Episode 64: 2022 Philanthropy Industry Predictions

Welcome to another edition of “Around with Randall”, your weekly podcast making your nonprofit more effective for your community, and here is your host, the CEO and Founder of Hallett Philanthropy, Randall Hallett. Thank you again for joining me here on “Around with Randall.” Today our look into the future, for those who are old enough, kind of a Carnac the Magnificent to steal from Johnny Carson. A prediction of 2022, what might we see in the nonprofit, philanthropic world, and I believe I have nine thoughts, nine predictions, and frankly I’m encouraged because I went about six and a half out of eight in my 2021 predictions. So gosh, if we were successful here maybe there's some things in here you can grab and utilize to your advantage. So let's jump right in.

Number one is where do we see philanthropy in the large, in terms of grand numbers? We always have to wait until the Giving USA numbers come out, the total kind of view of philanthropy. July, August for the year before, so we're talking about what is it we think we're going to hear about this current year, 2021. And what I think you're going to find is that there's another uptick in philanthropy, and I always use as a comparison the percentage of GDP because that keeps it consistent. Remember for 2021 we reached the highest level ever at about 2.4 percent so that was for technically 2020, but the 2021 release I think it's possible we'll see almost 2.5  percent. I think that people have been very interested in making philanthropy a priority this past year. What I think is interesting as well is that we're gonna see increased corporate giving being reported - maybe four to six percent increase as you compare it to years past, in part because we've seen dramatic increases in corporate profits. I think the real question is, we'll save this for next year, but looking a little further into the future if the stock market and the economy turns, if inflation is being forced to be held in check by raising interest rates, particularly from the fed, that's probably going to put a damper on overall philanthropy for 2022. We won't know that until we get in obviously in the next you know six, nine months, to see what happens, but for 2020 one the report out we will see an increase again closing in on 2.5 percent of GDP and that would be an all-time high. So that's my first prediction. 

Second and probably the one I’m most concerned about. I think that we're going to see massive problems in non-profits when it comes to staffing and it will take, in kind of maybe two parts. The first is is that non-profits are going to have a tough time staffing what I will call basic services. So if we think about the amazing work that happens in a food kitchen, many times there are volunteers, but there are some paid staff. Sometimes you have to have paid depending on state or local regulations, paid cooks, things of that nature, that it's going to get harder and harder. Maybe it's in social services and we're paying social workers. We're going to see nonprofits actually either merge or close, or maybe find a different way of providing service because the staffing model is going to get out of whack. And if you're a larger nonprofit you may have more options but for smaller nonprofits they don’t. And so while we see an increase in giving, I think we're also going to see a bifurcated effect. Larger nonprofits probably doing better and smaller nonprofits, particularly those that pay frontline workers in some way, shape, or form, really struggling and even closing, saying we just can't operate with what we have to pay based on what we raise. So that's a downside. The second part of it is the idea of staffing is my third prediction. 

So number three is the immense pressure that's going to be placed on frontline fundraisers, not necessarily the pressure on them but the pressure on organizations, to keep them. What I think is going to happen is twofold. Number one you're gonna see more and more fundraisers, major gift, principal gift officers, annual gift officers, planned giving officers leave philanthropy because they can make more money in the private sector, because we're seeing such dramatic increases in those that are relationship-building activity related people. and number two, you're going to see an immense amount of movement in jobs amongst major gift officers. This is going to force nonprofits to have some very difficult conversations around how do they choose to pay fundraisers. The old adage that I always sat with was, is, that the process was, is, that well we're a nonprofit. You're a nonprofit. We're nonprofit, so we'll have to pay, you know, best practice normalized wages to scale and I think that's going to change, in particular if you're someone who is generating six, seven, eight, nine times your compensation package, that the ROI that you provide is so deep and so important that organizations, nonprofits are really gonna have to fight to keep good people and in doing so are gonna have to compensate accordingly. And I think that's gonna be an interesting ethical moral conversation for a lot of people who look at the dreaded word overhead. Salaries, what we do as a negative, but yet it may be the way in which we generate more revenue. Interesting conundrum. So number three is what's going to happen inside, really the active outgoing major gift, annual gift, planned gift, principal gift officers who are the institutions or organizations outreach to philanthropic opportunity.

Number four, I think we will see in the near term, in the first part of 2022 as mentioned, increased opportunities with the for-profit margins that come from companies to have increased corporate giving. That's going to push stock prices higher so I think in the early part of 2022 my fourth is you'll see increased opportunities for stock gifts, gifts that allow people to not worry about appreciated stock. I think though, if inflation does go up and the stock market then is pulled back some, that will decrease as we go through 2022, so it'll be better in the first part, but I think in the second part of 2022 you're going to see inflation tick up, which is going to cause financial concerns, which is going to slow down the growth of the stock market and investments. We'll see how that plays out. So it's kind of a two-for-one inflation going up no big surprise but how that affects corporate stock prices and what that means in the stock market.

The fifth is is a continuation we have seen in 2021, and I think it will become even a larger effort about what I call justice giving, that people and organizations will prioritize certain thoughts that are driving, or emotions, or values that are driving their philanthropy. So those justice - and they need attention - sometimes philanthropy has to be the mechanism that gets them that attention, are things around equal pay, around race and race relations, and equity, and then the final one is more and more about the climate what are we doing to ensure our planet's viability into the future. And that philanthropy will become more and more of a player in all three of those areas. Warren Buffett once said that philanthropy is society's risk capital and really that's what this is because in all three areas, as examples, whether it's equality from a gender perspective, race equality, race diversity in terms of opportunity, and not only inside nonprofits but in society, and then climate, which applies to everyone who lives on this earth, sometimes for-profit governmental agencies and and companies are slow to move. And what Mr. Buffett was talking about is society risk capital is that nonprofits can push dollars into these sectors in ways that sometimes for-profit companies can’t, and that mostly I think will be at larger non-profit foundation levels. So like the Ford Foundation, those big huge nonprofits that are looking at their risk capital, their investments, and how they can move society forward. So I think you're going to see a lot more conversation about justice giving and how that applies not only at the individual level but also in large foundations, donor-advised funds, things of that nature.

Number six, and this will probably apply mostly to the second half of 2022, is I think there will be a huge political political politicization of philanthropy politics the 2022 election where, certainly philanthropic giving is a part of the conversation. This is where you have political speech having part of the first amendment and that there are limitations on political dollars or contributions limiting people's speech. I think will be more and more of a conversation and that that will be seen as a very negative outcome for philanthropy, overall. In some ways I wonder if we're looking at philanthropy kind of in two tranches sometime in the future. One is what we think of traditionally, whether that's a hospital foundation or an educational foundation, could be social service foundation, museums, zoos, the things we traditionally think of that raise money as one part of our world, and political dollars as a second part. In the end they're all philanthropy because many times you get a tax deduction if you give to a PAC or something of that nature, but I wonder if they're really separate in terms of thought and and intent, doing good for mankind, helping mankind, the definition of philanthropy versus political outcome, which is a little different. I wonder if someday we'll kind of differentiate the two a little more distinctly, but I do think that in 2022 you'll see an increase in the veracity of political philanthropy and it won't be positive to be candid. 

Number seven, a much wider industry acceptance of artificial intelligence. I look at the work being done in particular by Bill Tedesco, Nathan Chappelle, with Donor Search and Aristotle and how I think it's going to revolutionize the way we do business in philanthropy, particularly major gift work, angel giving work. It's just a game changer. I think people are slow to accept it because it's new. I think that will be a part of a revolutionary change in how we can become more efficient and effective, knowing likelihood being 80 percent of the equation. Who are the people that we should be talking with? That number seven for me is the acceptance of artificial intelligence and its value to what it can be for a nonprofit, in particular, smaller nonprofits. If you're a university you have research and prospect management personnel but if you're a smaller nonprofit most don't have that capability financially but for a very small investment you can have the equivalence through something like what Aristotle does to get all the research in one place, really interesting stuff that's going to transpire so artificial intelligence and acceptance is number seven. 

Number eight is the viability the increased ascent, the impact of social media in philanthropy. I don't feel like I’m really out here in a limb but think about tik-tok. I still think there'll be places to give money on a website and you know the idea of crowdfunding, all things think about what I think what tiK tok is going to do in philanthropy being able in short messages to convey value in terms of what a nonprofit delivers. Let me give you some numbers here: 90 percent of adults ages 18 to 29 use social media multiple times a day; 90 percent on the other end, 65 and above it's 40, well 30 to 49 is 82 percent, so everybody below 50 years old is either in the 90 percent of using it multiple times a day or 82  percent using it multiple times a day. This is going to continue to evolve. I wish I was more socially aware on social media. I’m just not. It's not my forte but I just would be foolish not to embrace it as something that could be a game changer, and I think tik-tok and other social media will begin to elevate the idea of value instead of, you know, hey you know what a good charity what do you give to us or a gofundme page, it becomes more about why we're doing, why you should be engaged with this nonprofit, what they do that makes the community a better place, and tik-tok has grown so much in the last couple of years just something to think about and look at, maybe something for you to consider doing it yourself. Number eight.

Number nine, my final one. I think that there will be a continued increased pressure on larger foundations, and I’m not talking about the ones that get money but the ones that give money, donor advised funds particularly, through community foundations. Huge increases in giving that there will be pressure even into principle to give more money away. I’m not sure that we're in a political environment where there can be any legal changes to the requirements of a foundation or a donor advised fund. I think there's too much polarization in Washington to get much done before 2022 at the election, at least in November. But I think there's going to be other kind of pressure. It won't be legal with societal pressure. Harvard is the best example. There was a report here recently that they took $2 billion out of their corpus, out of their principle, and brought it in to be used because they were making such good money and they wanted to make an impact more deeply. I think we're going to see more conversations about this where larger funds can leverage more political capital engagement outcome value, however, you want to look at it by going bigger and bigger may mean a little more aggressive from their investment funds or even into their corpus depending on what's allowed. But I think we're going to see a lot more conversation and pressure about that.

So those are my nine. So highlights. We're going to see GDP going up in terms of its relationship to philanthropy - maybe up to 2.5 percent. We're gonna see huge staffing issues where nonprofits, particularly with those that hire people on the front line, are gonna really struggle and even close. And that for pressure, number three, on major gift officers, principal gift officers, going to be intense to try to keep them, and that there's going to be real conversation about how they're compensated. I think inflation will jump in the second half of 2022, in the first half though it'll still allow for a lot of opportunity in stocks and bonds to be used for philanthropic purposes to reduce capitalist, capital gains and appreciated stock value. But in the second half of the year that's going to be a struggle because inflation will maybe take a hold and cause interest rates to go up, which probably will slow down the markets. We'll see an increase in what I think of as justice giving in the areas of gender, race, equality and related issues, also in terms of how the climate is viewed and how philanthropy can help support that. I think we'll also see a, particularly in the second half of the year, a real challenge with politicization when it comes to the 2022 election and how philanthropy is used. I think we'll have a greater acceptance, number seven, in artificial intelligence. Number eight is this idea of how social media begins to tell more of the story of why philanthropy is important, what organizations are doing. I specifically mentioned tik tok is something to keep an eye on. And number nine, the final one, is increased pressure and opportunity for larger foundations, donor-advised funds, community foundations, other, to have more of an impact with larger allocations of either their investment income or even into their corpus.

The look into the crystal ball brought to you by Carnac and Johnny Carson here on Hallett Philanthropy of what 2022 might look like. If nothing else, I hope that you are thinking about how you can impact your nonprofit in your community to allow wonderful things to happen for your organization and most importantly to serve the people in your community in whatever way the mission dictates, drives, implores for you to be at the top of your game. And I hope you can use these podcasts and other things from the website at hallettphilanthropy.com as ways, as teaching tools, as mechanisms to allow you to continue your improvement in your professional career. I thank you for your time. I thank you for a great 2021. Thank you for listening. Don't forget, share this with other people, leave a review, send me an email if you have a concern podcast@hallettphilanthropy.com, and don't forget my all-time favorite saying: some people make things happen, some people watch things happen, then there are those who wondered what happened. We're people in this industry, nonprofit work, who make things happen for those who are wondering, for the things that are wondering what happened. That's a great profession and I’m glad you're a part of it as well. We'll see you next time right here on “Around with Randall,” and don't forget make it a great day.