Only 36% of millennials defined ‘giving’ as making a charitable financial donation, versus 61% of Gen X participants and 83% of boomers. Far more than other generations, millennials said ‘giving’ meant investing in companies making a positive impact and ‘social entrepreneurism.’” Although this is not cause for immediate worry, as baby boomers and Gen Xers still account for the bulk of charitable giving today, advancement professionals need to start investing in strategies to reach this group who will one day make up the bulk of the donor base.
Trend 5: Making transparency a key determinant
Do donors conduct more research today before contributing to a cause? In a 2018 generational giving study, Blackbaud reported that three-fourths of responding donors reported being concerned about charities’ overhead expenses, but only 56% said they conducted the research to ascertain a charity’s performance. And, for those who do conduct background research, the majority do so through the organization’s website. What do they specifically look for? The Blackbaud report uncovered that 70% research efficiency, 59% look at impact, 54% want facts about the charity’s reputation, 53% want data on operating costs as well as mission and services, and 43% want to know the executive’s salary. Because so much of this research is conducted through the organization’s website, advancement professionals can provide the needed transparency and tell their story in a way that engages donor loyalty.
There is much to consider as we envision how philanthropy could evolve over the coming decade. Advancement professionals need to engage in generative conversations that probe what effective fundraising will look like in this changing landscape.