Demand for nonprofit services shows no signs of slowing—and neither does the competition for funding dollars and staff needed to deliver on their missions. With an eye to the future, nonprofit leaders can create impact with new innovations and opportunities.
Business-as-usual came to a screeching halt in early 2020, but the need for nonprofit services did not. Many nonprofits quickly pivoted to virtual and hybrid operating models so they could continue to serve their communities. Since then, need has only accelerated—34% of nonprofits have a more than 30-day wait time for their services—as has the competition for funds.
Cranking the pressure valve even higher is a widespread struggle to attract and retain nonprofit workers, in a larger landscape of tight talent availability and rising compensation. Nearly four in five nonprofit leaders say the need to compete with private-sector wages poses a serious challenge, a Chronicle of Philanthropy study found.
Rather than belt-tighten any further, many nonprofits are seizing this moment as an opportunity to future-ready their technology infrastructure.
“As nonprofits now have fewer resources, these organizations can help their people thrive by investing in technology that helps them focus on the mission. It’s about optimizing the workforce,” says Michael Merino, vice president of advisory services for Collaborative Solutions.
Though no one can say for certain how the future might unfold, industry leaders and nonprofit experts are quick to weigh in on the trends and opportunities that may have the biggest impact on the field—and what steps today might best prepare nonprofits for tomorrow.
From social services to symphony orchestras and healthcare systems to public media outlets, nonprofits all share one thing in common: They exist to deliver impact—to improve the lives of the people and communities they serve. But for too many nonprofits, legacy systems have hindered their ability to deliver on that mission.
“These cobbled-together systems are so highly customized that only a few people at an organization can do anything with them, which places a tremendous and unsustainable burden on the organization and hinders its ability to change, grow, or make good decisions,” says Tim DeMagistris, national director, nonprofits, Workday.
According to a 2022 Workday study, 51% of nonprofit organizations are concerned that their enterprise resource planning systems lack the flexibility to meet the business needs of today and the future. And while only 12% of nonprofits consider their organizations digitally mature, nearly 75% view digital transformation as essential, according to a global survey by Salesforce and independent research firm Reputation Leaders Ltd.
Little by little, nonprofit organizations are turning the page on legacy systems by investing in digital transformation. “Nonprofits know they need to change so they can focus on their mission rather than babysitting their systems,” says Merino.
One such nonprofit is Boston Symphony Orchestra (BSO), one of the largest orchestras in the United States. During the pandemic, BSO closed for 18 months and lost 50% of its revenue.
“Even before the pandemic, it was clear that we needed to upgrade our financial systems. Most everything was on-premise, and we weren’t in the cloud at all,” says Evelyn Barnes, former CFO of the BSO. “Like many nonprofits, we’d preferred to spend our money on the real mission and lagged with infrastructure and technology.” Since then, BSO has deployed a cloud-based enterprise management system, including business planning.
Historically, nonprofit organizations have spent very little on technology or cybersecurity due to budget constraints. Then came the 2020 ransomware attack on cloud computing provider Blackbaud, which heavily impacted the nonprofit sector around the globe. It was a wake-up call to many nonprofits that they needed to do more to protect their sensitive financial data.
“As nonprofits now have fewer resources, these organizations can help their people thrive by investing in technology that helps them focus on the mission.”
Michael Merino
Vice President of Advisory Services
Collaborative Solutions
As change and disruption accelerate, more nonprofits will invest in secure, cloud-based platforms that enable effective financial stewardship and strategic planning, so they can deliver the double bottom line of financial and mission sustainability.
“The need to plan, execute, and analyze quickly across an organization with one source of trusted, secure data is key to succeeding in the 21st century,” DeMagistris says.
The nonprofit sector hasn’t been immune to the tight talent market. In fact, 42% of U.S. nonprofits have a vacancy rate of 20% or higher, according to the National Council of Nonprofits. And headcount doesn’t necessarily translate into future-ready skills. Nine in 10 nonprofit employees report they lack the workplace digital skills required for the jobs of the future.
Yet some leaders have managed to buck the trend using cloud-based solutions, with unified data and artificial intelligence (AI) and machine learning (ML) built into the core, to maximize the efficiency and impact of the talent they have, while also creating a work environment that attracts external talent.
For the WNET Group, which operates the flagship PBS public television station, an intelligent platform allowed the organization to expand rapidly through acquisitions, without getting bogged down in manual data aggregation. At the same time, access to analytics and self-service tools has empowered and engaged a huge swath of the nonprofit’s workforce.
“My headcount may be the same, but my staff is much more upskilled,” says Caroline Croen, CFO, The WNET Group. “They’re analysts now. They’re not coordinators filling in fields anymore. It’s been a wonderful skill-set transformation.”
When AI and ML are embedded within the core of a technology platform, they can be used to analyze the way skills are used in human language, and map that to a skills-centric workforce at scale. Intelligent automation can streamline every part of the hiring process, from background verification to offer management. Analytics can easily cut through the clutter to surface internal trends where diversity and equity workforce goals are effective, and where leaders should focus next to maximize progress toward their goals.
Nine in 10 nonprofit employees report they lack the workplace digital skills required for the jobs of the future.
That tech-enabled assist toward greater diversity, equity, and inclusion isn’t a nice-to-have but, increasingly, a mandate for organizations that want to stay competitive in tomorrow’s talent market. Young workers especially expect an inclusive culture, according to research published in The Chronicle of Philanthropy.
And regardless of their areas of focus, DeMagistris notes, “Nonprofit executives want to make sure that they’re recruiting and hiring a diverse workforce and that their organizations are welcoming and support equity.”
Not that long ago, most nonprofits didn’t have a CIO to speak of. IT teams sat within finance departments and were expected to mainly deliver optimizations or efficiencies in internal processes. Today, however, that’s changed, with the Deloitte Global Tech Trends 2022 report noting that the majority of nongovernmental organizations and international development organizations have a CIO with an active hand in strategy.
As nonprofits have become more data-driven and as digital channels have become more essential to funding and stakeholder management, the importance of the nonprofit CIO is growing. “Their role is key in driving cross-functional collaboration and decision-making, ultimately ensuring the fit-for-purpose alignment of new systems, processes, and people,” Deloitte reports.
Mission agency Pioneers, for one, turned to its IT leadership to spearhead the digital transformation the organization needed to catch up to its substantial growth. “Our legacy systems were being bent and twisted and customized to accomplish our needs. Because of our growth, we knew the situation wasn’t sustainable,” says Paul LeBar, vice president of IT, Pioneers.
Today, LeBar says, the organization has much greater visibility into its processes. “We can build models for key metrics that our executive leadership needs so they can more quickly make strategic calls,” he says. “They just go to a dashboard and pull up the report themselves with a single click.”
Bridging the gap between finance and IT teams will be of particular importance for nonprofit CIOs. Just 9% of nonprofits say their finance and IT teams are aligned, according to a Workday survey. Yet, investments in tools such as automation and ML can pay major dividends. In a Deloitte survey of IT and engineering leaders, 74% said that automation has helped their workforce become more efficient and 59% of those respondents say their teams have achieved cost savings of 30% or more because of it.
Despite the unpredictability of the long-term future, there’s one thing the nonprofit sector can safely assume: Amid economic uncertainty, healthcare disparities, demographic shifts, and geopolitical instabilities, demand for nonprofit services won’t dip anytime soon. In fact, an overwhelming majority (85%) of U.S. nonprofits anticipated a 10% year-over-year increase in demand for their services in 2023, according to the Stanford Social Innovation Review survey of 1,100 U.S. nonprofit leaders.
“These cobbled-together systems are so highly customized that only a few people at an organization can do anything with them, which places a tremendous and unsustainable burden on the organization.”
Tim DeMagistris
National Director, Nonprofits
Workday
That’s why nonprofit organizations must plan for any number of future scenarios—and replan with agility as conditions change. An enterprise platform with powerful modeling capabilities enables nonprofits to model and analyze various funding and spending plans across multiple fiscal years.
Accurate financial forecasting in particular will allow nonprofit organizations to service demand and to pivot in the event of future disruptive events. Many nonprofits are preparing by keeping more cash on hand—a practice that jumped by 17 percentage points between 2018 and the end of 2022. And while a Workday survey found that 43% of nonprofit leaders have not yet developed a digital finance transformation strategy, the same number say they plan to do so in the next two years.
Having a financial strategy will be critical as economic uncertainty impacts everything from individual donors to government grants to the unexpected impact of so-called billionaire giving. This trend toward more trust-based philanthropy, as embodied by MacKenzie Scott’s unrestricted gifts totaling more than $14 billion, will empower more nonprofits to focus not just on their programming but also their operations.
“It’s a matter of not only understanding annual operating costs, but also making sure we’re sustainable now and in the future,” Barnes says.
To learn more about how Workday helps nonprofits drive digital transformation, visit our website.
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