(Declining Donations: What It Means for Charities)
(Beggar)
“Alms for the poor, alms for the poor…”
(Lazar)
“Here, Reb Nahum, is one kopek.”
(Beggar)
“One kopek? Last week you gave me two kopeks.”
(Lazar)
“I had a bad week.”
(Beggar)
“So, if you had a bad week, why should I suffer?”
~Fiddler on the Roof
Recent reports of charities merging, reduced charitable giving and increased competition among charities is creating challenges for the sector as many charitable organizations struggle to maintain their level of operations and services with reduced revenues.
The recent merger of the Canadian Cancer Society (CCS) and the Canadian Breast Cancer Foundation (CBCF) [1] is a clear indication of an emerging trend in which charities are facing critical strategic decisions that will determine their future. There are indications that other charities may well soon join the newly merged CCS, a clear indication that this is not just a problem facing a few large charities. There are charities that are reorganizing [2] in order to streamline their operations, divest of activities that are either no longer relevant or cost effective (i.e. a rationale business model no longer exists to support such activity).
Of course this trend is not affecting all charities. Many of the largest Foundations (e.g. in the health and education sectors) have been able to maintain strong and flourishing organizations. But in several areas, like the research and social/health care services sector, many charities are facing a steady decline in their revenues and are being forced to deal with the deterioration in their budgets. Organizational streamlining, consolidation of operations across the country, employee dismissals are but a few of the more drastic measures being employed to stem the diminution of resources and maintain a stable operation base.
Declining revenues are a result, of course, of the decline in philanthropy in Canada. The Fraser Institute’s study on charitable giving shows that Canadians “…are less generous than their American counterparts when it comes to private donations to registered charities.” [3] The percentage of Canadian taxpayers making charitable donations has declined from 25.1% in 2004 to 21.3% in 2014. The percentage of aggregate income donated to charity has also dropped in the same period. Those Canadians who donate, give – on average – just over one half percent (0.56%) of their income to charity. At 1.42% of aggregate income donated to charity, Americans are far more generous than Canadians. Noteworthy is the fact that the average U.S. donation was US$5,807 compared to the average Canadian donation of C$1,618.
Competition among charities for the reduced charitable dollar is another key factor in the fiscal challenges being faced. Donors are constantly being contacted by charities (multiple phone calls, emails, text messages, social media ads) and it is not surprising that donor fatigue is taking its toll on the bottom line for many charities.
Directors (lay leaders) are paying more attention to budgets and operations resulting in more stress and pressure being placed on CEOs and Executive Directors. The goals of charities are changing and professional leaders are facing increased expectations to increase the revenues and/or make drastic changes to the organizations business model and organizational structure. Leadership is now becoming a focus of attention by charity Boards.
In discussing the central themes that appear most often in job postings for senior executives in the non profit sector (vision and inspiration, change management, business acumen and entrepreneurship, and technical skills), David Edell (DRG Executive Search) notes, “The differences between the aspirations outlined in job descriptions, the expectations of the individuals who have identified them, the practical challenges of changing culture and achieving new goals with limited resources, are often the variables that ultimately lead to board-CEO tensions. The lack of clarity, search committees’ failure to ensure that the entire leadership is committed to those themes before the search and/or reverting back to old assumptions and behaviors at the conclusion of a search, all have the capacity to undermine the very goals organizations say they want to achieve.”[4]
When organizations are in financial stress, it is the time for lay leaders and professionals to work in close collaboration and plan methodically for needed changes and transitions, thus avoiding the negative effects of potential conflicts. It is important that everyone understand their particular role in finding and implementing solutions to the financial and organizational challenges being faced. Careful thinking and planning with a well developed process for realizing the required changes to maintain a viable charity are essential to successfully transitioning from a difficult, indeed stressful, situation to one that can reset the organization to continue its good work. Changes may often require legal work to amend objects/purposes and deal with the multitude of issues entailed with mergers and/or divestment of organization units and activity centres.
Professionals can assist with planning and implementing organizational change and strategic direction.
For further information on non profit change management, contact the firm.
[1] Reguly, Eric; “Donation drop forces merger of Canada’s largest cancer charities” The Globe and Mail, February 1, 2017.
[2] “Reorganizing A Non Profit/Charity to Secure Efficiency and Stability in Operations – A Current Case”, Drache Aptowitzer PC Charity Law Insights Newsletter, August 2015.
[3] Fraser Institute, Fraser Research Bulletin “Generosity in Canada and the United States: The 2016 Generosity Index”, December, 2016.
[4] Edell, David; “Leadership Transitions: The Importance of Clarifying Goals and Supporting Change”, eJewish Philanthropy, March 2, 2017.