Like so many other industries, the nonprofit sector is being disrupted. But it’s not technology or automation that is sparking change. Instead, it’s young donors who are shaking up philanthropic giving and how nonprofits operate. MiBiz spoke about emerging disruption in the sector with Michael Moody, co-author of a new book called “Generation Impact: How Next Gen Donors are Revolutionizing Giving.” Moody will be the keynote speaker of NextGen Nonprofits, a new MiBiz event for nonprofit executives, staff and board members on Jan. 24 in Grand Rapids.
The promotional materials for your new book use a lot of superlatives in describing Gen X and Millennial philanthropists: ‘They’re going to shape our world in profound ways.’ ‘They’re going to revolutionize and disrupt the sector.’ Who are these people?
The ones that we focus on in the book are at the top end of the giving spectrum … the big donors of tomorrow. A significant number of them are coming into their giving roles through some sort of inheritance. But there are also a significant number of them who are becoming big donors because of the wealth that they’re generating themselves. This includes the Mark Zuckerbergs of the world, but it also includes other people who are making significant wealth at younger and younger ages.
So these are just the super wealthy, then?
Some of the people in the book have last names like Rockefeller. And others of them are two doctors who are living in Kansas City, and they are just very involved in the causes that they care about, and give a significant amount of their resources every year. They are part of the 1 percent of major givers, but they’re not the sort that many people would know.
In West Michigan, we certainly have the well-known wealthy families, but it sounds like you’re also talking about the young doctors, lawyers and next-generation owners of family businesses.
I make the claim that in every community around the country, including Grand Rapids, there are a significant number of these next-generation donors who don’t make the papers. They’re the ones … that tend to come from closely held family businesses in which the next generation is often taking a role in those businesses. That family wealth tends to stay here.
So the wealth will stay in local communities, but is the next generation going to allocate it differently?
They’re not necessarily changing the causes that (their families) give to. And that is, I think, a big finding that’s important for the nonprofit world. People are worried that the next generation’s going to come along and they’re going to stop giving to health care, or stop giving to education, or the environment. We found, on the whole, that their cause interests are roughly similar.
In that case, what’s changing?
What’s changing is the ways that they want to give to those causes, the types of organizations that they want to give to and how they want to engage with those organizations. They want to give to those organizations that can prove effectiveness. They want evidence of impact. We talk a lot in the book about all the changes they want to make are really about them being obsessed with showing impact and being able to see more impact.
They don’t just want to write checks and go to galas like their parents and grandparents did.
They consider just writing checks — and especially waiting until (they) retire to write checks — to be the most uninspired and ineffective way of giving. They want to give their time and their talent, and they want to do so in meaningful ways. That has tremendous consequences for nonprofits and how they engage with these next-gen folks. They don’t want to be seen as an ATM, and they also don’t want to be seen as just a party planner. They want to come in and help, roll up their sleeves with the organization and really try to solve important problems.
These next-gen donors put a lot of importance on due diligence and research before they’ll even get involved. What does that mean on a practical level for nonprofits?
I think what it means for nonprofits, maybe most dramatically, is that (they) are going to have to be more transparent about those sorts of things than they may have been in the past, or than they may be comfortable with. You’ve got big donors of the next generation that want to do due diligence, want to see the books, want to see the outcomes, want to see maybe where the problem areas are, or where a nonprofit is struggling so that they can really dig into those issues, and know the full picture before they make a choice.
It sounds like what a public company has to deal with in terms of dealing with shareholders.
We say all the time these next gen donors are more high maintenance. They require more time and energy than previous generations of donors because of how they want to give. They want to meet periodically with the executive director and go through the details of how things are going. There’s an ongoing kind of engagement around details that is going to be required for the nonprofits to do with these donors that they may not have done in the past with other donors as much. The next gen loves site visits, for example.
But the site visits also have to be real and authentic, right? They can’t do the Potemkin village-style presentation.
These donors can sniff that out pretty quickly. When they take in a site visit and it’s only smiling children and every staff member is happy with their job … I think that’s less likely to be a motivating fundraising and engagement strategy.
MiBiz new coverage of Michigan’s nonprofit sector is made possible through a generous sponsorship by the Grand Rapids Community Foundation, a leader in funding, initiating and leading programs that benefit the Grand Rapids area in the arts, community development, education, environment, health, and human services. For more information, visit grfoundation.org.