Episode 162: 2024 Nonprofit Predictions

Welcome to another edition of "Around with Randall" your weekly podcast on making your nonprofit more effective for your community. And here is your host, the CEO and founder of Hallett Philanthropy, Randall Hallett.

I welcome you to this edition, the latest edition of "Around with Randall". Today we do the second part of our two-part series on a look back into 2023 where we did pretty well when we talked about the number of things we predicted in December of 2022. This Edition is looking forward trying to be, to steal from Johnny Carson, Carnac the Magnificent. My envelopes that are hermetically sealed from funwagglesport and if you're old enough to know what that is then you know what I'm talking about. 2024 what will nonprofit work industry numbers, trends what are they going to be? And today I want to spend a few minutes talking about I think eight or nine different aspects that I'm fairly comfortable predicting, and see if I can get them somewhat correct. And if you remember in the past, I don't just guess and say well philanthropy will continue. I get into like details and so far I've been pretty close. So maybe these could be helpful for you as you think about what your 2024 might look like.

I'll start at the top, just the bigger category of philanthropy and fundraising overall. We dropped from 2022 into 2023 in terms of the percentage of GDP. Now the the key here is we don't get those numbers from the giving collaborative, Giving USA, until July for 2023 of the calendar year, so I'm kind of predicting what we're existing. I think what we're going to find is is that giving is going to drop again and it's gonna have several effects. Number one, I think it drops as a percentage of GDP. So I think we're at about 2.85 or 1.85 of percent of GDP. I think it'll drop closer to 1.75 or 1.7. Think there'll be less philanthropic dollars inside that though. I think what we're going to find is that there is an enormous drop and we'll begin to feel and see this at the end of 2024 from various sources in terms of annual giving. I don't think we have a full understanding of what inflation has done to people and their, what we think of as disposable income, because that's where philanthropy generally comes from. And those with higher amount of dollars probably aren't going to be as affected, but those that are watching the change in cost of bread and basics whether it's heat and electricity or into the changing nature of when we have to replace something big like a stove or a refrigerator or a car, yes inflation's down in terms of a year-over-year in terms of increases. But it's still increasing. In the next edition of "Around with Randall" I'll go into this inflationary issue in much more greater detail. But I believe that we're going to see a really large loss of lower level dollar figure wise donors and that what I posit as the 955 rule. We used to be, when I started my career, we were the 80-20 rule 20% of our donors made up 80% of the dollars.

In the last five to seven years I've believe I think the numbers bear me out that it's about 5% of the donors make up 95%. I think we're going to start moving to 3% are making up 97 % that we're going to see the critical nature of how large donations truly are going to affect many campaigns and campaigns because the lower band of opportunities, public phases, campaign, your standard $20 to $50 to $100 to $250 donors are slowly going to start to dry up. In some ways part of that as mentioned was the idea of disposable income decreasing because of inflation. Some of that is because of economic uncertainty, which I'll get to in a second, when we talk about the overall economy.

And the last thing is that I think the 2024 elections are going to cause some people to pull back in addition what we normally see is immense particularly in the senatorial and presidential elections. But I think with where the house is at and so close in terms of democrat and Republicans the amount of dollars that are going to go in there are going to be beyond significant break every record in the book, and that sometimes can affect nonprofits in terms of non-electoral or non-political campaigns. Whether it's your food bank, your hospital, your University, your public school, your private school, Social Service, whatever, all of that I think is going to really be affected and see a downturn in terms of the end of what 2024 will bring in terms of what I'll call generically fundraising and kind of those many steps or stages.

Number two because of that I think there'll be an incredible push, particularly in the second half of the year, to really do a better job of stewardship for our donors that we currently have, particularly the idea of maybe I'll call it personalization that the more we personalize, build depth in the relationship the more likely they are to keep giving to us. Because if we have less people giving and we know that the importance of their continually giving becomes more critical as we look forward then I think stewardship will become a critical part of huge conversations about are are we really building what Nathan Chappelle and Brian Crimens and the Generosity Crisis talk about in terms of radical connection. Are we getting to the point where we're building those deeper relationships that are going to allow us to maybe keep some of these donors when they have less dollars to choose between a number of nonprofits.

Number three is the overall economy. Now last year I predicted the stock market would be down and I admit I was wrong. I still still think the economy is not in as good a shape as people tend to think. Inflation's a big part of that. I think we're moving more and more into a bifurcated effect of the, or continuation of a bifurcated effect of the economics coming out of covid because of the pandemic and then obviously government, governmental choices in terms of expenditures. And then that led to the inflation. I think some people made money and those are the people going to be more generous. I think there's a lot of people that are hurting. I think it's a lot more than we realize, and again I'll go into that and some examples and what I'm seeing and feeling and hearing when it comes to inflation and the and kind of the overall what I think of as the really most deadly economic challenge that any country deals with is inflation. You can deal with other things but inflation is a killer because, you know, put people behind more quickly. We'll talk about that in the next edition.

So overall I'm predicting I think the economy may go down. I think you're going to see stocks, I think, suffer a little bit because of decreased purchasing power. I think we're going to have layoffs in larger sums, particularly from larger companies. They're going to try to strengthen their bottom lines particularly in public companies. Just think there's a lot of uncertainty that we're going to feel the effects of in 2024 from an economic perspective. Market down a little bit. Higher unemployment, stagnation of wages, things that are going to affect people's choices.

Number five is we're going to continue with what I will call alignment challenges. And you've heard me begin to talk about it more and more and I apologize when I do because I talk about my own book, but I talk about Vibrant Vulnerability and how we are not aligned in philanthropy and healthcare with the CEO, because CEO doesn't really understand what we do. That's our fault. We got to keep pushing in, I think that's true of universities. I think that's true of other nonprofits where the CEO is really truly the chief development, fundraising officer. Now there are other people around them that maximize their efforts because their time is incredibly limited. I think this economic challenge that we're going to feel particularly if we see less donations and less dollars is going to really, we're going to start to feel more pressure from the CFO saying but we need unrestricted dollars to just keep the doors open or keep doing what we do. And we know that in our side of the equation like we need a better strategic plan that articulates what our vision is, what we're trying to accomplish, how we're going to get there, and how philanthropy fits into that. And this kind of juxtaposition of philosophy is going to cause a rub, chaos, and some organizations are really going to struggle with this. If we don't get aligned with our leadership in philanthropy we are just going to be siloed and be a nice thing to have as organization keeps cutting the budgets, and healthcare is going to be the first. I think education shortly thereafter. Social service has already begun. I think there's going to be some pressure, so number five is alignment challenges will become more prevalent in terms of what we hear in the industry because of all of this.

Number six I think there's going to be an incredibly strong increase in pressure to reduce fundraising budgets, and I'm already beginning to see it this alignment issue that was number five bleeding into number six, is all about trying to get them to understand that we are more like the surgeon in health care than we are the nurse on four west. We are revenue stream and at some point if you start cutting us too much you start losing revenue. And the problem is they can't afford to lose that revenue because it's cheap money, so we're going to have to have harder conversations. What's going to end up happening, at least in my belief system is that these, we're going to have to have really hard discussions about what we're going to cut, what we're going to keep. Some of that's people, some of that's just like we just can't do this anymore in philanthropy because we don't have the budget anymore. They're just, they're just cutting it. In that same vein I think what you're going to see is a a drastic increase in what I would call, and I did a podcast about this maybe two months ago, about social media, social engagement, digital digitalization of different annual fund opportunities that will become the preeminent thing that we need to push because it's free for a lot of purposes, or a lot cheaper that when we have postal costs for an envelope, pre-sort first class rate of 45,50, 55 cents. They're a certain point what like it's just not worth it to mail anymore which means that the ability for us to use social media, email, digitalization of connection through X, formerly Twitter, through Facebook, and other things will become more and more important. That that may become the way in which we really leverage our annual giving programs because the cost with printing, with mailing return envelopes, all those things make it to a point where it's just not worth it anymore, and the segmentation of who gives in certain ways becomes more important. Keeping those, only those donors that will only do something in the mail kind of like my mom getting something in the mail is pretty important. We, a whole lot of other people, yeah we can do it different, we can make it work that way.

So number seven is this idea of really pressing issues in our budgets. Number eight is the continued growth. I'm sorry number seven is the continued growth of AI, artificial intelligence. I truly believe in two or three years if you're just using well screening data it'll look like you're a dinosaur, that the future is getting to likelihood and that's the advantage of AI, and I've got one or two clients that are really out in front on this. And just to give you an example, one of the clients who introduced AI to their grateful patient initiative, you know building out a new pipeline of donors, maximizing the gift officer time, all of a sudden about a month and a half ago began to trust a couple gift officers began to trust the artificial intelligence and I recommend Donor Search. I recommend Nathan Chappelle and I recommend Aristotle or dsai as they call it now in terms of a product. It's, I think the cheapest, and I think it's most effective. The gift officers began to trust the artificial intelligence, the likelihood or engagement numbers and kept, stopped worrying as much about where they, well, screen. And holy cow! What do you know? They had better conversations. They had more door opens that they could walk through they were having quicker conversations to gifts. Were they all the wealthiest people? No. But this goes back to something that we talk about all too often but don't seem to do that much about. Likelihood. Passion is the reason we should be concentrating on figuring out who we should engage with, and then we overlay it at the last 20% about wealth, not 80% wealth and then trying to hope that they might like what we do. I think AI continues its journey into being a viable important aspect of who to reach out to, who to mail to, who not to reach out to, who not to mail to, who are the people we should prioritize into individual conversations, who are the people that we can just leave to other ways and allowing them to give. So AI continues its massive growth and exponentially faster in terms of acceptance.

Number eight is the labor market, and I mean our labor market in philanthropy. I think people who are tried and true proven fundraisers, people who generate revenue, will begin a multi-year process where they're going to see dramatically greater increases to their salaries and bonus structures because they're revenue stream, they're guarantee, you know it's if you can you're paying me $150k but I'm bringing in 1.5 million I'm worth a lot more than that. I think they're going to really benefit. I think that's a small group of people and as a result you're going to see a lot more pressure to reduce staffing that aren't the people who are generating the revenue and that means databases, infrastructure, finance, annual giving, special events, administrative support, that this labor market's going to begin to tighten quickly and those that can produce and have a track record of truly building out relationships and making money for their organization will benefit, some others will not. So number eight is tightening of the labor market overall.

Number nine is I think that we will begin the journey and I think it will elevate or increase when we talk about mergers and closures that more universities, more hospitals, more departments in hospitals will close. This 2023 was a record year for the number of hospitals that closed in the United States. I think that continues and I think it'll get more nuanced in that you will start seeing departments within hospitals close. That things and we're already beginning to see this, but maternity wards or birth centers are going to see a dramatic decrease in areas that don't have great populations and people are going to have to drive further. You're going to start seeing more complicated surgeries be people being told I'm sorry we just can't do this in this community, we don't have, we can't keep, we can't have track. We can't get, because of finances, those specialists that can do those surgeries. And you're going to have to drive 30, 60, 80, 100 miles to go have that surgery done, if not get on a plane. That these mergers and closures in academia because we're moving into a time frame where we're seeing a decreased number of students and an increased cost, and I think you're going to start seeing closures of departments and maybe even you know satellites of parts of universities, that a drama department, while important, is not a revenue stream because there's not enough students. All this is going to lead to a greater deal of conversations in mergers, whether it's Boys and Girls Club and not having all the administrative cost because there's three clubs within you know 30 miles, we're going to move it down into one club with satellite offices. Or hospitals and they start limiting departments or bringing hospitals together, all of this is going to lead to more and more mergers and closures at a higher percentage than we're used to.

The last is where I see continued growth in philanthropy and that'll be in two fold. Number one, last year I predicted increases in climate and I get that one out of the park. I actually mentioned the droughts in the southwest really driving some of those conversations, and they actually did. I think that this will continue as we see changes to the climate and people trying to figure out how are they going to solve this, and this is not a one-year deal by any stretch. We didn't get here in one year, we're not going to get out of it one year. But I think you're going to see more and more people articulate that philanthropy and the power that money has should be driving some of this change. And that philanthropy dollars in climate will, in climate issues, will continue to rise depending on how the economy goes in inflation.

And I predicted a few minutes ago that I think there'll be some issues overall beyond philanthropy, but just in the general economy, I think you'll see a lot more conversation whether or not translates to dollars we have to find out about basic services, housing, food, that are homelessness issues that really are more highlighted in larger communities are going to become front-facing. That no matter where you stand on the immigration issue, take it for whatever it's worth, that people are showing up in numbers this last year in 2023 they're predicting something like 9.5 to 10 million people coming to the United States. Documented, undocumented, I'm not going to get into the politics. Where do these people go? And particularly when we talk about immigration, there are rules about working, which means they don't have in some cases depending on the circumstances, the ability to work at least above the ground. They may be in an underground economy which put and some states have pressures because they allow or have statutes, laws that allow for the state and or the city to be financially responsible for health care, for education, for living, and that these things are going to explode. And if the economy turns just a little bit, take away immigration, they're going to be other people who have overextended themselves and don't have the ability to adjust, who are also going to not be part of this equation. So I think basic service is going to be a part of a larger conversation.

So quick review. I think fundraising as a whole is going to decrease, particularly in the percentage of those that are kind of at the mid and lower levels. Our annual giving programs are really going to suffer. That that's going to drive more conversations around stewardship and personalization of those people we know we need to keep. That overall the economy is going to have some blips and in part because of things like the election and and inflation, and we'll talk about particular inflation in the next podcast of "Around with Randall". That we're going to continue to have a fight internally, alignment issues between the the C Suite or the administrative team and unrestricted dollars, and there's no strategy. You know we can go raise more money, but you got to tell us what you're going to use it for, and some of these leaders aren't ready for that kind of planning. That there's going to be reduced budgets in philanthropy, which is going to put pressure on staffing decisions and hold departments and things that we can and can't do anymore that there'll be a growth and continued growth towards a day in three years where AI, just and artificial intelligence is part of everything that we do in philanthropy, guiding us in terms of pipeline, development, prospect identification. That the philanthropy labor market, if you're a fundraiser, if you're a dedicated and you can prove productivity by bringing in, you know, six, eight, 10 times your salary or more you're going to take advantage because they're going to pay you. A lot of other people aren't, they get paid and in fact will probably be asked to leave because they're going to require, there's going to be a requirement to tighten the screws when it comes to ROI and reward those that produce the revenue. That overall I think that there'll be continuation of mergers and closures, not just in overall institutions but in departments, service areas, things of that nature. And finally that we'll continue a conversation about how important philanthropy is to the climate, climate change, as well as if we have a blip or two on the immigration as well as the economy into basic service, homelessness homes, shelter, food, things of that nature. The Randall Hallett, Hallett Philanthropy predictions for 2024.

If you listen to these and you think I have any credibility, you need to be thinking about how you can overcome this stuff. Start the personalization now. Identify your best donors. Spend more time with the people that are are making the biggest difference. Work in partnership with your executive team. Make sure they understand the value of what's going on. There's some things you can control, and some things you can't, and as I tell my son and my daughter, it's the things you can control or at least have influence on you got to get ahead of. The other things you just got to be ready for and have options for. So the more you think about this the better off you're going to be. I don't mean it to be doom and gloom. I don't see our future that way. I just think in philanthropy we're we're riding a wave a little bit ahead of everybody else. It's like a predicting element and there are some challenges coming. I just truly believe that. But great organizations and great people can adjust if they're prepared and create the options and be smart, and that's really what I'm hoping this does. Not to doom and gloom, but to give you a chance to think yep I kind of see that what can we do to get ahead of it. So we are ready when it hits full force.

Don't forget to check out the blogs at hallettphilanthropy.com. RSS feed you can write to your inbox and if you want to reach out to me it's podcast@hallettphilanthropy.com. This is a joy. I do this every week. I love the podcast. I don't even know if anybody's listening, although I hear from some people so I know a few people are. What I want to say is thank you as my year ends. I want to be appreciative and be grateful for you listening and allowing me to join you wherever you are in your car, in your home, in your office, wherever that is. And hopefully these things have been helpful and you feel like they are worthwhile and worth 20 or 22 minutes of your time, maybe a minute or two longer today, I'm taking a week off between the holidays so this is the last podcast of 2023. But I'll start in January and 2024 right back up and as I mentioned, really about inflation and that we've got to be ready for these conversations and some tactical outcomes that you can adjust to be ready for some of the changes that are coming, based on where we have been over the last year, year-and-a-half, and why inflation is just it's insidious when it comes to lives and families. We'll talk all about that next time right back here on "Around with Randall". Don't forget, some people make things happen, some people watch things happen, then there are those who wondered what happened. Be someone for your organization, for your family, for others, for the people in your community, for the things that are most important. Be someone who makes things happen for all the things in life that cause us to wonder what happened. That's a great way to live. I'll look forward to seeing you in 2024, right back here on the next edition of "Around with Randall". Don't forget, make it a great day.