9 trends in 9 minutes—here are some of the biggest trends in philanthropy that we expect will impact fundraising in 2023.
2023 will be marked by two dominant issues related to fundraising. As development and advancement professionals, we can do little to control the first. But we can, and we should, do everything possible to change the trajectory of the second.
Why We Should (Largely) Ignore Talk of a Recession
The looming possible recession is, of course, the first of the two primary issues that will dominate 2023.
We’re reminded of the famous phrase from 1990s politics: “it’s the economy, stupid.” Yes, fear of an impending recession has us all on edge, but should it?
We are fundraisers, not economists, so we can’t pretend to predict what’s coming. But history tells us that recessions are fuel for stock market rallies and growth. And if we focus only on a possible recession, we won’t be ready for what comes next: the upswing.
First, a refresher. Philanthropic giving is highly correlated to stock market performance, as you can see in the Total Charitable Giving Graphed with the S&P chart that maps giving against the S&P 500. It does not correlate as closely with the economy. The market and the economy are two different beasts that are not interchangeable.
Charitable giving is highly correlated with stock market performance.
If We Focus Solely on the Recession, We Will Miss the Rally that Comes Next
This next chart, The Price of Long-Term Growth is Periodic Volatility, was included in a presentation delivered to The Giving Institute by the wealth management firm Bernstein, shows recessions over the past five decades (noted as the heavy black vertical lines).
The blue squiggly line is stock market performance (the S&P 500). You’ll see that the blue line takes a dive when it hits the black bar. But look what happens next: the blue line (the market) shoots upward on a staggering trajectory.
What does this mean to our everyday efforts in 2023? We must keep engaging donors. Specifically, we should acknowledge fears of an upcoming recession if a donor expresses concern. But then we must keep the mission at the heart of all discussions. The need doesn’t evaporate in the face of recession, so authentic relationships with donors remain a priority. In fact, a recession may mean that the mission is more important than ever in the community, creating a renewed urgency to give.
We should NEVER assume that donors don’t want to hear from us because the economy isn’t strong or they have too much on their plate. If we continue to treat them as investors, we will be at the top of their list of giving priorities when the market regains its strength. If we do not, they will give elsewhere.
During recessions since 1969, the stock market dipped, but rebounded quickly and then grew dramatically.
A Crisis Is Brewing
The second issue that will dominate 2023 is also concerning, but it is one that we can solve with intentionality. It’s the giving crisis—the declining trendline that shows fewer American households are giving.
At first glance, U.S. giving is robust. The Total Giving, 1981-2021 chart from Giving USA, taken alone, paints a fairly rosy picture: philanthropic giving grew again in 2021—even after a record high 2020. So, what are we concerned about?
What the chart doesn’t show is that fewer than half of American households give to charity today, down from two-thirds in the early 2000s. Mega gifts are propping up total giving at the expense of the number of donors. Other trends exacerbating the giving crisis:
- We’re prioritizing major gifts at the expense of our middle donors—the lead donors of tomorrow.
- Rates of donor attrition are horrendous. Less than half of all donors stop giving.
- We’re not engaging our newest donors; as a result, they don’t give again.
- Traditionally, churches have been one of the primary ways children learned the importance of giving. With today’s decline in religious affiliation, these weekly lessons are fading away.
- The rise of crowdfunding philanthropy such as GoFundMe circumvents giving to organizations and gives directly to people in need.
- Round-up or add-on donations at store check-outs make giving more transactional and disconnected from an organization or cause.
If we continue along this path, we’re in trouble. The mega-givers will inevitably fade and because our focus has been on them instead of cultivating the next generation, there will be no one to take their place.
The solution? It’s not a hard one. We must build authentic relationships by treating donors at all levels like investors. Instead of giving them trinkets or building elaborate donor walls, we need to give them access. What does this look like? Some examples include:
- Call—don’t email—your top 25 donors before making a big announcement.
The Fundraising Effectiveness Project’s 2021 report paints a bleak picture of donor retention. In 2021, only 60.7 percent of repeat donors gave again while only 18 percent of new donors gave again.
- Have a board member host an event in his or her home where donors are invited to hear directly from the individuals who have been helped by the organization. These events should include both major and mid-range donors.
- Invite your major and mid-range to view architectural plans for your newest facility before anyone else.
- Arrange dinner between donors and a doctor whose research team is making exciting research advances.
- Piggy-back a special reception before or after a regular event such as a concert, seasonal program, or annual fundraising event.
Organizations Will Short-sightedly Postpone Campaigns in 2023 Out of Fear of the Economy
One trend we see continuing into 2023 is the hesitancy of many board members to embrace a campaign—even when clear donor financial support has been demonstrated.
Constant talk of an impending recession in the media has filled trustees, who are often heavily invested in the market, with fear that any campaign will be unsuccessful.
We’ve heard more than one board chair say, “now is not the time to launch a campaign.” Others with campaigns in the silent phase are considering pausing them until the perceived storm passes.
In 2023, it will be more important than ever for administrations and staff leadership teams to do a better job communicating with all trustees and board members to build understanding and trust.
As a firm, the Winkler Group weathered the Great Recession of 2008 and the pandemic. We saw the institutions and organizations that postponed or paused campaigns subsequently struggled. Unfortunately, they found out that:
- Postponing a campaign only compounds the need.
- As organizational needs became larger, donors were frustrated that leadership had failed to address them sooner.
- They missed out on the economic growth that happened soon after the recession ended.
- Their donors gave elsewhere, never to give at the same levels to the delaying organization again.
- When market recovers, organizations that launched campaigns were ahead of them.
Instead, we should listen to history and help our board members understand the lessons and the opportunities. A five-year pledge period instead of a three-year one may help lessen fears.
If you are left wondering how to convert a dysfunctional board into a high-performing one, this white paper provides helpful strategies.
Steering Committee Tenures Will Continue to Shrink
One trend we encourage is the move to campaign steering committees that are more focused and exist for shorter periods of time.
Over the past three years, many of our campaign clients have found success fielding multiple steering committees—each with short tenures. The idea is that a leadership gifts committee comes together to focus solely on the prospects at the very top of the gift chart. A subsequent steering committee focuses on prospects in the middle of the gift chart, and so on. Each committee has a shorter list of prospects, so their actions can be completed in a shorter time period.
Shorter spans mean organizations can recruit talented leaders with influence because the time commitment is not as great. These shorter steering committees are more focused—members see a sense of urgency and complete their cultivation visits and solicitations more quickly. With the faster pace comes more momentum, less procrastination, and more pledges. These targeted committees also better foster peer-to-peer asks as the committee consists of donors in the same giving range (major to major; mid-range to mid-range, for example). The “join me” ask can be made more effectively.
The Promotional Blitz for Donor Advised Funds Will Continue—to the Benefit of Academic Institutions
Donor advised funds (DAFs) are good business for national donor fund sponsors such as Schwab, Fidelity Charitable, and Vanguard.
As such, these sponsors will continue to promote the benefits of these giving vehicles among prospective donors.
We see a more urgent reason for national DAFs to enhance their promotional blitz in 2023. As DAFs continue to come under scrutiny in the form of legislation aimed at requiring annual payouts (the bipartisan Accelerating Charitable Efforts Act, or ACE, is still being considered in Congress), more national DAFs and even some community foundations will use their deep pockets to actively promote the benefits of their donor advised funds to overcome negative attention.
This is good news for academic institutions, who see the lion’s share of DAF grants (29 percent of all DAF grant dollars, 2014-2018) as opposed to only 14 percent of all total philanthropic giving over the same period.
The Giving Institute’s Special Report on Donor Advised Funds (2021) found that education received the majority of DAF grants (29 percent)—more than twice the percentage of total U.S. philanthropic giving to education (14 percent).
Regardless of one’s opinions of DAFs, fundraisers must understand them, recognize who in their database has one, and then encourage grants from them.
If you would like to learn more about donor advised funds and how to identify DAF holders already in your database, check out the Fundraisers’ Guide to Securing DAF Grants for further reading.
Support for Endowments Will Continue
Donors have pleasantly surprised us over the last few years.
Since the pandemic, they have expressed support for endowments like never before—often putting them above bricks and mortar as the campaign priority they would most like to support.
We don’t know for sure if support for endowments will continue in perpetuity, but we do expect the support to continue through 2023. This is great news for enhancing the long-term viability of organizations and institutions.
Foundations Will Continue to Give a Bigger Piece of the Philanthropic Pie
This sounds like good news, but there is a downside as well.
As you can see from this Giving USA 2022 chart, giving by foundations has grown tenfold since 1981.
Today, foundations account for nearly 20 percent of all philanthropic contributions. Forty years ago, foundations made up only six percent of total giving. The rise in the percentage of foundation gifts has come at the cost of individual gifts—which declined from 81 percent in the early 1980s to 67 percent last year.
This shift contributes to the giving crisis we mentioned previously. Consider the solicitation and stewardship process of a foundation gift against the cultivation and stewardship of an individual gift. With a foundation, a proposal is written and submitted—often with no human interaction.
More of the total philanthropic pie will continue to come from foundations.
A sterile accounting of how the grant was used is then transferred via email—full of data but often devoid of personal stories of impact. More time is spent behind a computer instead of building authentic relationships and engaging with the community.
We see no reason this trend will change in 2023. We continue to urge organizations and institutions to prioritize building relationships with individuals over foundations and corporations.
Campaign Gift Charts Will Look More Like an Hourglass than a Pyramid
Maybe it’s the impact of the Trump-era Tax Cut and Jobs Act that eliminated the incentive for most middle Americans to give philanthropically.
Or perhaps it’s our obsession with major gifts and donor acquisition at the expense of mid-range donors. Whatever the cause, the mid-level donor base has been eroded.
This attrition will continue to bring new challenges in 2023 since mid-range gifts are critical to success in campaigns and major gifts fundraising. Mid-range donors are the pipeline—they are tomorrow’s major donors. Without them, the future looks bleak.
Amid the Culture Wars, It’s Time to Put Mission Front and Center Once Again
Sadly, politics will continue to seep into our nonprofits, universities, healthcare institutions, and cultural organizations.
The stakes are high, especially when the views of nonprofit staff—who overall tend to be left-leaning—often clash with those of major donors—many of whom are more conservative.
Colleges and universities have grappled with this conflict for decades, but in the past few years, we’ve seen it become an issue across other nonprofit sectors as well. In 2023, it will be more pronounced.
So, what do we do? The answer is quite simple: focus on mission. We should focus on donors’ philanthropic priorities, not their cultural views, and keep our personal agendas to ourselves.
At the Southern Association of Independent Schools this past October, SAIS President Debra Wilson remarked, “Culture wars and political politicization have led to too many conversations with adults.” She challenged school leaders to always center schools around students and make their experiences the focus. In her words, “they will bring us all more joy and lift.” This is good advice for all of us and a reminder to put mission above politics.
About the Authors
Jim Bush, Winkler Group Principal and President, has been a fundraiser for more than 30 years. Recognized as an expert in his field, he’s helped nonprofits, universities, and healthcare systems raise more than $300 million and increase their organizational capacity through strategic planning. A noted lecturer, trainer, and teacher, Jim’s articles on fundraising have been published in leading nonprofit journals. He serves on the Giving USA Editorial Review Board and holds a bachelor’s degree from Elon University. Connect with Jim on LinkedIn.
Jessica Browning, Winkler Group Principal and Executive Vice President, has helped lead nonprofit organizations for more than 25 years. An award-winning case statement writer, Jessica is a specialist in donor communications and a former member of the Giving USA Editorial Review Board. Jessica received a B.A. from Duke University as well as an M.A. and M.B.A. from the College of William & Mary. Connect with Jessica on LinkedIn.
References
Giving USA. (2022, June 21). Giving USA 2022: The Annual Report on Philanthropy for the Year 2021. Giving USA. https://givingusa.org/.
Golla, C., & Heneghan, M. (n.d.). Economic & market outlook: Implications for philanthropy. Giving Institute 2022 Board Meeting, Chicago, United States of America.
Lindsay, D. (2022, July 12). How Fundraising Can Bring Americans Back to Giving — if It Changes. The Chronicle of Philanthropy. https://www.philanthropy.com/article/how-fundraising-can-bring-americans-back-to-giving-if-it-changes.
