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Let’s get adaptable: Findings from NFF’s national sector survey

In a May 14 webinar, the Nonprofit Finance Fund (NFF) presented a nationwide state-of-the-sector report based on their annual survey of nonprofits. The subtitle of this year’s report, “Achieving Adaptability in a Time of Flux,” sums up the challenge facing many of the survey’s 5,451 respondents: building a stable base, including financial support and human capital, from which they can grow their efforts for meeting shifting community needs.

The State of the Nonprofit Sector Survey began in 2008 as a response to the great recession. Now, said Bank of America Charitable Foundation Manager Charles Henderson, “it’s part of an ongoing community-organizing effort.” Henderson said the goal of the survey, which the Foundation has funded since 2010, is “to create a more authentic conversation about what it’s going to take for us all to succeed.”

Short-term stability, long-term concerns

The good news, said NFF Survey Manager Sarah Goff, is that short-term survival is no longer the concern it was at the height of the recession. The bad news is that demand is on the rise—76% of respondents, hailing from all 50 states, reported an increase in 2014—and nonprofits are falling behind in their ability to keep up. Only 48% said they were fully meeting community need.

“As the recession ebbs, and major metropolitan areas are seeing signs of growth, it’s easy to think things are fine,” said Goff. “Critical service providers know better.”

By cause area, the most heavily represented organization was “human services,” followed by “arts, culture, and humanities,” and education. A large majority of respondents (67%) said they serve low-income communities, and half of those identified as “lifeline” service providers. NFF CEO Antony Bugg-Levine said there are three parts to the story uncovered by the data those nonprofits shared:

     1) More organizations have stabilized since the recession’s end, but

     2) Demand for services currently exceeds resources; meanwhile,

     3) Long-term sustainability remains the greatest concern for nonprofit leaders.

The most frequently reported concern was “achieving long-term financial stability” and “retaining staff.” At the same time, more than half of nonprofits surveyed increased services in the last year by adding to, expanding, or collaborating with another organization on programming.

The most frequently reported concern was “achieving long-term financial stability” and “retaining staff.”

For many nonprofits, said Bugg-Levine, it’s a challenge to balance “long-term investment” with “meeting short-term need.” Still, he said, the data indicates a “worrying disconnect” between their worry over organizational stability and their action priorities.

“What can we do to get off this hamster wheel?” asked Bugg-Levine. “That is, how can nonprofits achieve long-term adaptability?”

Adaptability: The new “sustainable”

Bugg-Levine rejects the term “sustainability” as a goal, in that it implies a state nonprofits can achieve after which “things are going to be okay.” The reality of nonprofit operation, he said, is “a constant game of adaptation.” To become a more adaptable organization, Bugg-Levine said, these three strategies are key:

1) Build adequate reserves. Building reserves can be tricky, Bugg-Levine said, because they can be a donor turn-off: An organization with money set aside, they might think, doesn’t need donations. To push back, “we need to educate board, staff, and donors on the importance of reserves.” (One in five reported having added to their reserves in the past year; slightly fewer—16%—had to tap those reserves in 2014.)

2) Articulate your impact. Of course, Grantmakers are becoming more interested in results: More than 75% of respondents say their funders expect outcomes data in grant reports. But presenting a clear, specific explanation for a supporter’s role in helping the community is a winning strategy for stakeholders of all kinds, said Bugg-Levine. It’s a skill that will also help with the next point:

3) Focus on human capital infrastructure. All nonprofits, said Bugg-Levine, “need a staff that’s well-trained, nimble, competent,” and maintains “at least some continuity.” Retaining staff becomes harder as the economy improves, presenting staff with new job opportunities. Beyond offering more competitive compensation and development opportunities, articulating your impact will help keep staff in the fold: “There’s a lot of evidence that feeling connected to the organization’s impact is [one of the] unique employee retention tools at our disposal.”

Takeaway: Strategic questions to consider
 
From Nonprofit Finance Fund’s presentation of their 2015 State of the Nonprofit Sector Survey, with commentary from NFF CEO Antony Bugg-Levine. 
 
For nonprofits:  
 
- Do we ask for funding that covers full costs?
- Can we budget to build surpluses?
- Can collaboration improve our programs or increase our operational efficiency?
- Are we fully prepared for the growth or change that we are pursuing or planning?
- Can we influence policy to improve our funding environment and the way resources flow to our communities? “You cannot have a reliable safety net, nor a just society, if we depend on ever-diminishing money to meet ever-growing needs. Joining trade associations is one way to make sure your voice is heard.”  
 

For funders:

- Do we understand the full costs of the programs we support?
- Beyond programs, what resources do our grantees need to be adaptable in the long term?
- Are we effectively matching the resources that we provide to the resources our grantees most need? “That need might they be very different from what the grantee is asking for.”
- Can we help grantees offer competitive wages? “The turning of the economy is making it harder to retain staff.”
- Can we take steps to improve dialogue with our grantees? “And are we doing them?”

Candid conversation?

Further complicating the staffing challenge, said Bugg-Levine: “The importance of retaining staff has become clear to nonprofits, but may not yet be clear to funders.”

The reason for that, said Bugg-Levine, may be because nonprofits aren’t comfortable expressing their true needs. When asked for a list of topics they feel can be openly discussed with grantmakers, 6% or less included “developing reserves,” “reserves for fixed asset needs” like facility maintenance, and “flexible capital for organization change or growth;” just 17% felt they could discuss organization change or growth at all. (The most comfortable discussion topic? Expanding programs.)

“Nonprofits need to understand their own needs, but funders need to make it clear they are open to having these conversations,” said Bugg-Levine, citing another survey that found funders were much more comfortable discussing non-programming issues than nonprofits perceive. Bugg-Levine encouraged nonprofits to push the dialogue beyond programming, and said funders “should be asking about the long-term needs of an organization, not just a current or project-specific budget.”

The results of this stalled conversation are serious: nearly 70% of nonprofit respondents say government funders “never” or “rarely” cover the full costs of the programs they intend to support, and nearly 50% said the same of foundations. Bugg-Levine calls this a “great threat” to nonprofit survival: “When each contract you make requires you to raise money to break even, it’s hard to achieve adaptability.“

Georgia’s results

Data from Georgia’s 84 respondents largely reflected national trends: 77% report an increase in demand, and 55% say they’re unable to meet than demand; further, more than 80% predict an increase in need over the coming year.

Georgia nonprofits are also aligned with the “disconnect” identified in the national numbers: though their biggest concern is long-term financial sustainability and retaining staff, 55% of respondents invested in new or expanded services in 2014, and even more (60%) collaborated on new or improved programs. Still, 40% hired staff for new positions, and 31% made replacement hires (lagging slightly behind the national data). Further, 35% invested in professional development for staff last year (aligned with the national figure of 37%), and more than that (40%) plan to invest in the talent pipeline next year.

To see a complete rundown of Georgia’s survey data, and the rest of the national dataset, visit survey.nff.org.

Explore more insight into Georgia grantmaking trends and nonprofit-grantmaker relations and dynamic in our latest Taking Measure study, a collaboration of GCN with Foundation Center-Atlanta and Georgia Grantmakers Alliance.

 

 

 

 

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