Demonstrating relevance: a top priority for not-for-profits in 2023

Donors want to support organizations that align with their core values. They want to know these organizations uphold their promises. They expect NFPs to be ethical and act responsibly in their environmental, social, and governance (ESG) practices. 

Effective and efficient data governance strategies and practices are imperative for organizations to support stakeholder demands, including those of regulators. New federal and state data privacy legislation makes data governance a higher priority than ever. Today’s robust customer relationship management (CRM) and enterprise resource planning (ERP) systems have become valuable tools to gather, evaluate, store, protect, and report data; but many NFP executives believe there are also opportunities to optimize these critical data management objectives. 

Undoubtedly, the rapid accumulation and use of data in our daily lives, the migration of data to cloud environments, and the use of newer, smarter applications to process that data have brought significant opportunities and risks to NFPs. High among those risks is cybersecurity. In a recent survey cybersecurity was identified as a top concern for the next 12 months. Accordingly, NFPs without systems and practices to effectively secure and utilize data will find it extremely difficult to tell their stories. Those organizations may also experience disruptions that could deter stakeholders from using and supporting their programs. Supporting the need to evaluate these opportunities and risks has contributed to the growing interest among NFP executives and boards in standing-up and supporting an enterprise risk management process. 

Having rich, qualitative data and the systems to analyze, protect, and socialize them will aid in driving mission impact and demonstrating relevance to existing and new stakeholders. With good, clean, quality data, NFPs can reduce risks and seize new opportunities. Do you know:

• Which programs are driving impact?
• The ROI of your events?
• The age and geographic demographics of your recurring donors?
• The cost per dollar raised, by location, event, campaign, etc.? 
• Whether you are accomplishing the short and long-term objectives of your strategic plan? 
• Trends in social and environmental indicators relevant to your mission? 
• The effectiveness of your social media campaigns? 
• The risks your organization is facing that could impede mission priorities?

Good data is the foundation for informed decision-making, better risk management, greater stakeholder engagement, operational effectiveness and efficiency, regulatory compliance, and greater transparency; all essential attributes of high functioning NFPs. 

As the traditional donor base of baby boomers and Gen X continues to shrink and Millennials become the driving force behind "the giving culture," NFPs need to adapt in order to better reach, inspire, and engage this important dynamic class of donors. Better understanding how Millennials consume and share digital data on evolving technologies is essential to telling your story to this new and increasingly influential and generous class of potential stakeholders. 

Younger donors appear keenly interested in funding organizations that align with their objectives and demonstrate progress towards them. Not surprisingly, ESG objectives and reporting are getting more attention from NFPs than ever before.

To address the expanding interest in ESG information from NFPs, forward-thinking NFP executives and boards are evaluating their organizations’ ESG profiles and finding mechanisms to report on them. These pillars of trust are no longer just trends but are foundational ways NFPs are reflecting this significant paradigm shift. In today's socially conscious world, NFPs are expected to embrace values, and, not only understand these important issues, but champion them. NFPs must be adaptable and forward-thinking, embracing new technologies and current values to meet the realities of a dynamic social world. By prioritizing ESG and cultivating a direct understanding of the communities they serve, NFPs can build more meaningful relationships with the next generation of donors and create a sustainable future for their missions.

Today, donors value greater transparency and authenticity from NFPs. They are also more informed supporters with more access to data to confirm their decisions. Any breach of trust, negative publicity, or mismanagement of sensitive data can expose NFPs to social fallout in ways that are impossible to recover from. NFPs need to clearly tell their story, but they must prioritize data security and governance first to earn donors’ trust and cultivate stronger relationships. Stakeholders listen to trusted messengers.

Facing economic headwinds, greater competition, changes in stakeholder interests and engagement, and a need for greater transparency without compromising privacy, it is increasingly important for NFPs to demonstrate relevance in ways that will resonate with new constituencies, including a more globally conscious and value-driven culture of stakeholders.  

In short, NFP organizations that effectively collect, measure, and use data to position and drive mission impact will be better equipped to advance critical mission objectives, manage risks, build more meaningful relationships with the next generation of donors, and create a sustainable future for their missions. 

John Alfonso, CPA, Partner, Not-for-Profit & Education Industry Leader

646.254.7415

Allison Guttenplan, CPA, Senior Manager, Risk Advisory

646.601.7835

Lori Rothe Yokobosky, CPA, Partner, Exempt Organizations Tax Services Leader

973.228.3500