The State of the Social Sector
Published August 2020
From advocacy organizations continuing the fight for racial equity in light of this summers’ protests, to food banks rolling out socially distant collection and pick up days, many have stepped up to support the critical work happening across the social sector. Disruption to normal modes of business have impacted revenue and fundraising projections, all at a time when demand for social services is rising faster than ever.
In crises, we can turn to the past for help navigating uncertainties. In this report, we examine the factors that have affected charitable giving over the long-term and recent past. Time and again, key best practices in fundraising and engagement have supported organizations as they manage change.
At this moment, supporters, funders, and donors aspire to actively help find a solution to the challenges facing our communities. Expressing gratitude for these providers in a time of dire need, our organizations must be prepared to leverage this support and to look to the past for perspective in navigating a shifting landscape.
With 2019 in what seems to be the distant past, how can we better understand which trends reflect the state of our sector now? What types of information can we provide organizations, stakeholders, and constituents to help navigate the road ahead? And when challenges feel stark, how do we remind ourselves that they offer the opportunity to reimagine our futures?
Confronted by these changing times, it is more crucial than ever that we seek greater perspective.
Understanding the long-term trends that have shaped the social sector is a key component of your response to today’s landscape. We hope that these perspectives will help you to identify and invest in the right strategies to move your mission forward in the long run.
The Long View
Taking a longitudinal view allows us to see how charitable giving has weathered similar events. It allows us to learn from these changes, grow, and move organizations forward with data-informed strategies. Adjusted for inflation, giving has increased nearly $300 billion between the years 1979 and 2019 (Giving USA, 2020). Total charitable giving has increased or stayed flat in current dollars every year since 1979, with the exception of three years that experienced significant economic declines: 1987, 2008, and 2009.
While these declines coincided with severe economic downturns, overall charitable giving rebounded alongside the economy’s recovery. Giving USA Foundation research indicates that, in the past, it has taken an average of three to four years for inflation-adjusted charitable giving to rise back up to pre-recession levels. Between 2008 and 2019, giving increased by $77 billion, from nearly $350 billion given in 2008 to $427 billion in 2019. The recent Great Recession ended in 2009 and yet, for the most recent decade from 2010 to 2019, the total growth in inflation-adjusted giving is 33%. Giving in 2019 reached nearly $450 billion.
During the 2008 recession, with the heightened need to access social services, healthcare, and scholarships, donors rose to the occasion by funding that access. Though the effects of the coronavirus pandemic are not yet known, a focus on human services, economic security, and health may encourage giving, as many respond to the immediate needs it has created.
In addition to trends in total giving, gross domestic product (GDP) is one of the most helpful indicators for tracking and explaining changes in revenue across the nonprofit industry. Research shows that giving revenue growth rises during periods of strong economic growth, when the GDP is growing, and slows or even falls during periods of relative economic weakness (Target Analytics, 2015). Charitable giving in the United States has made up about 2% of total GDP for more than 40 years. In boom times, it has reached as high as 2.3%, and in recessions, it has dipped as low as 1.7%. This means that, in a slow economy, not only does giving slow down, but it also declines as a proportion of the average American’s spending dollar.
In recent years however, this figure has remained steady while overall giving has grown and while philanthropy has opened its doors to additional channels like crowdfunding and donor-advised funds (DAFs). When larger circumstances (like financial capacity and inclination to give) influence those factors, fundraising often feels the effects. However, philanthropy tends to lag behind stock market volatility, following the general up- and downward trends across time. As markets fluctuate and as philanthropy continues to shape its response to today’s current events, it remains too early for recent market volatilities to be seen felt across overall giving.
Trends in Total Giving, 1979 - 2019 (in billions of dollars)
Just as the percentage of GDP has remained steady, the percentage of disposable income has also hovered around 2% for the past 40 years (Giving USA, 2020). Despite this continuity, major events and social movements have the power to temporarily attract attention towards specific causes. Natural disasters, for example, have consistently prompted a noteworthy charitable response in their immediate wake. Additionally, in 2017, an extraordinary multitude of circumstances motivated Americans to engage socially and politically (Vital Signs Part 2, 2018). Beginning in late 2016 and gaining massive energy in 2017, civic involvement was charged with political and social energy due to the presidential election. In tandem with those influences, 2017 tax reforms further shifted giving dynamics by motivating the use of DAFs and foundations.
In the immediate aftermath, organizations saw significant rises in households making new gifts. While organizations did not retain all those new donors, the spotlights shone on their causes provided a renewed interest in giving.
Year-to-Year Change in Households Making New Donations
So far, 2020 has felt an unforeseeable convergence of similar influences. From economic shutdowns due to the pandemic to the advocacy and protests generated by the Black Lives Matter movement, we should anticipate 2020’s climate of giving to be affected by these events.
History—specifically the 1970s and 80s—shows us that while these kinds of social and political movements do not directly benefit all charitable subsectors, expanding the population of donors inevitably benefits all types of organizations. It stands to reason that advocacy organizations and those most directly affected by social and political movements receive the lion’s share of increased support.
We can more clearly see this by assessing the allocation of charitable dollars across subsectors. For instance, while overall giving to religion continues to receive the majority of giving year over year, it has declined as a share of giving to all organizations since the early 1980s (Giving USA, 2020). Moving from 54.8% of all giving in 1979 to 31.4% in 2019, this reallocation has allowed additional subsectors to flourish, furthering their growth.
Giving by Type of Recipient: Percentage of the
Total in Five-Year Spans, 1979–2019
Additionally, the breakdown of charitable dollars given by individuals, foundations, bequests, and corporations has fluctuated. Over the last 40 years, giving by individuals has begun to decline as a percentage of total giving. And for the most recent two years in a row, individual giving has totaled less than 70% of all giving. This is in sharp contrast to the five-year period beginning in 1980, when individuals gave 82% of all charitable dollars. The increasing concentration of wealth throughout the U.S. has played an outsized role in creating foundations. This trend, coupled with rising income inequality and the emerging influence of DAFs, continues to increase the share of giving by foundations and decrease the percentage of giving from individuals.
Giving by individuals remains the largest contributor to overall giving year over year. More than ever, this reminds us that while much is in flux, the core values of donors remain the same. It is up to our institutions to remain committed to cultivating these relationships. Staying attuned to the long-range trends, as well as the continued influences of innovations like DAFs and crowdfunding, will support your mission area as you approach your strategy for 2020 and beyond.
2019 In Review
In 2019, charitable giving in the United States grew 1.0% based on analysis of $36.3 billion in donations by the Blackbaud Institute (Charitable Giving Report, 2019). Online giving grew by 6.8% compared to 2018 after analysis of $2.7 billion in online donations.
Traditionally, most transformational and major gifts are not yet made online, so on average, online gifts are lower than offline gifts. In 2019, the average donation amount was $617, while the average online donation was $148. Organizations should continue to watch these trends closely as the shift to virtual fundraising and engagement events may impact donors’ reliance on online giving.
2019 also saw a continuation of multi-year trends in monthly giving patterns. While December remains the largest month as a percentage of giving, June continues to drive giving due to end-of-fiscal year fundraising campaigns. While this year has proven to be a mixed bag of unexpected spikes in need and attention, organizations should continue to anticipate growth at the end of the year as they execute giving days and end-of-year campaigns. According to the Charitable Giving Report, one fifth of all donations arrive in December alone. Know which months yield the highest giving for your subsector to ensure that you are prepared to maximize your opportunities.
Snapshot in Time
As 2020 trends emerge, we can identify how subsectors have begun to navigate the current environment.
Year Over Year Change in Overall Giving, June 2019 - June 2020
Pertaining to year-over-year trends, data from the Blackbaud Institute Index shows that overall giving declined in the immediate wake of the pandemic. The general donor population froze with the rest of the social good sector, as businesses shut their doors and individuals stayed home to quarantine. The cancellation of major events, conferences, and galas created a decrease in giving for March and May with slight increases in April and June compared to giving in the same months in the year prior.
Heading into April, overall giving spiked as philanthropy responded to the pandemic. Wide-scale giving days such as #GivingTuesdayNow shone a spotlight on charitable giving at a time when many were receiving economic impact payments.
Fundraising by large organizations, with annual total fundraising valued at more than $10 million, was up 2.0% (compared to the 12 months ending in June 2019). Medium-sized organizations with annual total fundraising between $1 million and $10 million had an increase of 1.0% on a year-over-year basis (compared to the 12 months ending in June 2019). Small nonprofits, with annual fundraising totaling less than $1 million, experienced a 0.8% decrease in fundraising results (compared to the 12 months ending in June 2019).
Across many charitable subsectors, increased demand for services due to economic shutdowns, job losses, and healthcare needs have been supported by increased contributions. Human services organizations such as food banks received significant support across several spring months. Organizations found their stride in late spring with overall giving in June increasing 1.2% for the last 12 months ending in June 2020 (compared to the same months ending in June 2019).
While the percentage of online donations has leveled off for the past two years, we may see an uptick in 2020 as in-person stewardship and programming give way to online-only engagement. These effects will be telling if seen throughout major giving, where gifts have traditionally been made in person. Across all subsectors, there has been a 36% increase in online giving year over year from the three months ending in June 2020 compared to June 2019. Significant jumps during the month of May showed an increasing reliance on online platforms, as many organizations rushed to leverage momentum from #GivingTuesdayNow.
In addition to these emerging trends, several other factors may continue to shape the year in charitable giving. Throughout the remainder of 2020, we may anticipate heightened civic and political giving following the growth of the Black Lives Matter movement, as well as increased advocacy for safety, health, and healthcare workers’ rights amidst the pandemic. In the fall, the potential effects of hurricane season may also draw increased support to disaster relief causes in the aftermath of any events.
In tandem with this engagement, the upcoming presidential election presents an opportunity for organizations to broadcast their causes and how they relate to issues on candidates’ agendas. This election will coincide with the start of many organizations’ end-of-year campaigns, which could further fuel charitable activity. Underpinning each these factors, the CARES Act of 2020 reinstated a $300 charitable deduction for one year. This may encourage low- and mid-level donations by a comparable amount as many individuals race to give to the causes of their choice. These effects may amplify as the effects of widespread unemployment and federal relief continue in the wake of the pandemic.
To brace for these and bolster your organization, you can focus on several core practice areas.
Diversify Your Revenue Mix
Social good organizations should not overlook revenue mix as a component of ongoing strategic planning. Examining data from the Urban Institute’s Nonprofit Almanac shows that across subsectors, social good organizations follow a multitude of revenue models. While different organizations may thrive using various combinations of revenue sources, organizations should avoid an over-reliance on certain sources.
Percentages of Revenue by Sources of Reporting
Public Charities, 2013
As the coronavirus pandemic has demonstrated, earned income lost through the cancellation of in-person events, fundraisers, galas, and more have left many organizations in weakened positions. Although crises like the pandemic are unpredictable, organizations should be aware of revenue sources that could exert an outsized influence on their budgets. Several key metrics can support you in uncovering hidden variables in your budget.
- For instance, the dependency quotient is a metric that quantifies the risk associated with a lack of revenue diversification. It assesses the percentage of an operating budget that would be left unfunded if an organization were to lose their top five donors. To calculate your dependency quotient, divide the total contributions of your top five supporters by your organizational expenditures. While some organizations may cease to exist if they lost their top five donors, others may experience minimal distress. This metric allows you to take a more nuanced approach to your fundraising strategy to steward your top donors, while also focusing on your other revenue sources. See The Right Mix to learn more.
- In addition to their dependency quotient, organizations should regularly calculate their cost to raise a dollar. This metric shows the investment your organization requires to fundraise. To calculate this, add the staff and all fundraising expenses together, then divide that by the net fundraising total. Most development staff understand that investment is often required to achieve long-term fundraising success. Regularly tracking this metric across your campaigns, grants, events, and more will help you to assess your most affordable or unaffordable actions and better steer your budgeting process in the long run.
Advocacy organizations have received heightened levels of attention in recent months, as many individuals are affected by economic uncertainty, business closures, and job losses. The increased awareness surrounding mission areas such as hunger and food access have inspired individuals, foundations, and corporations to step up to the plate in support of these causes. Organizations should keep aware of any changes in their revenue mixes as a result of increased demand for services, as they may inspire new cases for funding.
While your revenue mix may vary based on your cause area and subsector, these metrics can illuminate the weak spots that may be hiding in your budget. By putting the costs of your fundraising into perspective, you can strive toward financial sustainability by prioritizing a revenue mix that can weather downturns and position you for long-term success.
Inspire Your Major Giving Strategy
Data from the Vital Signs series has found that, while the overall amount of dollars donated continues to grow, the number of individuals donating money since the last recession has been shrinking. Research from How America Gives also demonstrates how the influence of major donors masks the distribution of giving across income levels. A decrease in the number of lower- and mid-level donor households shows that major donors persist as a critical component of any organization’s fundraising performance.
To shore up your major giving strategy, ensure that you are familiar with the donors in your file who are already giving as well as the prospects who have the capacity to make a major gift. Continually review your file to evaluate your major giving program and track the success of your stewardship and moves management. There are key resources that you can leverage throughout this process, as well as key wealth indicators that could help you assess the capacity to make a major gift.
While some prospects may be concerned by the current market’s performance, it’s critical to double down on your prospecting and cultivation efforts. Many donors and community members are eager to assist in their response to this crisis, while a valued stake in their community’s health, safety, and wellbeing. Focus on these efforts by updating your case for support so that it reflects how your organization has been affected by and responded to the pandemic. These are crucial steps in ensuring that your mission resonates with major donors.
Focus on Retention
With all the factors affecting philanthropy, fundraisers play a more important role than ever in guiding their organizations and causes through turbulent waters. Donor retention reflects how you keep in contact with your donors and build a pathway for their continued support. It is a direct, quantifiable reflection of how you are engaging your donors and communicating your mission.
You should annually calculate your overall donor retention rate to assess who is choosing to stay in your donor circle every year. While organizations with a high retention rate keep or renew many donors from year to year, those with a low rate must acquire new donors to keep their bottom lines above water. This reinforces the significance of benchmarking your internal progress annually and over time.
Donor Retention by Nonprofit Subsector, 2010-2015
While first-year donor retention continues to be a challenge among nonprofit organizations, but multi-year retention rates remain strong. New donors disproportionately come from the pool of supporters who are already donating to other organizations. Not only do they give to twice as many nonprofits, but they also give twice as much per year when compared to donors who did not make a new gift.
While the value of your retained donors should be clear, their continued stewardship should remain a core priority across your organization. Recall that your marketing and fundraising strategies must be aligned to best frame and communicate the societal values embraced by an organization’s mission and programs. This results in stronger donor engagement and retention.
Invest in Sustained Giving Programs
Sustainer giving is a long-term strategy in which donors commit to regularly giving a set donation amount. Sustainer programs automatically support your retention while ensuring a dispersed revenue source.
Data from Sustainers In Focus examined multiple donor files and compared the retained revenue of new donors—those who first gave a sustainer gift and those who later converted to sustainer giving—against those who never gave a sustained gift. Overwhelmingly, this shows that revenue per donor increased in the years preceding the two years following a donor’s commitment to a sustainer program. Giving increased from 50% to 300%, with even the low end far exceeding the typical return for non-sustaining donors. As a strategy choice, there is substantial value to be had in sustainer fundraising.
Returns on sustainer giving are long-term, and the success of your sustainer program relies on excellent retention strategies.
Double Down on Acquisition
To expand, organizations need to focus on strategies that address the changing macroeconomic environment in which we find ourselves. Though many of us are focused on retention and sustained giving at this time, they cannot happen without acquiring new donors. Organizations should not take their foot off the gas of acquisition. To provide the most long-term growth for your team, you’ll want to continually add to your pool of donors and enhance your acquisition strategy as a sustainable practice.
You should continually consult your donor acquisition cost. This metric is calculated by adding all expenses that go into recruiting a new donor, then dividing by the number of new donors acquired over a given period. By calculating the donor acquisition cost at your organization, you can better pinpoint the tactics that merit further investment while zeroing in on the channels, preferences, and behaviors that will expand your supporter base.
10-Year Overall DonorCentrics Index
Revenue & Donor Trends, 2007 - 2017
As highlighted above, major social and political advocacy throughout 2016 and 2017 resulted in a spike of new donors in 2017. In 2020, spotlights on widespread political change, civil rights, and social movements have garnered similar attention. Organizations aligned with these causes are in advantageous positions to welcome new donors into the fold (in tandem with these influences, the 2020 CARES Act reinstated a $300 charitable deduction for one year). Together, these influences could potentially inspire an increase in low- or mid-level donors, leaving it up to our organizations to complete the additional due diligence required to initiate and maintain relationships with these new donors.
Some of these effects may play out across nonprofit subsectors. With added focuses on healthcare, social justice, and economic supports, many have been inspired toward coronavirus-related relief efforts. For instance, the Food Bank of Central and Eastern North Carolina received a whopping 14,000 new donors in the immediate wake of the pandemic. To steward the influx of new donors, their fundraising team has kept donors informed with weekly email updates and stories from the front lines.
Other organizations can encourage teams to continue identifying and investing in the community members that have expressed gratitude for their cause area. There are many moving parts keeping your organization in motion and centering your cultivation around gratitude for this work can better focus your acquisition strategy.
Navigate Your Digital Transformation
From reducing your manual processes through workflow automation to thriving in remote working environments and embracing new platforms, organizations must adhere to a new focus on delivering strong digital experiences to their stakeholders. While a focus on retention and stewardship will advance your cause, you will also want to be sure that you are speaking to your stakeholders through the channels and platforms that they are embracing.
As consumer behavior begins to show itself across the social sphere, it is becoming clear that individuals are more eager to sit in the driver’s seat of their engagement. The acceleration of avenues like crowdfunding, do-it-yourself, and peer-to-peer fundraising will continue to be cohesive components of overall fundraising strategies. Speaking to individuals on a one-to-one versus a one-to-many level, these campaigns continue to gain traction, connecting people to the causes they care about through the channels they regularly use.
An organization’s success in these arenas lies in leading their staff and stakeholders. Whether you are leading your organization through shifts in your day-to-day operations, moving your in-person programming online, or toward a full digital transformation, you must be prepared to support the donors, follower, supporters, and networks who advocate best. Although our minds may try to steer us differently, we need to be even more communicative and collaborative during crises. Communicating about needs and understanding the realities your community and staff are working within will help you find tech tools that match their access and skill options. Just as the challenges of the organization may have changed, so too have new challenges been presented to your staff and community.
While digital transformation covers a broad spectrum, remember that the key is to use these tools to strengthen your relationships and build loyal supporters for life. In a changing digital environment, these platforms will be more crucial than ever before, offering you the ability to make more informed decisions about how to identify your supporters and nurture relationships with them.
Though we are still watching 2020 unfold in real time, we can expect a further confluence of influences to alter the year ahead. As the Black Lives Matter movement grows across the U.S. and as we head toward a presidential election, we may anticipate heightened civic activity resembling the waves felt throughout 2016 and 2017. The potential for an active hurricane season this summer and fall coupled with continued coronavirus relief may also usher in similar activities. While much may feel uncertain, we can better prepare for these events by grounding ourselves in the long-term perspectives that have helped philanthropy to adapt over time.
When challenges expose the areas in our organizations that require additional support or change, we can use these moments to emerge stronger. Using these moments as opportunities to reflect on how we can adapt and innovate will help us tap into the practices that work in the long run. Our social good organizations play an invaluable role in this fight—both as providers on the front lines of the response providing access to essential services and as conduits connecting supporters to these causes. As we grapple with the pandemic, the intentions that we set in our processes, relationships, and cultivation efforts will support our organizations’ responses to these challenges—and any others that lie ahead.