From adopting artificial intelligence (AI) to maintaining cybersecurity and managing turnover — nonprofits have a lot to consider. Keep these seven themes in mind as your organization makes decisions throughout the year.
1. Election Cycle Outcomes
Many nonprofits are closely monitoring anticipated U.S. election outcomes as they can have a meaningful impact on philanthropic giving, federal funding and reimbursement rates. Despite election noise, the S&P 500® has generally posted solid results during U.S. presidential election years, and in nine of the last 10 presidential election years, charitable giving has increased no matter the outcome of the election.[1]
2. Inflation Wars
While inflation has declined from its peak levels in 2022 , many nonprofits still feel the impact. For example, donors, whose budgets have been pressured by elevated inflation, may reduce their giving, or be less likely to give. Nonprofits should take time to discuss the value of each dollar with their donors, helping them understand that a gift doesn’t go as far as it did a few years ago. Nonprofits should also consider ways to diversify their revenue streams.
3. Interest Rates and Yield Curve Normalization
As yields on shorter-maturity fixed income securities come down, many nonprofits may decide this is an opportune time to make significant investments as borrowing costs should decrease. Also, the opportunity cost of spending versus investing excess cash would be lower. Consider this a key opportunity to evaluate your organization’s holistic financial picture, and if spending on strategic projects can advance your mission.
4. Cybersecurity
Cybersecurity remains top of mind for nonprofits as cyberattacks become more creative with threats such as ransomware and social engineering. Stay on top of best practices: avoid public Wi-Fi, use multi-factor authentication, keep technology updated and practice regular phishing tests. Put cybersecurity policies, emergency procedures and business resiliency protocols in place.
5. The Growth of AI
The pace of AI innovation and adoption is accelerating. While some nonprofits have been reluctant to embrace AI due to concerns about ethical dilemmas and security risks, these tools may create efficiencies in communications and research that allow organizations to spend more time focused on advancing their mission. Organizations can start at a gradual pace with a strong responsible use policy to guide AI adoption through a strategic and human-centered approach. Prior to using AI tools, organizations should fully understand how they work, the dataset from which they draw conclusions, whether they retain and share sensitive data, and where bias may impact the results. Ongoing fact-checking, proofreading and auditing of outputs is critical.
6. Generational Shift
Over the next decade, the nonprofit sector is poised to face immense changes in the way it does business. An estimated $84 trillion in assets is projected to be passed down from older adults to their Generation X and millennial heirs. Similarly, older generations are vacating their leadership roles, creating opportunities for the next generation who may approach leadership, community challenges and giving of their time and talent differently. Organizations should segment their stakeholders and work to adapt their engagement to the preferences of each. While this can require significant time and resources, nonprofits are finding success in tailoring their communications and programming to their most engaged stakeholders.
7. Managing Turnover
Nonprofits are still seeing high levels of staff turnover. Development staff are particularly hard to retain and recruit. Organizations often struggle to offer competitive salaries, benefits and flexible work arrangements relative to their for-profit counterparts. Organizations that cannot offer a living wage and competitive benefits will struggle to recruit and retain staff. Workers are also citing burnout as a reason for leaving their roles. Organizations should review their staff goals and expectations and ensure they are reasonable. Younger workers are often seeking development opportunities and may be motivated by educational or training programs. Most importantly, nonprofits should have a good succession plan in place for inevitable departures.
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