While he wouldn’t categorize it as “dire,” a leading Michigan-based consultant said the fundraising climate in Michigan has been better and currently is headed in the wrong direction.
Michael Montgomery, owner of Huntington Woods, Mich.-based Montgomery Consulting Inc. and an instructor at the University of Michigan’s Dearborn campus, lays out the rationale for his predictions in his annual Michigan Fundraising Climate Survey, released at the end of March.
“Michigan’s fundraising climate is starting to deteriorate — you see that in the slow but steady decrease over the past few years in the proportion of respondents reporting raising more money than in the prior year,” Montgomery said. “This deterioration is also evident in the rapidly decreasing level of optimism about Michigan’s statewide climate for successful fundraising as well as in a slower decline in how respondents evaluate local fundraising conditions in their organization’s home community.”
Among respondents to this year’s survey, 54 percent reported raising more money in 2018 than they did in the year prior, down from 57 percent two years ago. One-third of survey respondents said they failed to meet their 2018 fundraising goals.
As well, just 12 percent of executives surveyed expect the fundraising conditions in Michigan to improve. Their outlook on Michigan’s fundraising climate has dropped sharply since 2016, when 70 percent of respondents expected conditions to improve. This year, 35 percent said they expected statewide fundraising conditions to worsen in 2019, up from just 19 percent a year ago.
Montgomery said the view about statewide fundraising conditions is one that should “really blow your socks off.”
“That is suggesting that nonprofit leaders are seeing and hearing things indicating that they are going to be raising less money in the near future than they have in the recent past,” Montgomery said.
While some nonprofits seem to be acting appropriately, the way many organizations have functioned in the past is not going to serve them in the future, he said.
“You always have people who want to push for the answer. Crowdsourcing, social media — none of these things are the answers, but they may have a role to play in improving fundraising results,” Montgomery said. “They have to be better at establishing relationships with real people who believe in their work and will continue to give.”
Major organizations, including hospitals, colleges, universities, and private secondary schools have been good at establishing and maintaining relationships. This effort, he said, has resulted in the cultivation of lifelong relationships that produce ongoing giving and planned giving.
Montgomery’s annual survey was sent to a broad sample of 734 nonprofits throughout Michigan; he received 93 completed responses.
Respondents said that their donors at the $250 level were down by 4.4 percent and donors at the $1,000 or less level were down by 4 percent. However, those who gave more than $2,500 increased.
MORE WEALTHY DONORS
Montgomery said his findings are similar to those put forth by Fundraising Effectiveness, which was established in 2006 by the Association of Fundraising Professionals and the Center on Nonprofits and Philanthropy at the Urban Institute to conduct research and help nonprofits increase their fundraising results at a faster pace.
The Fundraising Effectiveness survey enables participating groups to measure and compare their fundraising gain and loss ratios to those of similar organizations. In the most recent survey, executives said they expected 1.6 percent growth in fundraising for 2018.
“That’s like nothing,” Montgomery said.
What is resonating with Montgomery and other fundraising experts is a steady increase in the number of high-net worth donors while the number of lower-level donors is decreasing.
Based on information from U.S. Trust about this particular group of donors, Montgomery said there’s a pretty clear indication that major givers have different agendas and preferences and are more likely to support causes focused on education as opposed to basic needs like food and shelter.
“If in a world where giving by John Q. Public tends to hit some types of charity harder, the big donors tend to favor large educational institutions, major hospital systems or major cultural organizations,” Montgomery said. “That’s going to leave nonprofits like homeless shelters pounding the sand.”
PASSING ON THE POWER
In addition to this shift in giving patterns, Montgomery said the internal politics of organizations will change. He said organizations that receive smaller donations from more people tend to have boards that are made up of experts in their fields and in their community.
“When you have organizations that are dependent on major gifts, you end up with a board of rich folks and they select different leaders and set a different agenda,” Montgomery said. “It’s a lot easier to raise money if that’s what your board looks like.
“This will be an advantage for some charities more than others and impact all charities not already funded by major donors.”
Montgomery said he has concerns about board representation reverting back to what it looked like before the Equal Opportunity Act of 1965 because of the increase in high-net worth donors.
He said he thinks this will depend on what causes people favor. Some donors truly support the work of particular agencies and give in the same openness of charity that others do, he said.
“This ends up not being a bad thing because nothing changes other than that there are fewer checks to process,” Montgomery said. “If an organization becomes funded primarily by major donors, you’re raising gifts from a smaller number of people who bring with them strong social, political, or religious beliefs and things will change.
“I’m always pretty blunt with people who want to get their major donor programs going. I tell them that the person with the gold makes the rules and if you consciously decide to create a funding structure where you’re raising gifts from a smaller number of people, you’re passing on to those people more power.”
What Michigan is experiencing appears to differ from data in the national Giving USA report, which finds that individual donors on the national level accounted for 70 percent of total giving. In Michigan, individual donors account for 58 percent of giving. However, respondents to Montgomery’s survey said they received a larger proportion from corporate donors, 18 percent compared to 5 percent reported by Giving USA.
Montgomery said this is not surprising.
“We raise more money from corporations than nonprofits in the rest of the country because three of America’s largest corporate givers are headquartered here in Michigan,” he said.
Those include General Motors, Ford and to a lesser extent Chrysler, which all have maintained legacy giving.
Meanwhile, Michigan’s nonprofit leaders think the growing importance of younger people in philanthropy is likely to be neutral or positive for their organizations with one key exception — among major individual donors. For that donor segment, almost a third feared that generational change could be unfavorable for their organizations.
“Rather than supporting their communities’ traditional charities, many significant younger potential donors are forming new groups, gravitating toward nonprofits where their age group predominates, or engaging in public spirited activities that may not focus primarily on giving,” Montgomery said. “As a result, how younger major donors may change the local philanthropic culture is a source of concern for some traditional nonprofit organizations.”
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