Changing Pies

David Coffaro
Dave Coffaro

As nonprofit development professionals know, there are many factors that influence charitable donations. Emotional connection to an organization’s mission, commitment to creating a better community, giving back to a charity that made a difference in someone’s life or tax deductions can all be influencers. Add to these internal motivations the external reality of economic conditions and you have an ever-changing environment informing development strategies.

Strategy as a Process, not an Event

Successful leaders know that their ability to adapt strategy as environments change is fundamental to sustaining a thriving organization. Reading the environment, interpreting temporary and longer-term structural changes and proactively adjusting approach are critical determinants of success.

Today, nonprofit leaders face an environmental shift in terms of fundraising. New preliminary IRS information, reported by MarketWatch this week (https://www.marketwatch.com/story/americans-slashed-their-charitable-deductions-by-54-billion-after-trumps-tax-overhaul-2019-07-09) indicates that as a result of the 2017 Tax Cuts and Jobs Act, taxpayers have itemized $54 billion less in charitable contributions so far this tax season compared to the previous year. These numbers could change as the IRS receives more tax returns (the agency expects a record 14.6 million tax return extension requests this year), but the headline corroborates what many nonprofits have been feeling over the past year of fundraising.

At first blush, this news suggests that nonprofits must now compete for a smaller pie of charitable giving. However, when we dig a little deeper, it may be that there are other pies available to get a bigger slice. Here are three specific ideas to contemplate as your organization considers refining and adapting its’ strategy:

  • Market the mission – Step into the shoes of the donor and ask “why would I contribute to your organization”. Tax benefits are one reason, but for most of your donors, there is some kind of emotional connection to your mission. The work your organization does every day resonates with the donor at some level, or they wouldn’t be one of your donors. This is a perfect time to revisit your mission, how you articulate it, your organization’s value proposition and how you message all of this through every medium to make sure the story is communicated the way it needs to be delivered.
  • Increase focus on corporations and foundations – Concurrent with the 1/1% decline in the dollar amount of donations from individuals, funds from corporations and foundations actually  increased (+5.4% from corporations and +7.3% from foundations). Translation – there’s still a lot of pie available; you just may have to look in different places to get what your organization needs. This is where the role of leaders comes into play in terms of refining strategy based on a changing environment.
  • Explore non-financial gifts – Beyond the 2017 tax law changes, one theory suggests that equity market volatility over the past year may be playing a role in individual giving. This behavioral finance explanation suggests that when capital markets are volatile, investors feel less confident, therefore more cautious about donating from their investment portfolios to charities. As an alternative, developing or expanding your organization’s focus on non-financial gifts – real estate, automobiles, oil, gas or mineral rights, specialty assets or artwork may be a way to enable your donors to support the mission in a manner that is more comfortable in the current market cycle.

Effective nonprofit strategy is on ongoing, dynamic process that continually recalibrates to its environment. This is a perfect time to revisit your organization’s strategy to see how it aligns with current reality, and the pies that are available to you.

Author: David Coffaro, Executive Coaches of Orange County, www.ECofOC.org