Lagging Donations Could Be Symptomatic of a Much Larger Operational Problem for Nonprofits

Lagging indicators are easy to measure but can be hard to influence. For nonprofits, a clear lagging indicator that is easy to measure but hard to improve on is donations.

The problem with lagging indicators is, well, they’re lagging. It’s not too tricky when we are experiencing year-over-year increases in revenues but quickly becomes a problem when the trend line starts to flatten or turns downward.

Since most nonprofits still measure their revenues and build their budgets against previous year’s numbers, the trouble accelerates when donations slow and slow they have.

According to the Fundraising Effectiveness Project, fundraising and number of donors tanked the first six month of 2019 when compared to 2018. In short, the number of donors declined 5.8 percent with a corresponding drop in revenue of 7.3 percent.

The squeeze is exacerbated because bills still have to be paid and the spread between money received and money owed is widening. This is because many nonprofits operate in the red for most of the year hoping and praying to break even by year-end. So, what happens when the revenues do not come in?

Unfortunately, too few nonprofits maintain reserves to cover the shortfall. So, belts are tightened. Programs are pulled back. New projects screech to a halt. The layoffs start. It’s like seeing a train wreck coming and there’s nothing you can do about it.

So, how can your nonprofit buck the lagging donations trend?

According to Overcoming Barriers to Giving, Fidelity Charitable’s latest study of over 3,200 donors, 64% of donors want to give more. While your donors may have other questions and concerns, demonstrating your nonprofit’s effectiveness has the greatest potential of encouraging your funders to increase their gift size and/or giving frequency. 

Here’s the skinny: Nonprofits need more funding. Funders need more confidence. More confidence comes from demonstrated operational competence. Funders with more confidence give nonprofits more funding. Operational competence can be measured and improved.

Jim Collins in his seminal work, Good to Great and the Social Sector said it this way, “What matters is that you rigorously assemble evidence – qualitative and quantitative – to track your progress.”

Assessing competence against best practices and prescribed industry standards takes all the guesswork out. Jim Collins would be proud.

Are you ready to get beyond the symptoms to the core problem?

For smart online tools that measure and improve nonprofit operational effectiveness, please visit The Global Center for Nonprofit Excellence® where Nonprofits, Funders and Recognized Experts work together for the greatest impact. We make nonprofits better. We can help yours.

Marc

Marc is Co-Founder and Principal Advisor of The Global Center for Nonprofit Excellence. For the previous 12 years, Marc served full-time as executive and practitioner in three significant yet very different Nonprofits overseeing extensive domestic and international operations.