Episode 138: Giving in 2022

Welcome to another edition of "Around with Randall", your weekly podcast for making your non-profit more effective for your community. And here is your host, the CEO and founder of Hallett Philanthropy, Randall Hallett. Thanks again for joining me, Randall, on this edition of around with Randall.

I take no great pleasure in talking about some of the content of today's podcast to be very candid. In fact, I wanted to be wrong back in December of 2022. Multiple times during the last year I said that we were going to eventually get the numbers from philanthropy as a part or in totality of 2022, and they're beginning to leak out, and they're not what anybody wants. And it's sobering, is kind of the word that comes to mind. Today we're going to talk a little bit about what those numbers tell us and what you can be doing to for your nonprofit get out ahead of the curve.

Each year Giving USA along in its partnership with the Lily School of Philanthropy at IUPUI produce the report that really kind of the annual report of giving in the United States, and they're just coming out with the 2022 numbers. Takes about six months for them to put them all together and while we have seen some generally good information and good news over the last several years it's hard to find as much good in this report. Overall, philanthropy year-over-year, dollar for dollar dropped 3.4 percent. And if we take inflation into account, it dropped 10.5 percent as a percentage of GDP, which kind of gives us an understanding or estimation of where that compares. The overall economic climate of the United States a couple years ago we were 2.41. In 2022 we had dropped to 1.9 percent or just below. We're seeing a drop in philanthropy across the United States in ways many of us don't quite understand and can't really quantify.

Inaccurate numbers. I talked about me and my my own thought process in the last several years about this concept and unfortunately it's documented in the podcasts that I thought this was coming. You could see it in the way in which our economy was and in which way nonprofits were kind of signaling some of the concerns about donors. I think the thing that gets me at least the most upset, disappointed, concerned is that it's the drop in individual donors. Now I'm going to talk about maybe some of the reporting mechanisms that I still question a little bit, but the numbers are such that there's no doubt that individual donors, in terms of the dollars they provide, has dropped another two percent in terms of the amount of money going into philanthropy each year. Last year was at 66 percent, this year at 64 percent. That takes into account a lot of individuals that we are looking at in terms of who we should be approaching and who we should be talking to.

That individual giving revenue being down overall so significantly is troublesome. Now I don't have the numbers yet of how many households are giving. We've seen a dramatic drop in that, but nevertheless it's also going to drop just by the nature of connection between people living in homes or in households. So we're really getting challenged in our industry about what we should be doing.

Now on the individual front let me throw something in there. I've always said that we really don't have a clear definition of individuals because within the foundation's reporting our Donor advised funds, well, we're seeing a dramatic increase in those well individuals make those choices. So in some ways those are that's individual giving. We have seen a steady growth until this year in planned giving and we saw diminishment this year. But planned gifts are made by individuals. So 64 percent, as articulated a few minutes ago, is kind of the number that's coming out of the giving USA annual report, isn't actually accurate when it comes to the number of individuals making decisions because it doesn't account for those other two categories, but it still means it's down.

What does it mean for us? What is it we should be doing? Well you can go back and find about six of these podcasts where I talk about this in various ways from predicting it to ways to overcome it, and today I want to cover some high marks. There are four major things and the tactical is going to take a few minutes longer than normal. Four things that we need to be concerned about in terms of improving our own behavior, impact, control. So let's kind of take these apart.

If you ever thought or continued to think that a nonprofit is worthy of someone's contributions, blindly, particularly at larger numbers than you're being left in the past. So the first thing is we have to be able to express why are nonprofit, why the charity, why the mission is critical to the community. Why would people want to invest in it in some non-profit areas or sectors? That's easier to do than others. I've articulated for many years that I believe the three core components of a great community are infrastructure, fire, police, safety, just living, not nonprofit-related. Just core in this to a great Community infrastructure.

Number two is education. That's your hope. That's your future. That's attracting young people or keeping young people. I don't mean that means you have to have a major university. Some smaller communities don't, but they have a community college or they have other things that might provide that kind of hope and that investment into the future. Talent.

The third is healthcare. We just. You can't live in a community that doesn't have healthcare because what's going to end up happening is people will leave to go find it. Now there are lots of people possibly listening that are saying wait a minute. I'm in Social Services. Yes, they're critically important. Or, I'm in arts and science or membership - zoos, museums, I belong to those type of things. I think they're important. But the question is going to become how you quote unquote sell that as to why it's critical, and it's a harder sell. Healthcare is easy because we're eventually all going to need it. Education is easier because that's hope in the future. If there is nonprofit work, and infrastructure, and there's probably the less that's usually, not always, more tax or government-related but there's nonprofit support around that. We've talked about the public-private partnerships on a different podcast. That's more easily understood as to why that's important. In any of these cases, plus all the other sectors of the nonprofit area including religion you're going to have to explain it. What is it you're doing that makes a difference, that changes lives?

I think about, certainly, have my own religious perspective but that you should just give us money because we deserve it. You're a member of our church. I'm telling you I think that argument is harder to sell today. What are you doing with the money in the church? What is that doing to make the community a better place? How are you interacting with other nonprofits who maybe have similar views that about what it can be and what difference it can make for people who are either looking for a religious experience or what churches, which are phenomenal at providing some base necessities for people. At times if you're not communicating that then you're putting yourself at a disadvantage. There's a second part to this conversation about why things are important and what you do and from your mission, you have to be willing to listen and accept the rejection. Can you adjust from it?

Let me give you an example. If you're a hospital and you're wanting to do some major project and the community just says gosh, I don't want to do it, keeping banging on that door, trying to get in isn't going to help you. You're going to have to shift, which means we'll get to this enrollment in the relationship with our c-suite, CEOs, Executives, leaders, you're gonna have to have hard conversations. Say I, we, the community doesn't want that project. It may also require some organizations to think about creating a more long-term, which we'll talk about in number four, strategy about finances in financing. It's not going to be easy, which means you may want things more. More fundraising opportunities towards endowments for programs, positions, things of that nature. Trouble is that we always need cash. We'll get to that in a minute. You've got to be willing to go listen to what the community's saying. You need to be, hey here's what we're trying to do. But then listen to the feedback and adjust to it, which means strategic planning may change how we identify, what we want to do. Maybe come faster and quicker.

Many campaigns, as we talk about in healthcare, more often may become more of the norm because they can be stood up, executed, and stood down more quickly to meet that community need. flexibility is going to be the key, but being able to explain the value you deliver and why it's important is critical.

Number two is we've got to stop assuming we know what donors want to give to. The question we need to be asking is what moves them if we have fewer people giving and those people who are at the top we talk about all the time, at least I do, we used to be in an 80-20 world. 20 percent of our donors made up 80 percent of our dollars. We're in at least a 95.5 world, so if you're working with that five percent you can't just walk in the door and say this is what we do and you should give to it, kind of tailors into number one. We talked about a moment ago but then the second part of it, which is really the tactical, take away number two. You've got to be asking questions. What moves you? What if you could make a gift? What would you give to and what would you want the output, the impact, the value to be? That's a scary question because they may articulate something that you don't do or that someone else does better.

I go back to what Brian Crimmins and Nathan Chappelle said in their book The Generosity Crisis. Radical relationships, radical engagement. You've got to build deeper relationships. Longer term people don't make million dollar decisions. Most of the time with one or two meetings that kind of level of giving, the bigger the gift the more the trust, which means you've got to spend more time with them. And a part of that time in building trust is asking what moves them and then filling it in to where the mission fits that particular passion, which is going to create more conversations which we're going to get to in number three with our leadership listening about passion, and engagement, and what moves people for that top five percent who are making all the gifts possible. At least most the money possible is critical.

Number three is alignment with your leadership. I'll be announcing in the next week or so a major effort that I've undertaken to really push ,and there'll be a number of podcasts in a row on this, really push the concept of where leadership is through the eyes of healthcare, but it'll work anywhere or in any sector of nonprofit. Work around where the executive team is regarding philanthropy. I've come to believe that philanthropy in any one organization will only go as far as the leadership takes it. Not the fundraising leadership, the leadership, because as philanthropic leaders, philanthropic agents, philanthropic connectors, gift officers, communicators, whatever you want to call yourself. For most of us we don't get to make the decision how the money's spent, we're on the revenue side. Income and what if we want to get to number one or number two about the importance and value to the community, and being able to find out what moves people. We have to engage the people that are actually going to spend the money. Now some sectors have figured this out. We've talked a lot about this. This will be a big part of the next series of podcasts in the work that I'm going to announce is that higher eds got it figured out at least much better. You. There's studies out there that says higher ed CEOs, chancellors, presidents, are spending 30, 40, 50 percent of their time on philanthropic-related activities. They're running a 100 million or billion dollar organization and they're not worried about what time chemistry class occurs. They couldn't care less. They want to be done. Well, but they got other people to figure that out. They're the ones setting the vision, spending the money, and they're engaged with philanthropy. This is why higher ed has seen these dramatic increases.

So let's take it out of higher ed. Before I do, I was speaking at a conference here recently and there was a university president in the room and I asked her how much of this is in the last couple weeks, how much of your time is spent every day, percentage on philanthropic-related, relationship-based strategic Vision conversations, relationships development. She said 80 percent. I said do you know what time chemistry class is today? She says I have no idea.

If you are in religion, whether that's a minister, a rabbi, an Imam, a priest, it doesn't make any difference. Their role is going to change because they're the ones who are setting vision and certainly there's a board and you know others who are a part of that direction but at the end of the day there's a central figure the CEO who's driving this conversation they're not spending as much time on this they don't want to not everyone but a lot of them whether you're the zoo director or the museum director the same applies

how we engage with our leadership how we leverage the CFO in understanding Finance how we leverage the CEO in terms of vision and about the relationships that they have to have at the top levels in our community and the time that that takes other leaders who fill in those gaps

this is a cry for less siloing of philanthropy and more engagement across the board

number four there is still an immense opportunity in plain giving inflationary issues over the last year I think are a part of the reason the numbers have diminished I don't think there's any question and if people are concerned that opens up the door to giving after someone passes land giving the problem we have is as mentioned earlier we need the cash today how do we reposition our philanthropy to leverage the greatest assets that are available to us through someone's estate well that requires two certainly two major components number one is a realization by the organization outside of philanthropy that if we see a drop in cash we might be seeing an increase down the road when those bequests come to fruition so it's repositioning philanthropy in a positive way for long-term investment that could include endowments that could include delayed gratification the second is changing our communication with donors

I can't tell you how many conversations more and more clients are asking me to join where I say well let's talk about your estate and what your thoughts are they go well I hadn't thought about it. Or I just did a series of seminars for financial planners and state attorneys and I'm like here's where your where your clients are. We don't asking you to divulge anything that's proprietary and or confidential but my guess is they're asking these questions quietly in their back of their mind or in their own kitchen are you asking what they really want not about the tactics about a trust versus a bargain sale and not the tactics the philosophy this requires these changes does our organization understand that it's a delayed gratification and we're going to have to mark the the return on investment a little bit differently and they may need to plan accordingly. If we could get $500,000 in the state and let's say 10 years versus $5,000 or $10,000 today it's a change in mentality.

Number two is how we communicate. These are the four things we're gonna have to figure out. Why are you critically important to your community? Mission-based, outcome-based. Number two, what moves people and how do you max those two up. Then how do we listen better and ask the right questions?

Number three is getting our executive team, particularly the CEO, to engage at a much higher level, more in-depth level, about philanthropy. And number four is thinking more long-term with the last number. So I was $85 trillion in the next 25 years or 20 years when it comes to generational change in wealth and play 3 being a part of those plans. Those are the four. It's gonna be tough but unfortunately we saw this coming. The challenge becomes how do we become leaders to take these four things, and others, to put them into planning so we can meet the needs of our community through nonprofit work. It's a great question, worthy of your time and worthy of your effort.

Don't forget check out the blogs at hallettphilanthropy.com. Great 90 second reads just to give you something to think about. If you'd like to reach out to me that's podcast@hallettphilanthropy.com. Even though things may be a little bit more challenging than we even realized you play a critical role. We need philanthropy. We need non-profits to fill gaps. Don't forget my all-time favorite saying some people make things happen, some people watch things happen, then there are those who wondered what happened. We're looking for people like ourselves on the philanthropy side, the phone being a philanthropist of making things happen so we can help those things and people who are wondering what happened. It's a great, noble cause. It's gonna take a little extra effort, the numbers we thought were coming are here now. The question is what we're gonna do about it, and you're capable and you're an important role player in making things better for philanthropy and for your nonprofit. And I thank you for that even though I probably will never be touched by it, it is making a difference to someone. I'll look forward to seeing you next time right back here on "Around with Randall" and don't forget make it a great day.