March 1, 2021
Dynamic and Disruptive Forces are Increasingly at Work

Guest post by Teri Behrens, Ph.D, and Michael Layton, Ph.D

This post first appeared as part of the Dorothy A. Johnson Center for Philanthropy’s 11 Trends in Philanthropy for 2021 report in January 2021. View the full report at this link: https://johnsoncenter.org/trends

The Nonprofit Ecosystem

At the Dorothy A. Johnson Center for Philanthropy, we think of philanthropy as an ecosystem of nonprofit organizations, individual donors, formal foundations of all types, and corporate giving programs. Essentially, it includes all of the nongovernmental entities who work toward improving our lives – that is, whose overall purpose is to express love of humanity.

The concept of an ecosystem comes from biology, where it is defined as a complex of living organisms, their physical environment, and their relationships in a particular unit of space. Increasingly, the word is being used to describe how organizations interact with each other and their environment. As Hwang (2014) noted,

An ecosystem … is about the dynamic interactions between things. It’s about how people meet, talk, trust, share, collaborate, team, experiment, and grow together. When an ecosystem thrives, it means that the people have developed patterns of behavior – or culture – that streamline the flow of ideas, talent, and capital throughout a system. (para. 11)

The concept of a nonprofit ecosystem got a boost from a 2008 article, “Cultivate Your Ecosystem,” in the Stanford Social Innovation Review by Paul N. Bloom and Gregory Dees. The authors argue that rather than finding gaps to fill, a social entrepreneur ought to understand where they fit as an entity within a larger, complex system.

Evolution and Adaptation in an Ever-changing Industry

In recent years, we’ve seen an increase in dynamic forces that are disrupting this philanthropic ecosystem. In previous years and in other trends we revisit in this report, we’ve described how some of these forces are affecting the sector. While complex systems are continually adapting to change, what has become apparent is that these trends are interacting in ways that were unforeseeable a decade ago. Some examples:

• Wealth has become more concentrated. Megadonors – ultrahigh-net worth individuals and families who have amassed tremendous wealth – are making jaw-droppingly large contributions. At the same time, the small- to mid-size individual giving that has been a mainstay of nonprofit revenue is declining (Rooney, 2019). Total individual giving in the U.S. was $279 billion in 2016, up from $174 billion in 2000, but the percentage of households reporting having made a donation fell to 54%, down from 66% in 2000. Rooney also cites evidence that this trend is not limited to the U.S.

“This shifting weight, rather than promoting the ‘reconciliation of the rich and the poor,’ to borrow a phrase from Andrew Carnegie’s The Gospel of Wealth, means philanthropy is running the risk of becoming yet another social realm dominated by the rich.”

It may also reinforce the perception of an “Elite Charade of Changing the World” – the subtitle of Anand Giridharadas’s provocative, best-selling critique (2018). Rather than generating greater social capital and cohesion, philanthropy is another element aggravating divisions.

• More giving mechanisms means more complexity for development teams. Donor advised funds (DAFs) and online giving platforms have led to a broader array of giving mechanisms for individual donors of all levels of wealth. For nonprofits, this leads to a need for increasingly sophisticated fundraising strategies that incorporate social media savvy, technological sophistication, and extensive donor cultivation work. Add in a bit of gamesmanship with contest-like funding opportunities (the MacArthur Foundation’s 100 and Change project, for example) and you have a development role that requires an incredible juggling act on the part of development staff. DAFs, in particular, provide a challenge in terms of their opacity: it’s hard to make a pitch when you don’t know who controls the purse strings.
  
  
• The amount of data available continues to grow. We’ve seen an incredible increase in the data available to understand markets, individual behaviors, and geographies. Nonprofit organizations and foundations are both users and providers of this data. However, we’re also seeing how these data can be misused, and there are persistent concerns about privacy and inequitable access to data. Sector leaders must now understand their legal obligations to protect privacy, evolving protocols for ensuring data are secure, and the many ways they could use data to further their missions. In addition, there is a risk that unequal access to data can exacerbate the gap between larger, better resourced nonprofits and financially strapped, smaller organizations.
  
  
• Diversity, equity, and inclusion are becoming more central in philanthropy. The triple pandemics of COVID-19, economic insecurity, and racial injustice have accelerated and accentuated the urgency of the philanthropic sector’s struggle with the issues of racialized outcomes. It has prompted a reckoning with the sector’s complicity in maintaining structures that perpetuate racial and social inequality. The chronic underfunding of organizations led by Black, Indigenous, and people of color (BIPOC) leaders has become apparent (Dorsey, Bradach, & Kim, 2020). Good-faith efforts to promote diversity in the sector – such as foundations requiring grantees to report on the demographics of their boards and staff – may have led to a focus on diversity at the expense of inclusive practices. Focusing on diversity can lead to tokenism (Ho, 2017), with people of color are used as racialized props, rather than addressing the critical issues underlying racial and social inequality.
  
  
• The boundaries among the sectors continue to blur. The rise of social ventures and the blurring of roles among the business, government and philanthropic sectors has created a demand for sector leaders who can negotiate new boundaries. What are the limits on philanthropic funding of infrastructure and human services that have traditionally been the purview of government? Can and should philanthropy play a role in overcoming the digital divide, for example? The rise of “for benefit” B corporations (see fourthsector.org, for example), is leading some to question whether much of the work traditionally done by the sector can be done more effectively by this new hybrid.

“This trend of converging, overlapping, and nonlinear disruptions in the sector is likely to persist, elevating the demands on leaders to operate from an ecosystem perspective.”

Even in their internal operations, lines are blurring. Over half of private foundations surveyed have part of their endowments in impact investments (Foundation Source, 2019), blurring the lines between business investments and philanthropy, investment manager and program officer.

It will require greater collaboration between and among the entities that comprise the philanthropic ecosystem in which they are embedded. It will require new ways of training and bringing new leaders into the sector, cultivating the ability to work across what have traditionally been sectoral and socio-economic boundaries.

For more content from the Dorothy A. Johnson Center for Philanthropy, consider joining the Center virtually for Lunch & Learn: 11 Trends in Philanthropy for 2021, on April 15, 2021.

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About the Authors

Teri Behrens, Ph.D. joined the Johnson Center in 2009 and currently serves as the executive director. She is also the founder and editor-in-chief of The Foundation Review, the peer-reviewed journal on philanthropy published quarterly by the center. Teri is focused on embedding equity in the center’s work, building bridges between funders and nonprofits, and creating new career pathways in the sector.

Previously, Teri was the director of evaluation for the W.K. Kellogg Foundation, providing leadership for the foundation’s overall evaluation program. Her early career included roles in a nonprofit organization, state government, and private consulting. Teri holds a doctorate in psychology from North Carolina State University and a bachelor’s degree in psychology and English from Case Western Reserve University.

Michael Layton, Ph.D. joined the Johnson Center in September 2020 as the W.K. Kellogg Community Philanthropy Chair, the nation’s first endowed chair focused on community philanthropy.

Michael brings a wealth of experience to this role, including his work as a researcher, teacher, director, advocate, and consultant. He has worked closely with a mix of community philanthropy organizations throughout the Americas, and brings to his position a nuanced understanding the unique challenges and capacities of community philanthropy to act as a catalyst in promoting community-led development and in strengthening the local context for philanthropy.

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References

Bloom, P. N., & Dees, J. G. (2008, Winter). Cultivate your ecosystem. Stanford Social Innovation Review. https://ssir.org/articles/entry/cultivate_your_ecosystem

Dorsey, C., Bradach, J., & Kim, P. (2020, May 4). Racial equity and philanthropy: Disparities in funding for leaders of color leave impact on the table. The Bridgespan Group and Echoing Green. https://www.bridgespan.org/bridgespan/Images/articles/racial-equity-and-philanthropy/racial-equity-and-philanthropy.pdf

Foundation Source. (2019, November). Survey: Impact investing and private foundations. https://foundationsource.com/resources/library/impact-investing-and-private-foundations/

Ho, H. K. (2017, September 18). 8 ways people of color are tokenized in nonprofits. Medium. https://medium.com/the-nonprofit-revolution/8-ways-people-of-color-are-tokenized-in-nonprofits-32138d0860c1

Hwang, Peter W. (2014, April 16). The next big business buzzwork: Ecosystem? Forbes. https://www.forbes.com/sites/victorhwang/2014/04/16/the-next-big-business-buzzword-ecosystem/#5d6d64c25456

Rooney, P. M. (2019, December 4). Where have all the donors gone? The continued decline of the small donor and the growth of megadonors. Nonprofit Quarterly. https://nonprofitquarterly.org/where-have-all-the-donors-gone-the-continued-decline-of-the-small-donor-and-the-growth-of-megadonors/