What next for not-for-profits? Experts pick the trends leaders must know

We approached a panel of sector thinkers representing expertise across finance, technology, governance, regulation, law, insurance, human resources and advocacy and asked them to nominate the most pressing challenges and the biggest opportunities facing not-for-profit leaders now.

A consistent theme among them was that despite the tough times community leaders have faced in the past two years, the pandemic shock has also created new ways of doing things, which they say should not be lost.

Pandemic upheaval brings opportunities for NFPs

Susan Pascoe, chair of the Community Directors Council and the former chief of the Australian Charities and Not-for-profits Commission (ACNC), summed up the thoughts of other top thinkers when asked to nominate key issues for the sector.

“The hope we bring to 2022 relates to the possibility of enduring positive change from the experience of the pandemic – better wages and conditions for aged care and early childhood workers; workforce flexibility that allows a mix of home-based and workplace-based working arrangements; real focus on mental health as we observe the impacts of extended restrictions; and deepened appreciation for community organisations that have provided grassroots support to those doing it hard during the pandemic.”

Similarly, David Crosbie, the chief executive of the Community Council for Australia, said the federal election, staffing and community engagement were areas ripe for influence by savvy community groups.

“Governments are slowly figuring out that working with charities and community groups saves them from making costly mistakes and improves their capacity to deliver on policy goals. I expect that during 2022 a more collaborative or partnership style of relationship will continue to grow between governments and the NFP sector.

“When the dust settles on this period in our history, I think we will look back and realise just how much we have grown as individuals, communities and organisations through meeting the many challenges of the pandemic.”

The Commonwealth Bank’s head of not-for-profit sector banking, Julienne Price, said organisations should look forward to “strong economic momentum” throughout 2022.

“Now is the time to ask for donations,” she said.

In a similar vein, Aon insurance not-for-profit specialist Derek Turner said NFPs now had an opportunity to get back to regular fundraising activities and events which had been affected by covid.

Salesforce.org nonprofit insights senior director John Jensen, drawing on Nonprofit Trends Report, 4th edition, a recent global study of 1250 NFP managers (250 from Australia), said existing trends related to technology, inequality and a collapse in trust had “greatly accelerated” during the pandemic.

He said many organisations had weathered the storms well, especially those not held back by “legacy inertia”. Australian groups were more likely than those overseas to have diverse boards, he said, and leadership diversity was set to increase further.

Salesforce.org is a cloud-based software platform so it is perhaps unsurprising that Mr Jensen would argue that the groups equipped with “fit for purpose tools” would do best, but he also said responsive managers were critical in the new hybrid online and place-based environment.

Infoxchange chief David Spriggs, whose organisation specialises in tech help and training for NFPs, said: “The sector proved itself to be incredibly determined and resilient throughout 2021.

“We’ve seen the sector navigate the many obstacles thrown their way by taking an innovative approach to how they utilise digital technology that will ultimately place them in good stead as we learn to live alongside the virus in 2022.”

Leadership expert, Leading Edge author and Emergent CEO Holly Ransom said not-for-profits have a once-in-a-generation opportunity to attract the best talent to their organisations.

Ms Ransom said the “forced pause” triggered by covid-19 lockdowns had prompted many talented workers in many fields to ask themselves, “Is it worth it?”.

Not-for-profits had an exciting “window of time” in which they could press their “incredible appeal” to other disaffected workers, Ms Ransom said.

This would combine the community’s sector’s “purpose-driven focus” and its status as “best in class with flexibility of work” to pitch for new talent.

Lawyer Lindy Richardson, a partner at legal firm Maddocks, also believed that not-for-profits had a chance to take charge of their own destinies.

“Given the many challenges faced by NFPs during 2021, they have been doing a fantastic job simply by continuing to provide services to the community” while navigating a string of changes to employment law, she said.

“We see 2022 as an opportunity for NFPs to be more proactive as opposed to reactive.”

What is the big picture for not-for-profits?

The Salesforce Nonprofit Trends Report identified three overarching trends affecting NFPs:

• growing inequality
• the widespread adoption of digital tools
• a growing sense of mistrust that affects not-for-profits alongside government, politicians and the media

Mr Jensen said the pandemic had hastened those trends.

“All of these trends – both positive and negative – have been greatly accelerated … what happened in the pandemic is that existing trends didn’t really change, they just sped up,” he said.

Ms Pascoe, whose involvement in charity regulation, education and international aid is longstanding, witnessed many of the impacts of the pandemic and the way the sector had responded.

“The community sector faces 2022 with a mix of hope and trepidation as Australia adjusts its health response in light of the virulent Omicron wave,” Ms Pascoe said.

“The trepidation is that we don’t know if we are living through the last wave of the pandemic, or if there will be more. This is a real challenge for planning. Community sector organisations need to have plans for best- and worst-case scenarios.

“Many of you will have seen increased pressure for services in the past two years, at a time when volunteers have dropped away. Part of the approach for 2022 will be ensuring covid-safe workplaces, enabling working from home when this is feasible, finding means to re-engage volunteers, and shoring up your financial position.

That summary sets the scene, but how should not-for-profits approach the challenge? Our experts delve deeper into the actions your not-for-profit should take, and the issues you should take the time to understand.

Mr Crosbie, who has recently argued strongly against a government crackdown on charity advocates, said the upcoming election was a chance for NFPs to influence the agenda.

"I am looking forward to the federal election. It is time to reset our national priorities, to focus again on what makes our communities strong and how we can drive real change that benefits not just the rich and powerful, but all Australians.

"While elections can in some ways be difficult for charities, we do know that most political candidates like to be photographed at a charity or community organisation, helping out, making an award, meeting the people involved. So, this year, I expect to see thousands of photographs and media reports of aspiring political leaders visiting their local community groups and charities, offering their support, handing out their business cards and smiling for the cameras.

"And, I am hoping there will be more opportunities for the NFP sector to influence policy beyond the election.

"The pandemic has taught us that engagement with charities and community groups is critical to maximising impact and effectiveness in government programs and services.

“In aged care, disability, education and other settings, we have clearly seen that imposing government-shaped solutions on community groups does not work. We currently have defence force personnel being paid over $120,000 co-opted into casualised aged care roles that pay a fraction of that salary. It is not working!”

GiveNow executive director Cathy Truong, of Our Community’s donations and giving platform, said organisations should consider using the election to generate financial support.

“If you know that the community you serve is going to be part of the national discussion, claim your organisation’s role in addressing the social issue and ask the public for funding to make it happen. You know how your organisation can contribute to solutions.”

Funding certainty still the key to NFP survival

The Commonwealth Bank’s Julienne Price was confident that NFPs would be able to take advantage of predicted stronger economic conditions to seek donations.

But she accepted that the pandemic’s financial impact on the sector was not uniform.

“We witnessed different NFP sub-sectors facing different circumstances. Some found the various support measures went a long way to help them through their financial challenges, while others faced unprecedented demand on services.”

And the bank had seen some groups face expenses pressure from the costs of cleaning, rapid testing, rising freight costs and “supply chain management stress”.

“The expenses mentioned above aren’t going away, and finding a way to continue funding these needs to be addressed. You need someone who is good at planning, budgeting or forecasting to ensure you’re kept on track and can continue to meet the demand for your services.”

Salesforce.org’s John Jensen said donations would face a shakeup, predicting groups would seek more help from bigger donors.

He said growing inequality had both increased demand for the services of not-for-profits and led to a growth in the ability of wealthier donors to give.

He predicted a “slow, gradual shift” by not-for-profits seeking to win more major donors, while spending less effort chasing smaller, “casual” donations.

Keep watch for rising insurance costs

Aon’s Derek Turner said insurance claims from bushfires, storms and cyclones have hit the profit margin of insurers, which in combination with low interest rates and rising costs has seen insurance rates rise and coverage change.

He suggested that groups should review, update and improve their risk management procedures to enable them to remain “robust and agile”, and they should approach a trusted broker before renewing their coverage.

Check ICDA’s dedicated insurance mini-site for more help.

Not-for-profit workplaces hotbeds of change

Not-for-profit workplaces will continue to throw up challenges for leaders in the transition to covid-normal operations.

Maddocks partners Lindy Richardson and Catherine Dunlop nominated a raft of issues facing not-for-profit leaders in the workplace during 2022:

• the return to the workplace
• performance management
• managing vaccinations
• the “Great Resignation”
• psychosocial health
• sexual harassment.

Ms Richardson said NFPs, especially those with office-based workers, need to carefully consider flexible work practices – such as working from home – in managing the return to work, as covid-19 allows.

In a related issue, organisations would need to continue to “navigate the nuances of performance management in a remote working environment”, she said.

Maddocks recommends organisations review existing workforce performance measures, invest in new technology or training if needed, and establish a monitoring framework with “regular and helpful feedback”.

Vaccinations will continue to be a big topic, giving rise to issues including:

• medical exemptions
• defining “fully vaccinated” as opposed to “booster shots”
• unfair dismissal and general protection claims.

Organisations should keep tabs on the latest directions and court cases and conduct regular safety risk assessments. Maddocks also recommends organisations regularly update their vaccination policy. (Read more in Workplace vaccinations a prickly business and download ICDA’s free vaccination policy.)

Catherine Dunlop said there was “increasing recognition that ‘health and safety’ now includes both physical and psychological health”. She said regulators were increasing their scrutiny of the issue.

The recent Maddocks publication Year in Review 2021: Employment, Safety & People said psychosocial hazards included stress triggers such as excessive work demands, exposure to trauma, conflict, harassment and remote work.

“Most employers have recognised that we have come a long way from the ‘fruit bowls, yoga classes, employee assistance programs (EAP) and engagement survey’ model of mental health support of a decade ago,” Ms Dunlop said.

“This year will be a year for NFP leaders to review what they are doing, to ensure they are demonstrating best practice, to increase retention and morale, to ensure productive collaborative teams, and to comply with legislative duties”.

Ms Dunlop said organisations should conduct “comprehensive psychosocial risk assessments” and address complaints, but also aim to prevent problems such as “uncivil behaviour”, poor workplace culture and inadequate support.

Sexual harassment would also continue to be a major issue for not-for-profits, she predicted, with a recent unfair dismissal case involving a Westpac manager found to have sexually harassed a colleague setting higher standards of workplace behaviour.

In its ruling the Workplace Relations Commission observed that “Australian workplaces [are] on notice that their behaviour will attract greater scrutiny and face higher standards than in the past”.

She said reviewing existing policies made sense whether work teams were returning to the office or adapting to new hybrid arrangements.

Recruiting well will be a tricky task

Ms Richardson nominated the “Great Resignation” trend as one that NFPs would need to address, with the Maddocks publication Year in Review 2021 predicting a March 2022 peak for resignations.

Amid all of the workplace challenges, perhaps the greatest will be attracting and retaining staff in the first place.

Late last year, the Institute of Community Directors Australia revealed in a Pulse Poll that 40% of workers in the NFP sector were tempted to leave their current jobs. At CommBank, Ms Price said the bank’s not-for-profit clients were suffering “serious staffing shortages” and exhaustion in high-demand areas.

The Community Council for Australia’s David Crosbie agreed that staffing was one of the biggest issues of the year.

“We know it is getting harder to retain and recruit good staff into many charities and community organisations. This has already driven a rethink about how the broader NFP sector engages with staff and provides the kind of support and opportunities staff need to grow in their roles and as individuals. In many ways we have seen a more person-centred approach to human resources management, and I expect this positive trend to continue and grow in 2022. This will provide more flexibility in the way we work, more options for growth and exploring how we work better together – even when we are apart.”

The Salesforce study found 85% of respondents identified staff retention as a major issue, with 79% expecting to outsource work in the next three years as a way to “close that circle”, nonprofit insights senior director John Jensen said.

He said not-for-profits weren’t as easily able to raise salaries or change organisational structures as for-profits, but more than half had addressed wellbeing, collaboration tools, and support for the mental health of workers.

He added that “in a hybrid distributed environment, managers are more important than they ever were before” with better managers able to understand workers’ needs in the context of remote working and the lack of the “social cues” that normally occur in an office environment.

Leadership thinker Holly Ransom believes the “Great Resignation” brings opportunities for nimble NFPs, saying that the upheaval represents “an incredible opportunity for organisations in the community sector to attract extraordinary talent who want purpose.”.

The Commonwealth Bank’s Julienne Price agreed: “The pandemic has seen many experience a shift in mindset in terms of how they view their work and careers, and NFPs that are recruiting may see a greater selection of candidates … as individuals look for greater meaning and purpose in the work they do.”

Tech trends are accelerating

The biggest tech challenge for organisations continues to be “handling remote program delivery, implementing tools and technologies, online service delivery, and online events”, according to the Salesforce.org study.

Amazingly, 78% of respondents believed their organisations would become fully virtual in “the next three years”, and while Mr Jensen was skeptical, he said, “I think that [the answer] is indicative of the level of understanding – and perhaps resignation – that many non-profits have about this sort of the future that we're rapidly moved into.”

Infoxchange’s David Spriggs had a similar message.

“We’ve seen an increased number of organisations across the sector embracing digital transformation during covid-19 to enable more efficient and effective service delivery.

“It is critical for not-for-profit organisations to continue evolving the ways they use technology. From the way they deliver services through to introducing new ways of supporting staff working from home and hybrid working environments.”

“Less than a quarter of not-for-profits have a digital transformation or IT improvement plan in place. Last year, Infoxchange launched the Digital Transformation Hub as a way of simplifying the process, with access to web-based resources, capacity building programs and personalised advice.”

Cyber threat is rising

“The Infoxchange Digital Technology in the Not-for-Profit Sector report indicated that only 50 percent of organisations have effective information security plans,” David Spriggs said.

“This vital area is often overlooked, particularly in small to medium-sized organisations, and it is important that organisations of all sizes regularly revisit their policies, along with making sure their staff regularly participate in cyber security awareness training.”

Aon’s Derek Turner agreed: “Cybercrime continues to be the fastest growing crime in the world. There has been a significant increase in claims frequency and costs, particularly during covid when many volunteers and employees have been forced to work from home,” he said.

Legal precedents with sector impact

Not-for-profits should expect a series of recent court decisions to affect their future.

Sector thinker Myles McGregor-Lowndes recently published a summary of a number of recent legal cases for the Australian Centre for Philanthropy and Nonprofit Studies (ACPNS), based at the Queensland University of Technology (QUT).

Based on these, Mr McGregor-Lowndes nominated a number of issues and trends with implications for not-for-profits:

• legal battles over vaccination mandates and infections
• commercial companies acting as charities
• challenges to grant funding
• defamation cases involving not-for-profits
• outdated structures and constitutions
• the rights and powers of unincorporated associations
• volunteers suing organisations for injury
• battles over bequests
• the limits of advocacy
• test cases affecting governance, taxation, charity deregistration and more.

Not-for-profits with a handle on these trends will be well placed to navigate the tricky times ahead.

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