The historic, ongoing, struggle for annual operating dollars coupled, with an uncertain political and economic climate have resulted in a number of question marks within the nonprofit sector.
While there may not be one clear answer, there are trends taking shape among not-for-profit organizations seeking to remain financially viable. As questions remain, industry experts are advising nonprofits to provide clarity around messaging as the basis for impactful engagement and, hopefully, sustained funding.
Marcelle Epley, president and CEO of the Long Beach Community Foundation, believes building one-on-one relationships with donors is one of the most effective strategies in maintaining their interest in a nonprofit organization. (Photograph by the Business Journal’s Larry Duncan).
According to national nonprofit database Guidestar, there are more than 1.8 million active nonprofit organizations in the United States. Nonprofits range from large universities and hospitals to neighborhood associations, making it difficult to predict how shifts in the economy and federal spending will impact different organizations.
“The sector is comprised of a variety of industries, and their economics are very different from one another,” says Jeffrey Wilcox, president and CEO of Third Sector Company.
“Every organization has a dynamic at play between what people pay for services, what people donate and what public dollars are at work,” he adds. “How much each of those sources of potential operating dollars are available is always in flux, and we have a lot of organizations wondering what the equation is going to look like. . . . And, depending on an organization’s dependency on public funding, I think that is directly proportional to their level of anxiety and fear.”
President Donald Trump’s proposed budget and speculation around changing tax codes, in particular, have created an environment that has yielded deeper conversations around financial viability and sustainability.
“It’s not political – it’s the reality,” says Linda Alexander, executive director of The Nonprofit Partnership in Long Beach. “It’s something that everyone’s preparing for. . . . Everyone is bracing for more and more money to leave the nonprofit sector.”
This is especially concerning, she says, given that many nonprofit organizations provide basic core services for the community.
“In a lot of ways, in this country and in this community, in particular, nonprofits are the bloodline for our community,” she explains. “It is through our community organizations that the community gets served. . . . Clearly, there are folks in the sector who are trying to anticipate and navigate what that means because if there’s less money for services for people who are already disenfranchised, who don’t have money, how does one provide those services? A lot of people are strategizing on how to be ahead of the curve.”
Advocacy And Building Communities
The increasing use of advocacy, or effectively communicating a nonprofit’s mission and impact to stakeholders, is on the rise, according to Wilcox, who notes that the way nonprofits achieve this is evolving.
While some nonprofits have historically defined advocacy as government lobbying, Wilcox stresses that lobbying is just one form of advocacy. He notes that one of the most visible forms of advocacy that has taken place since the new administration was the national Women’s March on January 21.
“Not every organization is taking to the streets and marching, but organizations are recognizing the need to not only tell people what they do but, more importantly, to tell people why it’s so important to the community – and that’s advocacy,” Wilcox explains.
One of the main focuses this year of The Nonprofit Partnership, Alexander says, is to help organizations effectively craft their message, clearly and succinctly communicating their cause to potential supporters.
For Wilcox, advocacy efforts such as the Women’s March also reflect changing approaches within the nonprofit sector – one that has become more entrepreneurial in spirit.
“The Women’s March was a new and different way to get a message out to the country. A march like that hadn’t been staged in decades, and it took an entrepreneurial approach to get that off the ground and to have so many organizations and so many people across the country get involved.”
Another example is an arts festival working with Third Sector that recently shifted from being a traditional art show and festival to being a celebration of community diversity through art. And a nonprofit that had historically provided services to disabled individuals has reframed its focus to be a civil rights organization advocating for individuals with disabilities to be fully embraced, participating members of the community.
“The feeling is, if [an approach] doesn’t work, we’ll come up with something that does,” Wilcox explains. “There’s a real pioneering, trailblazing, do-it-a-different way spirit.”
Some nonprofits have turned to organizations like the Long Beach Community Foundation as a vehicle for advocacy, says President and CEO Marcelle Epley, who notes that nonprofits are also working hard to develop strong boards as an advocacy arm.
“If they can develop strong boardmembers, then they can utilize those boardmembers who have connections in the community, who have the education and the experience to be ambassadors for that nonprofit, to be advocates and further their reach into the community,” Epley says.
In fact, Washington, D.C.-based BoardSource, a national resource for increasing board effectiveness and strengthening organizational impact, has recently added advocacy and ambassadorship as a primary responsibility for nonprofit boards of directors. Historically, boards have been tasked with governance in the form of legal, ethical, financial and programmatic oversight.
“That’s a big national shift,” Wilcox says. “That’s a call for boardmembers to be community voices for community betterment.”
“In today’s environment, we are working with boards to understand that they were causes first before they were organizations,” he adds. “And we’re working to understand what it means to lead a cause as opposed to leading an organization. There’s a big difference. So you have to change your paradigm.”
The Role of Data
As nonprofit organizations increasingly advocate for their cause and their missions, it has also become important to integrate concrete data to convey clear impact, industry experts say.
“More and more, donors are also becoming more savvy,” Alexander says. “These partners are really looking for strategic partnerships – how do I know that what I’m giving is truly impactful? So, as nonprofit organizations, it’s wise for us to be telling that story, even if our donors aren’t asking us yet – because they will be.”
For Tesoro and its Tesoro Foundation, seeing measureable outcomes is integral to its community investment strategies. In 2016, Tesoro provided roughly $3.95 million in grants to 165 Southern California organizations spanning STEM education, public safety, environmental conservation and sustainability, and local health, human and social services. Tesoro’s grant-making budget represents roughly one percent of its annual net income.
As such, data and measurable outcomes are especially important to convey the return on investment to shareholders who have entrusted the foundation with philanthropic dollars, notes Jared Skok, executive director of the Tesoro Foundation and director of community investments at Tesoro Companies, Inc.
“We’re not giving away money – we’re investing money, and we’re building relationships,” Skok says. “And we’re doing so hoping to see a measurable impact in our communities.”
For Tesoro, this may also include making longer-term investments in nonprofits through multi-year grants.
“One of the biggest trends I’m seeing is nonprofits want to deal with unpredictability,” he says. “If unpredictability is one of their biggest concerns, we want to try to minimize that. Where it makes sense, we will explore multi-year funding opportunities. Not only is that easing some of the concerns of the nonprofit . . . but also we’re about measurable outcomes.
At the end of the day, we’re really interested in making a difference in the communities where we operate. And sometimes that takes time. . . . You get to see how programs grow and evolve over time and whether they truly are making a difference.”
While mobilizing support through advocacy and data-based storytelling are increasing, so is a focus on deepening relationships with existing supporters.
“We’re seeing more one-on-one relationship management,” Epley says. “There’s a lot of technology out there, and that’s very good, but I think the best relationships and the long-term relationships you can have with donors is through one-on-one conversations, really finding a donor who cares about your cause, and keeping them updated on all the things going on within the nonprofit.”
Alexander agrees, noting that while strategies such as online presence, mobile optimization and solicitation letters all have a place in engaging supporters, it is especially important to nurture interpersonal relationships.
“However you do that – to deepen the relationship with your supporter – that seems to be the key in the long run for more sustainability for the organization and for that donor partner to feel fulfilled that they’re making a difference,” she says. “It’s really about providing clarity and communicating in the best way possible.”
Sustainability concerns have not only impacted the way nonprofits approach fundraising and community engagement but also the way funders have approached grantmaking.
“I believe there are about 1,800 nonprofits in Long Beach alone, and with that, it creates a very competitive environment. And while a lot of nonprofits are doing amazing work every day, there’s a lot of duplication and there’s a lot of competition for operating dollars,” Epley says. “Donors more and more these days . . . very much favor when nonprofits are working together and collaborating. When we’re talking about trends among nonprofits and struggling for operating dollars, the donor community is also looking to get together to see what they can do to assist.”
Roughly 20 philanthropists within the Greater Long Beach community, Epley says, asked the Long Beach Community Foundation to convene strategic discussions around working collaboratively themselves to maximize impact. The result was the release of a recent grant opportunity that will award a $75,000 to $100,000 grant this summer to one organization that addresses the identified needs of youth empowerment, health education and opportunity, and community improvement.
Additionally, for two consecutive years the Community Foundation has offered collaboration grants for nonprofits to work together on a project or a program.
“To ask two nonprofits to work together, it’s a much longer conversation – it’s more of a partnership and a strategic union or strategic collaboration,” Epley says. “It takes a lot more relationship management and trust, but that has been the answer of the Community Foundation to attempt to try to resolve part of that issue of competing for operating dollars.”
For the Tesoro Foundation, collaboration has been key to its grant-making process. “Collaboration is not just a one for one,” Skok says. “It’s not just us collaborating with our stakeholders – it’s us potentially collaborating with multiple stakeholders to have collective impact.”
This includes bringing together grantees that may be providing similar services to assess common concerns, review strategies, and to work together for increased efficiency and effectiveness, Skok explains.
“We’re not simply a reactive organization,” he says. “If someone applies for funding, it opens a door and it starts a dialogue between us and that organization to find out what is this request and how does it align with our mission and what we’re trying to achieve. . . . It takes work and effort to truly understand what the needs are, what the problems of the community are, and trying to find innovative and impactful ways of addressing those issues.”