Building stronger relationships with donors who are part of a U.S. demographic shift should be part of the fundraising strategy for the nonprofit and philanthropic sectors.
That’s especially true after an annual report found that giving is down nationally for the first time in 10 years.
The Giving USA 2019 report, released last week by the Giving USA Foundation and written by the Indiana University Lilly Family School of Philanthropy, indicates that giving decreased by 1.7 percent in 2018. The report estimated total giving to U.S. nonprofits at $427.7 billion, down from $435.1 billion the prior year.
“Obviously, the numbers going down is a concern, but the corporate and foundation numbers have been pretty much the same,” said Christina Gavin, founder and CEO of Detroit-based Gavin & Co., a philanthropic consulting firm. “The thing about this market (Michigan) is that there’s a tendency not to diversify fundraising and to go with the easiest possible pathways. This is the time to amplify individual giving sectors.”
Gavin also wonders if major fundraising initiatives such as “Giving Tuesday” may be complicating giving and contributing to the stagnation.
Prior to the release of the 2019 report, Michael Montgomery, an educator and owner of Huntington Woods, Mich.-based Montgomery Consulting Inc., said he thought giving statistics for last year would post a modest increase or remain flat.
“The severity of it came as a surprise,” said Montgomery, who lectures at the University of Michigan-Dearborn’s Department of Health and Human Services. “A good number would be between 3 and 4 percent. (The decrease is) nothing to get distraught about because 2017 was a high base to come down from.”
Earlier this year, Montgomery released the results of his 2019 Michigan Fundraising Climate Survey, which indicated that leaders in Michigan’s nonprofit sector saw the “softening in charitable giving reported by Giving USA coming.”
“Over the past four years, we’ve seen a sharp decrease in the proportion of Michigan nonprofit leaders expecting statewide fundraising conditions to improve — from 70 percent in 2016 to just 12 percent this year,” Montgomery said. “We also saw an especially large one-year increase in the proportion expecting Michigan fundraising conditions to get worse — from 19 percent in 2018 to 35 percent this year.”
Younger generations of donors and the implication that some nonprofits might not be resonating with generational shifts in the fundraising landscape could be affecting the outlook as well, Gavin said.
“What I’m finding is that the older nonprofits are not really spending a lot of time looking at social and online giving, and we’re also finding that they’re slow to look at the demographics of Millennials and Gen Z,” Gavin said. “How do you cultivate those individuals who are growing up online?”
Respondents to Montgomery’s Michigan-specific survey said individual donors made up 58 percent of their total giving, compared to 68.3 percent in the Giving USA report. Another disparity emerged among corporate donors, which made up 18 percent of giving in Montgomery’s survey and just 4.7 percent in the Giving USA report.
Additional research coming out of the Giving USA study estimates that changes in the tax laws could cost up to $19 billion in giving.
“I think between general economic nervousness growing and tax law changes, we’re looking at a not rapid rate of growth in giving for a few years,” Montgomery said.
The lower rate of individual giving reported in the Michigan study is “largely the result of Michigan’s culture of major individual giving to secular causes not yet being as fully developed as in some other areas of the country,” he added.
“Michigan’s higher rate of corporate giving is not surprising given that this remains the headquarters of some of America’s very largest corporate givers,” Montgomery said.
Still, Gavin noted the process of receiving funds from these corporate givers is tougher than it was two decades ago when she first started her consulting business.
“Twenty years ago, you could call Ford or GM and say, ‘Hey, I’m working on this’ and they’d say send us a proposal,” she said. “Corporations and foundations are more into logic models and outcomes of impact. They want to see more impact and logic models and there are concerns about nonprofits having the right staff and consultants to deliver that data.”
While fundraising professionals have long prioritized relationship-building to ensure the success of their campaigns, Montgomery said those efforts will become even more important in the future because of the dip in giving. He notes major gifts officers will need to spend more time cultivating new prospects — whether individual donors, corporations or foundations — and should be developing relationships with key decision makers.
Sending them mailers will no longer produce the desired results, he said.
“This will require diligent and aggressive classic fundraising,” Montgomery said. “Developing additional donors is really going to be key. Most organizations have many donors, but the real growth is going to be in expanding the pool. People at the top level are giving, yet we’re seeing the number of households making charitable donations diminish.”
The majority of the nonprofits Gavin works with are focusing on the social equity space because of changes in the country’s demographic base. They’re also looking at more progressive ways of asking, she said.
“Millennials like to give, but a lot of them are starting families and have student loans to pay off,” she said. “They can be cultivated through volunteer work and social settings.”
A number of young wealthy people are taking their philanthropic efforts to a higher level by forming organizations and undertaking projects that benefit their communities through direct project activity as opposed to philanthropic giving, Montgomery said. He cites ArtPrize as an example.
“These young people are looking at the world in a profoundly different and more hands-on kind of way,” Montgomery said.
As well, Gavin said nonprofits need to focus on growing their Hispanic and female donor bases.
“It’s important to pay attention to women donors,” Gavin said. “Another area that’s been overlooked is the significant rise in women corporate leaders. We should be paying attention to up-and-coming female executives and have them involved, in addition to multi-race, multi-ethnic individuals who are leading the cause.”
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