Non-profit organizations are adapting their strategies in response to changing economic realities, workforce challenges, and emerging risks. By keeping up with these trends, non-profit directors can navigate challenges and manage risks effectively.
Demand for Transparency in the Non-Profit Industry
Some non-profits are leveraging new AI tools to fine-tune their marketing strategies and automate many of their processes.
At the same time, the rise in big data has lead to calls for transparency, which extends to the non-profit sector. Donors want to know how organizations will be using their donations. According to research published in the Journal of Accounting, Auditing & Finance, embracing transparency is connected to stronger governance. Non-profit organizations that become transparent increase contributions by an average of 53.27%.
Changing Fundraising Strategies for Non-Profits
High inflation has caused financial strain for charities and donors. According to the Giving USA 2023 Report, charitable giving declined by 3.4% between 2021 and 2022. When adjusted for inflation, this means charitable giving declined by 10.5%. Although giving by foundations, bequests, and corporations increased, these increases were not enough to keep up with inflation. Giving by individuals decreased by 6.4% – or 13.4% when adjusted for inflation.
Changes in the tax code also impact charitable giving trends. According to the Tax Policy Center, the 2017 Tax Cuts and Jobs Act could discourage donations by reducing the tax savings for donations. However, the IRS says the CARES Act of 2020 allowed taxpayers to deduct up to $300 in donations in 2020, even if taxpayers didn’t itemize their deductions. This could encourage individual donations.
Although trust-based philanthropy and legacy giving in non-profits remain crucial for many organizations, new giving models are developing. Charities can now leverage digital platforms to collect donations from people around the world. Collective giving models are another growing trend. According to Stanford Social Innovation Review, the collective giving approach (also called the giving circle movement) often focuses on community needs and solutions. More than 2,000 giving circles have now raised nearly $1.3 billion.
Workforce Challenges and Non-Profit Staffing Solutions
Many sectors have been dealing with staffing shortages recently, which has also been a problem for non-profit organizations.
A report from the National Council of Nonprofits found that 74.6% of non-profits have job vacancies and 51.7% have more vacancies now than they did before the COVID-19 pandemic. Public-facing positions have been the hardest to fill. Most non-profits say salary competition and a lack of funds have made it hard to recruit workers. Non-profits also commonly cite burnout and stress as issues.
Since non-profits can’t fulfil their missions without sufficient staff, recruiting and training talent is a priority. To overcome the current challenges, non-profits may need to reassess the funds they’re allocating to salaries while finding ways to support well-being and reduce stress for workers.
Increasing Need for Leadership in Non-Profit Organizations
Overall, the need for non-profit leadership strategies that focus on organizational health has increased as organizations grapple with social, economic, and technological threats.
- Social: Racial and gender inequity have received increased attention in recent years. Non-profit organizations may need to assess their missions in light of changing societal views and needs. They may also face increased scrutiny from the public. As an example of how non-profits may get caught up in social issues, the National Multiple Sclerosis (MS) Society recently fired a volunteer who had been with the organization for 60 years. According to MSN, the volunteer had asked “what pronouns meant” in response to new guidelines for email signatures and was then let go, which drew backlash and accusations of ageism. The National MS Society has since issued an apology.
- Economic: Financial stress may reduce the amount of donations a charity receives while increasing demand for the charity’s services.
- Technological: Although new technologies are giving non-profits additional tools to raise money and awareness, these advancements are also resulting in heightened cyber exposures.
Insurance Implications for Non-Profits
Although non-profits focus on making a difference rather than making a profit, they are still vulnerable to lawsuits. Insurance can provide financial protection, enabling non-profits to continue focusing on their missions. In light of recent risk developments, some insurance policies may require attention.
- D&O risks: Increased scrutiny over DEI issues means board members may encounter additional challenges. Lawsuits may occur if stakeholders believe that board members have not acted in alignment with the non-profit’s mission or policies.
- EPLI risks: Increased social scrutiny may also lead to increased employment-related litigation. For example, workers who believe a non-profit has discriminated against them on the basis of gender or race may file lawsuits.
- Cyber risks: Non-profits often hold data on donors, and these records may include sensitive financial information. A data breach may expose this information and put donors at risk. Ransomware and phishing attacks have become a constant threat.
- Turnover risks: The non-profit sector’s staffing challenges may also lead to liability. For example, staffing shortages may lead to higher workloads and increased stress, which may lead to employees cutting corners. New and inexperienced workers are also more likely to make mistakes. Worker injuries and oversights may increase as a result.
How to Adapt to Trends
This is a challenging time for the non-profit sector. Organizations need to adapt to trends and risks.
- Reassess strategies to achieve primary goals. As non-profits continue to work toward their missions, they may need to adjust their donation, outreach, and employment strategies.
- Follow risk management best practices. Non-profits have numerous risks to consider, including cyberattacks, violence, and allegations of harassment or discrimination.
- Secure sufficient insurance. Budgets are tight, but skimping on insurance may lead to even higher costs that put the non-profit’s mission at risk.
A broker can help your non-profit organization review its insurance coverage and discuss whether you need additional coverage. Watkins Insurance Group is here to help.
