Episode 161: Review of Predictions for 2023

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.

Thank you so much for joining me Randall on this edition of "Around with Randall." Today one of my favorite episodes. This and the next one, predictions. Today, looking back on what I predicted a year ago right now for 2023. Next I'll look into 2024 and try my best to figure out what philanthropy in the world of nonprofits might look like. Having done this for a couple of years, I'm always a little surprised, to be candid. I have been pretty darn close in my predictions and I don't just say philanthropy will be great. I get specific. Last year I was seven of eight. I believe in my predictions, and this year looks to be, as I look back on what I said a year ago about 2023, pretty darn good. So let's jump right in and talk a little bit about what I said and what actually happened.

My first major group, and it was really more of a group of predictions, all dealt with the economics of our world specifically around stock market, GDP around where philanthropy fits in certainly around some financial issues related to organizations. The first thing I said was, is that I believe that from a GDP perspective, so if you look at philanthropy as a percentage of GDP, that it would drop. We were above 20 and a couple years ago almost 2.41% that my prediction when it was all said and done, when the numbers were released in July by Giving USA that and the Giving Collaborative that we would be down to about 1.9% 1.85% to 1.9% and I was right. It was 1.9%, which means we had fewer people and fewer dollars coming into the philanthropic environment, and it was a lower part of GDP. And I think we all are beginning to feel that as a part of this process that it's tougher to get people to give, that philanthropy is not as large as it was two or three years ago.

The one that I missed was the second one here where I said part of the reason I think GDP, at least the philanthropy, is a part of GDP will decrease is that I think believed that the stock market was going to take a hit, that we had over inflated stocks, that there was economic uncertainty ahead, and that maybe it would go as low as 29,000. At some point during the year, that one actually I get an F for. It's actually up and I'm still surprised. Stunned would be the better word. I truly believe that our economic climate is still one based on the pressures of inflation, which we'll talk about in the predictions and certainly in the first podcast dedicated to inflation, first podcast in 2024, is the issues involving the stock market are not done here. But for a prediction last year to this year I was wrong. I also said as a subpart of that that there would be less stock giving, meaning individuals making appreciated stock gifts mostly appreciated and that actually was wrong because the stock markets up and so people are making gifts. And I also said that because of the pressures on the stock market, which are based on corporate engagement in the economic model in the bigger do gross domestic product of our country that corporate giving would go down. And actually, according to the Business Journal, it's actually stagnant. So it wasn't that far off, but I missed the prediction when it came to growth of the market.

In that same vein, general economics, donor advised funds, I had predicted that we will continue to see a dramatic increase in dollars coming out of donor advised funds, going into donor advised funds, and coming out for philanthropy. And that one I was right. I'm not sure that was that great of a leap in actuality. What we know is that giving was up to donor advised funds by 9% or about $52 billion according to the National Philanthropic Trust. And that the value of donor advised funds actually decreased, which is interesting considering that the amount going in and coming out both increased. We also saw an increased number of donor advised funds ,a growth of almost 3%. And if you go back and look at various podcasts, I talk about donor advised funds, there's just growth in them. Heard a gentleman today talk about the fact that he works with six incredibly wealthy families. They use their community foundation to distribute the funds even though there's some infrastructure for these families regarding their own philanthropic interests because it masks who they are and how things are being done, and so that's another way of looking at why donor advised funds are advantageous to donors, not only the donation.

The two bigger ones that I talked about besides philanthropy as a whole in comparison to gross domestic product was about inflation, and that I predicted that inflation would go up, that it would create immense pressure on nonprofits. If we look at the actualities, and we're all living in the world where inflation this last year has hit us pretty hard, is that number one that 93% of nonprofits had to increase their wages, and a significant number had to increase some positions dramatically to either keep and maintain or to attract personnel talent, that we have an immense amount of openings in our profession. In the last month of the 2023 we've seen a little bit of a decrease, but in the nonprofit world according to the Nonprofit Works study, nearly three out of four jobs, just short of 75% report nonprofits reported some level of job vacancy. Incredibly high. Three out of four had a job vacancy within that nonprofit, and that because of this these vacancies that the workload, 45%. According to Nonprofit Pro, 45 % of all fundraising professionals said that there was an immense amount of stress of, because of being overworked. So not only has this job opening situation and the increase in salaries and inflation being up caused pressure on the finances, is putting pressure on people who are trying to keep and cover jobs that are open.

The last one was around what I would call closures or bankruptcies. When we talk about the economic climate and what I predicted was, is, that there'll be some hospitals that will close departments, that will close, and that there will be some universities that will begin the process of closing because of the reduced philanthropy. The economic climate inflation things of that nature on hospitals, I unfortunately was correct. I wish I wasn't. That there were 21 hospitals that closed, or called, or filed for bankruptcy in 2021, 46 in 2022, and as of October 31st, 80 in 2023. So you saw the closures or bankruptcies in hospitals in Envision Health Mercy in Iowa City, Central Mass health, American Physician Partners, Right Aid, which you think of as maybe not a hospital but an immense health care provider. Bankruptcy, universities, didn't see as much. There were some closings. A Lincoln Christian closed. What we did see though, that I really didn't predict but probably should have seen, is consolidation. That there have been a number of universities that have chosen to consolidate to save on expenses.

And so all of this, whether it's the percentage of philanthropy's GDP, the stock market, which I missed, inflation, and bankruptcy was about three out of four. I got the bigger premise, the stock market, I missed it. Means that we have a pressure going on. When we talk about the economic climate and our nonprofits are struggling, may not be seen as much but I think that it's being felt internally. The question becomes what happens next year, and that's what you need to pay attention to next time when I talk about my predictions for 2024. So the bigger conversation piece in my predictions a year ago about 2023 economics, I had some others though.

The second was that there would be a really highly developed series of strategies by nonprofits to increase pay particularly of fundraisers because of not only inflation but the job turnover, the great resignation, the great reshuffling. And on that one I was right on that. What we know is that the average salary increased average almost five %. In a nonprofit world that's some serious money. We also knew that according to about 2/3 of the nonprofits that participated in a survey by Nonprofit Pro HR that 57% have resorted to some type of remote learning or remote working, excuse me, for their organization. Part of that is because of pressure not to lose people so if they couldn't raise salaries more what could we do about benefits. In fact, 40% of nonprofit employees report an increase on the benefit side even if they didn't get as much if they, as they wanted in maybe salary increases. Interestingly enough, also that this salary increase is affecting recruitment. So the nonprofit Workforce study also found that 72% % of those who are looking for jobs, almost three out of four, talked about the fact that it was a major component and yet the nonprofits, about 66%, 2/3, say we just don't have enough money, we have constraints when it comes to the demands that some people are asking about in terms of salary. The last thing I'll say also out of the Nonprofit Workforce Study is is that the most cited reason for why someone would leave, 72%, was salary competition, that someone could offer him more money. Anecdotally, I just had a a friend of mine take a new job with a cross town rival and this individual is just distraught, almost feels like she's betraying someone, but the money difference was so significant my counsel was you got to protect yourself and your family. Go back, see if the other place will match it, but if they can't you got to do what you got to do. That's what we're hearing more often. Salary constraints, bonus structure, a remote work environment, the ability to be more flexible. Maybe it's retirement, other things are going to become more and more of a conversation because our talent pool is such that the the emphasis on the worker, they have more power than the employer and so it's something to keep in mind. If you're the leader trying to figure out how do you get people to feel good about where they're at, part of that's comp and it's becoming more and more of a conversation.

The big third area was where would I see increased dollars going to emphasis in terms of philanthropy and my prediction was and I think I used the example of the huge fight that was finally settled near the Grand Canyon and in the water system of the West Coast, Arizona, southwest Arizona, Utah, California, New Mexico, Colorado, that climate philanthropy would see a dramatic increase. And this one I hit out of the park. It appears, according to the Climate Leadership Initiative, that philanthropy dollars is more than 20% increased in this general area. So if we look at it we've gone from about seven or just really short of $8 billion that was tracked a year ago or a little more more than a year ago for climate jumped to almost $12 billion. That's $12 billion of $800 billion dollars when we talk about global giving in a year. And so that comes from a combination of the Climate Leadership Initiative and Climate Works Foundation. The bottom line is that climate's getting more attention. There's more and more articles and commentary about philanthropy being a part of the solution when we talk about the climate challenges, and I think that big, no big secret. We'll talk about this in the next podcast. I'm predicting going forward 2024. It's going to increase. It's going to continue.

The fourth major area was about cyber security, that we're going to see dramatically increased cyber attacks and we're going to see dramatically increased expenses related to that. So 27% of the nonprofits in the world this year, 2023, have reported being a victim to some type of cyber attack, according to the nonprofit Tech for Good report. Think about that. A quarter of all nonprofits had some level of cyber attack, ransomware, or whatever. That's the ones that fell victim. They're now talking about, from various reports, that 50% of all non-government organizations, 50%, had, were, at least had some level of being targeted which obviously a lot didn't work. But you see immense health systems from Common Spirit having their data taken out of the EMR to Carthage Area and Claxton Hepburn Hospitals, Save the Children had enormous data breach. All of this is to say that we're in a position where cyber is just a a challenge for nonprofits, so much so that the average increase in insurance for cyber which I have to have, which nonprofits have to have, they are anticipating it going and skyrocketing because this last year it went up 25% to 30%. And I'm a nobody, but if you're housing HIPAA compliant data you're talking about paying millions and millions and millions of dollars on insurance that doesn't include the people, the processes, and the investment that has to be done to take care of it. They also predict that going forward, and I'll give you a little hint of what we're going to talk about with 2024, is that next year the increases could be as much as 50% to 100%. There is a point where somebody says, and maybe it's me, I can't afford cyber insurance. It doesn't make a difference what you do. I can't afford it. It's not worth it. That conversation is coming and nonprofits will be the first to be in that discussion because the for-profit world will change their pricing model to afford it. The nonprofit world may not be able to do that.

Second to last major group of predictions or guess about 2023 is that we will see an increased level of special events in our nonprofits coming out of Covid, that there'll be a mass movement of need to get together and action. Actuality, I'm not sure there's data out there to support it. Anecdotally I think it's true. A lot of places I work with, a lot of places I know have gone back to special events. With that said there was a hidden intent. I may not have articulated it well enough that if you're going to do special events we're going to be watching it more, much more closely, and according to party slate there is ever increasing accountability pressure on special events to be more financially conscience. Better ROI and even if it's not ROI, don't spend stupidly. Even if we have a great ROI people don't want to go to elaborate knowing that their donated dollars, their philanthropy is being used to supplement an activity for the people who are actually giving. It's like self- inducement, party, slate saying we have to be very careful about that and that people are going to have to be care, really interested in doing great events that are meaningful and appropriate.

My final major area of prediction was the growth of artificial intelligence in philanthropy, and here I want to give a nod to my dear friend Nathan Chappelle what Donor Search is doing with Bill Tesco and Sarah Tesco as leaders. What my friend Scott Rosen CR is doing inside DS, we see it from other places, but frankly what's going on there I truly believe that in two years if you're only well screening you're going to be so far in the Dark Ages. If you're not using artificial intelligence in a meaningful way you're just being left behind, that this was the year that AI was truly accepted. Now it becomes about how do we perfect it.

So those were my predictions a year ago. The economics, the pay issues in nonprofits, that climate would be an ever-growing philanthropic area, that cyber would become a challenge and being at the attacks and insurance and things of that nature, that events would probably grow, but hidden in there is that there's an accountability, and that AI would be something that becomes more of the norm, the growth. Where I missed was the stock market. I was off about that but I'll take it. That's two years in a row, seven out of eight, out of nine, I'll take that. Maybe that's some credibility to listen to the next edition of "Around with Randall" where we'll talk about next year. Maybe my predictions might be right. Maybe you get something that might be valuable in terms of your planning and what you can do for your nonprofit and for your career.

Don't forget reach out to me podcast@hallettphilanthropy.com. Check out the blogs at Hallettphilanthropy.com, get an RSS feed right to you. We live in these crazy interesting times. 2024 is going to be even more crazy, believe it or not. Maybe not quite as bad as the pandemic as a whole. I hope you'll tune in and listen because if you can get a little bit of an edge, make some adjustments, you can do what really is my favorite all time saying, at least the first stanza of it. Some people make things happen, some people watch things happen, and then there are those who wondered what happened. You can be someone who's more ready to make things happen for those people who are wondering what happened. It's a great way to spend a career. I hope you feel that each and every day. I'll see you next time right back here on another edition, the prediction of 2024 edition of "Around with Randall." Don't forget, make it a great day.