Eyes on the Industry: Current Trends in the Nonprofit Sector

Since the start of the Great Recession in 2008, a new normal has emerged within the nonprofit industry—one that demands more nimble strategic plans, disciplined financials and innovative operational solutions capable of doing more with less. While financial challenges may be front and center for many nonprofits, simply keeping the lights on is not the only issue they face. Even organizations with deep pockets and reserves for a rainy day are coming to terms with the financial, technological and regulatory transformations that have shaken up the sector in 2014 and will continue to reshape the landscape in 2015.

As the New Year approaches and nonprofits revisit their strategic plans for the months ahead, let us know which issues are top of mind for your organization in our latest reader survey. In the meantime, here are several of the most impactful top line issues that remain on our radar:

1. Heightened competition for financial resources: This trend, which began in 2008 with the start of the recession, continues to mire nonprofits’ progress in 2014. The scarcity of funding that is available for nonprofits to meet their programmatic needs also generates intense competition for resources, making it more important than ever for boards to participate in their organizations’ fundraising activities. We have observed an increasing number of nonprofit organizations adopting “pay to play” policies, in which board members need to either contribute to the organization or get others to contribute in order to join the board. These policies can work well for more established community organizations, colleges and universities, and healthcare organizations. But they are not the right solution for every nonprofit.

2. Significant service gaps: The past few years have seen a notable decline in the amount of government funding available to nonprofits on the federal, state and local levels. At the same time, the demand for services by the communities and individuals that nonprofits serve has increased, resulting in a considerable shortfall of services. In 2013, more than half of the nonprofits surveyed by the Nonprofit Finance Fund reported they didn’t expect to have enough resources to meet increased community needs. While there are adamant calls from across the industry for governments to ameliorate this difficult situation, address inefficiencies in their tax structures and shore up new funding, this gap in services will continue until the U.S. economy is able to improve more substantially. We expect this to be the single greatest factor influencing nonprofits’ overall impact in the coming years.

3. Double down on advocacy and transparency: In the face of challenging competition and widespread funding shortfalls, we are seeing more nonprofits refocus their efforts on advancing their missions through advocacy. The critical advantage of advocacy is that it focuses on promoting a nonprofit’s specific knowledge, services and mission, such that policymakers and other key influencers are more educated and in a better position to enact positive change. Still, the cornerstone of effective advocacy is greater transparency regarding an organization’s governance and financials. Donors, stakeholders and policymakers demand that nonprofits uphold ethical and accountable practices in all programmatic and financial areas, especially around the sensitive topics of fundraising and executive compensation.

For more of the top trends currently impacting the nonprofit sector, I encourage you to read the full version of this article, which originally appeared in the Fall 2014 Nonprofit Standard newsletter. Stay tuned to the blog in the coming weeks, when we’ll release the results from our latest reader survey surrounding nonprofits’ top areas of concern for the year ahead.