Why the Knowledge Age Is Making It Harder for Fundraising
One time I heard someone say that the nonprofit sector doesn't change. But the reality is that, as with anything else, it will change on its own, or another force will make it change. If the nonprofit sector is the same old one that existed through the 20th century, the knowledge age is bringing about furious change.
The reality is that new technologies quickly come to market, and old solutions rapidly fall out of favor. For example, there has never been a time when data could be analyzed with predictive analytics and you know exactly who to ask, when and how much. Moreover, all of it happens at lightning speed. And with knowledge comes power. Donors today, from major donors to general gift contributors, have immense power over nonprofits — and they're using it. They want transparency and results.
What Is the Knowledge Age?
The knowledge age is when organizations and individuals increasingly are empowered by knowledge. In other words, it goes beyond the information age. New technologies that facilitate information sharing and exchange lead to greater transparency, collaboration and the democratization of information. Ultimately, it results in more power for consumers and donors in the case of nonprofits. Again, knowledge is power. Information is the gold of the knowledge economy. That economy refers to a system where success is measured by the creation and sharing of knowledge rather than the ownership of it.
Why Donors Know Too Much
The ability of donors to instantly access information on their favorite causes is a boon to nonprofits and philanthropists alike. However, at the same time, donors also act more strategically and with more intent. Previously, a donor with a philanthropic bent was satisfied with receiving a glossy report from the nonprofit they supported. Today, donors expect an online presence and concrete information about the impact and how their donations will be used.
Let's face it, donors don't have to be technology savvy to understand that nonprofits must demonstrate what they need to contribute (e.g., impact, outcomes, quantitative reporting). As a result, knowledge makes donors more discriminating about the causes and places those that don't toe the line hang on the precipice of failure. Further, donors are also more likely to have a critical view of organizations that can't keep up with the new pace of the times.
The Changing Landscape and Rising Costs of Fundraising
The knowledge age may bring more funding opportunities, but it is also bringing higher costs associated with doing business. Organizations are now expected to maintain a robust online presence, have an expert and qualified team, and comply with ever-changing regulations. These new costs increase the marketing and fundraising budgets, so the times of starving a nonprofit, thankfully, are ending. Moreover, organizations must have the agility to meet anything that happens head-on, including a nonprofit crash, which I believe will arrive at some point.
Regardless, the changing landscape of fundraising impacts the types of donors that organizations tend to attract. As we know, in the last decade, there’s been a shift away from checks to online giving. And although cryptocurrency has its ups and downs as it relates to its worth, the blockchain that underpins cryptocurrency isn't going anywhere. That means younger generations will continue to drive change, and nonprofits will have to adapt or perish.
Implications for Nonprofits
The combination of donor expectations and rising costs has pressured organizations to find new ways to supplement fundraising efforts. In reality, this is a good thing. Through the years, many fundraisers have complained that people never understood the idea of investing in a nonprofit. In other words, for generations, there's been an idea that nonprofits were all about charity, which meant they shouldn't use business principles. That's a mistake.
Nonprofits are businesses, and for them to thrive and make a broad impact, they need to rely on bright and financially savvy leaders and donors. The fact that costs are increasing for nonprofits is actually a good thing. Hopefully, it will fully instill the idea that people need to invest in nonprofits with their financial contributions. What are the returns, you ask? The answer is the impact and outcomes a nonprofit can show in a qualitative and quantifiable way.
Moreover, as new technologies continue to force change, finding new ways to supplement fundraising efforts may help organizations to navigate the changing landscape. But it also requires a significant shift in mindset. Organizations must spend more time marketing themselves and engaging in donor relations activities. For many nonprofits, it means placing donors at the center of their actions and not just saying they do.
Ways to Overcome the Challenge
One way to embrace the idea that donors have knowledge at their fingertips and can make swift decisions about your organization and whether to support it or not, is to ensure your organization does everything possible to make its activities transparent. That includes making information about your nonprofit easily accessible to donors and potential donors. The more information you provide, the better it is for your nonprofit.
Get in the habit of fully informing donors about how their donations are used, and clearly explain the challenges and opportunities your organization faces to meet its mission. In addition, many donors are interested in following your organization's progress and achievements, so it's also a good idea to provide regular updates (not just spin). Amazingly, it's so simple and fundamental, but I can't tell you how often I see it ignored.
In the knowledge age, donors are more educated and critical of how their money is spent. That means that fundraising is getting more expensive and complex, but that's a good thing. It's time to let go of the charity mentality. We tried that approach throughout the 20th century, and we saw it fell short. Now it's time to take a bold view of the future of fundraising. Look at your donors as investors in your cause and mission. Provide increased expectations of transparency and find new ways to expand and enhance your fundraising efforts. Invest in your organization, and donor prospects will notice and want to become a part of the vision you set.
Paul D’Alessandro, J.D., CFRE, is a vice president at Innovest Portfolio Solutions. He is also the founder of High Impact Nonprofit Advisors (HNA), and D’Alessandro Inc. (DAI), which is a fundraising and strategic management consulting company. With more than 30 years of experience in the philanthropic sector, he’s the author of “The Future of Fundraising: How Philanthropy’s Future is Here with Donors Dictating the Terms.”
He has worked with hundreds of nonprofits to raise more than $1 billion dollars for his clients in the U.S. and abroad. In addition, as a nonprofit and business expert — who is also a practicing attorney — Paul has worked with high-level global philanthropists, vetting and negotiating their strategic gifts to charitable causes. Paul understands that today’s environment requires innovation and fresh thinking, which is why he launched HNA to train and coach leaders who want to make a difference in the world.