January 04, 2012

5 Challenges for the Nonprofit World in 2012

The still-troubled economy will loom large over charities in the coming year, but simply keeping the lights on won’t be the only problem organizations will face. All sorts of nonprofits, including deep-pocketed grant makers, are likely to struggle with the following issues and their fallout.


Philanthropy and the 99 percent

Economic inequality raises tricky issues for donors

The yawning gap between rich and poor came into sharper focus in 2011. And philanthropy, increasingly a status symbol for America’s wealthy, is facing tough questions about the benefits it reaps for society. The issue seeped into the debate over the once-sacrosanct charitable deduction, with President Obama and some experts saying it’s time to revamp a tax break that mainly benefits high-income Americans. Calls for the wealthiest people to focus more of their multi-million dollar gifts on fighting poverty—rather than paying for new buildings at their alma maters—seem poised to intensify. This year, the question of how to broaden opportunities for all Americans is likely to occupy much of the philanthropic agenda.


Pressure from shrinking government aid

Foundations and nonprofits may step up the fight against cuts

With no end in sight to budget woes in Washington and all but a handful of state capitals, philanthropy will face new demands to fill the gaps created by dwindling government aid—to give more to protect the safety net, keep museums and theaters open, and ensure kids go to decent schools. But private donors can never match the breadth of government coffers. A new study found that households in the hardest-hit states would have to increase their giving by 60 percent in the 2012 fiscal year just to help nonprofits make up for projected cuts in state spending on social services, Medicaid, and education—an unprecedented (and unlikely) jump. To help temper the budget fallout, nonprofits and grant makers may have to boost their advocacy and lobbying activities.


Soothing generational tensions

Managers must make peace between baby boomers and 20-somethings

America’s charities have been living with a rotten economy for more than three years. Jobs for new graduates are fewer, and many older workers don’t have the savings they once did to retire comfortably. Friction between younger employees, with their MBA’s, and baby-boomer charity executives, with their 70-hour workweeks, has long been a fact of life in the nonprofit workplace. In 2012, will the tension boil over?


More demands to show results

Moving the conversation away from overhead costs

Charities continue to plod along on a quest for good ways to measure their effectiveness, with donors biting at their heels. The “overhead ratio”—the share of a nonprofit’s money that it spends on administration—is under assault from nonprofit experts, but it still holds sway with many donors and some charity regulators. No perfect evaluation measure has come along to replace it, and perhaps it’s unrealistic to think one could. Still, in 2012, all nonprofits should be prepared to answer this question: “What impact are you having?”


Innovation (and competition) from social enterprises

Will new approaches help charities or get in the way?

Excitement about organizations that use a for-profit business model to help solve social and environmental problems showed no signs of abating in 2011. Several states, including California, created new corporate structures that allow companies to incorporate social purpose into their businesses and put social goals ahead of profits. But what the trend means for the nonprofit world is still unclear. Will hybrids give nonprofit groups a bold, new way to pursue their missions—or will the new entities siphon off financial support that had previously gone to traditional charities?