Past and Future Giving Trends: Q&A with Jeremy Tennenbaum of Vanguard

breiby@growyourgiving.orgIndividual & Family Giving

Senior Philanthropic Advisor Nicole Stuke recently discussed the 2021 Giving USA Annual Report on Philanthropy with Jeremy Tennenbaum, senior nonprofit strategist at Vanguard. In this Q&A, Jeremy lends his insight and opinion on past and future giving trends and shares advice for nonprofit leaders.

Get to Know Jeremy Tennenbaum: 

Jeremy TennenbaumJeremy Tennenbaum, CFA, is a senior nonprofit strategist at Vanguard and leads a team that creates thought leadership for hospitals, higher education, foundations, and other tax-exempt organizations. He writes on a wide range of issues, from spending to fundraising to improving financial health.

Before joining Vanguard, Jeremy was CFO at the Altman Foundation, responsible for investments, finance, and information technology. Previously, he was CEO of Spouting Rock Consulting, and before that role, he led a single-family office for the owners of Continental Grain, in addition to investing on behalf of the company. Jeremy has held senior roles at Seagate Technology, Wellington Management Company, and Salomon Brothers Inc. He sits on the advisory board for MIT’s Sloan School of Management, where he earned a master’s degree in finance. He earned a bachelor’s degree in politics and intellectual history from Princeton University.

Jeremy holds the Chartered Financial Analyst® certification and is a longtime board member and former president of the CFA Society of Philadelphia. He presently serves on the investment committee for Main Line Health.

Q (Nicole Stuke): While total philanthropic giving increased in 2021, once adjusted for inflation, the total was not down but flat in comparison to 2020. Do you think the continued market turbulence and inflation will continue to impact giving?
A (Jeremy Tennenbaum):
Working for Vanguard, we spend much of our lives talking with clients about the difference between nominal returns and real returns. And the fact is the human brain is wired to think in nominal dollars. If overall philanthropic giving is up, that’s the message most of us take away, that giving’s up. Now if you’re going to be particular about it and academic about it, you can say, well, adjusted for inflation, giving is down. But for most of us, we looked at giving being up.

And I think the context is even more important, which is that throughout the entire pandemic, I for one, think most other observers were surprised by how giving held up overall. And moreover, we saw this particularly in the 2020 figures where donors were actually being thoughtful and voting with their feet. Meaning everybody knew, for example, that food banks had this massive increase in demand. So guess what? Donors gave less money to arts and cultural organizations, and a lot more money to food banks. And they gave a lot more money to homeless shelters, and they gave a lot more money to organizations that were facing the immediate needs that were exacerbated by the pandemic.

And again, I think 2020 numbers were very robust. I think 2021 numbers were robust. And I think 2022 numbers, when the year’s all said and done, I wouldn’t be surprised if they edge down a little bit. But again, if you look at the Giving USA statistics going back, I guess they go back over 40 years now, giving is sensitive to the economy, and it’s also sensitive to the capital markets. And so we’re having a year where the economy, although it’s still pretty robust, is slowing and capital markets have been giving everybody a lot of agita. So I don’t want to outsmart it. I think giving will still be pretty good, but I think it’s going to slow the second half of the year and is likely to slow into 2023.

Q: How can nonprofits convey a message to their donors that their needs are great because of inflation; especially as we’re heading into the end of the year or giving season?
Don’t go to your donors and say, “Well, inflation’s up 8% this year. So we want you to add 8% to the match you’re going to give us.” Because that just sounds self-pleasing. I always think it’s important for nonprofits to be very transparent with their donors and to educate them. So how does inflation hurt nonprofits? Well, nonprofits are suffering from two elements right now. Number one, if I’m McDonald’s, or if I’m Proctor and Gamble, and the cost of my inputs goes up, I have some ability to raise the prices in what I’m selling. I can raise the prices for Charmin or for Tide or for a Big Mac.

It’s much harder for most nonprofits to charge more for the services they provide. In many cases, they don’t charge for the services at all. So what happens is they face higher input costs, and they have limited if any ability to pass along the price of those higher costs. I think in addition, as we know, many nonprofits, small nonprofits, have historically depended upon relatively lower-cost labor. Even larger nonprofits. Well, guess what? A lot of nonprofits depend on low-wage, hourly workers, so they’re going to have to pay them more in order to keep that talent. And nonprofits, as we know, have not been immune to the great resignation that’s afflicting everybody. So I think the message to donors is, “Hey, we’re doing our best to retain staff. We’re doing our best to add to staff. We have limited ability. We’re facing higher costs. Please try and find it in your heart to be more generous.” Because if we just say, “Inflation’s up 8%, so we want to add 8%,” people just view that as that’s just math and that sounds kind of self-serving. But if you tell the story, people will respond to the story because it’s true.

Q: Online donations now represent 13% of total giving, increasing more than 20% in 2021. How can nonprofits increase engagement with their donors online?
A: Number one, I think increasingly nonprofits are becoming more comfortable with their online presence, and they’re realizing that their online presence is very important to help them get their message across. Especially because people are going to come across their website that they’ll never see in person. They’ll never even know that they’re looking at their website. So it’s very important to make the website appealing to people coming by.

And I tell public charities, part of your job is to raise money. So put it right out there on the homepage. Redesign your website, put a button to donate. Because sometimes you’ll see there’ll be a whole lot of tabs across the top, our mission, our board, our history, our programs, how to support us. Okay. I want to be able to read about your mission and your history, but if you want my money, make it more visible. Make that button I need to press to donate, make it more visible.

And I think secondly, don’t scrimp. Donors want to feel as secure donating money to your organization as they do buying something from Amazon. So invest in whatever technology you need to invest in so that donors know that their credit card information is safe. And I always encourage nonprofits to tell donors that they are committed to protecting the privacy of their information.

Q: Do you think that the huge increase in giving to arts, culture and humanities organizations in 2021 was a correction from 2020 due to social services organizations being prioritized? Do you think this will be a trend moving forward?
A: People cut back on giving to area arts and cultural organizations, and gave a lot more money to other local food banks and shelters. I think the country as a whole probably did that. So I think it was payback. I’d like to see a whole new off-to-the-races funding for arts and cultural organizations. I don’t think that’s in the cards. And if anything, they’re in a precarious position because they have to go back to having live performances, to opening up the museums. In some cases, the willingness of the underlying arts organization to engage the public might be greater than the public’s willingness to get out there and show up in person. And they’re just going to have to figure out ways around it.

Q: Giving USA also reported that foundation giving was on the rise in 2021. We know that an incredible amount of work goes into writing grants, grant applications, hiring and retaining qualified grant writers, etc. What advice do you have for nonprofits for maintaining the grants they have and cultivating new grants moving forward?
When my kids were applying to college, I said, “You don’t want to apply to 100 colleges. A, it costs money to apply to colleges, and B, just try and be a little bit more focused.” And I say the same thing to organizations. Just because you can apply for grants from dozens of different foundations and other funders doesn’t mean you should. And so; be selective.

And if you have gotten a grant from a foundation, number one, be thankful. Number two, remember the foundation wants to know that the grant they made has been useful. And I’m always encouraging charities to be very upfront. Say, “This is what we used the money. These are the results we got from the grant.” And don’t make the stuff up. If you were using the grant to fund a new program, and the new program wasn’t as successful as you’d hoped, be honest with your donors about that. They appreciate that. And they appreciate the full and open and transparent feedback that you’re going to give them.

I always encourage charities to go to convenings or other events that are put on typically by several foundations or by an interest group. Because that’s the way, you’re going to meet the program officers. And again, I think it’s a lot more effective to send a letter or an email to a program officer that you’ve met at a recent event than just sort of cold calling that program officer and saying, “We’re such and such charity and give us money.” It’s just human nature.

Q: How can nonprofits maximize their relationship with their local community foundation to access assets in donor-advised funds?
To begin with, community foundations are all over the map in terms of how involved they are in investigating and vetting charities. Some do a one-time investigation, and they put you on their approved-for-donation list and don’t talk to you for another five years, or until you hit the newspapers in a bad way. Others, I remember Lorie Slutsky, who recently retired as the executive director of the New York Community Trust. Lorie had a very thorough staff, and they would be in touch with every charity every year, sometimes multiple times a year.

And again, human nature being what it is, if you want your local community foundation to encourage more of its donors to support you, well, the more you tell the local community foundation about what you’re doing… And again, don’t email them every new program you have, but send them once or twice a year an update on what you’re doing, an update on what your fundraising has looked like, an update on how successful your programs have been, that makes it easier for them to suggest you as a place for donors to give money.

Q: Individual giving totaled an estimated $326.87 billion last year, up almost 5% compared to the year before. How can nonprofit organizations ride this wave and sustain their individual giving programs?
A: First and foremost, there are major gifts, and then what I call elephant hunting. Elephant hunting is best left to people like Harvard or the Metropolitan Opera or the Getty Museum. I mean, that’s their ballpark. Don’t even waste a moment’s worth of time doing that. And again, major gifts, define a major gift within the context of your organization. If most of your donors are $1,000 and $2,000 donors, then for you a major gift might be as little as $10,000 or $25,000. It doesn’t have to be $2 million or $10 million or $20 million. And so that’s number one.

Number two, I always tell smaller nonprofits to start with their existing donors. If they believe in your mission, maybe they have friends who would also believe in your mission. It’s a lot easier to reach out to a potential new donor through an existing donor than it is to find that donor on your own. And you’re not asking them to commit an unnatural act. You’re asking them to say, “Hey, look, you believe in our organization. You believe in what we do. Do you have any friends who you think we might be able to reach out to?” Or, “We’ll buy lunch. And if you want to take us to lunch with one of your friends, we’d love to do that.” I think many donors would love to be able to do that. They don’t feel that’s an imposition. And if they do feel it’s an imposition, they’ll be very quick to tell you that.

I also think in terms of individual donors, organizations have to be very respectful of individual donors, and what their likes are and dislikes are. Many people want to be able to a write a check once a year. I’ve never met anybody who didn’t like getting a handwritten note. I think emails are fine. Handwritten notes, particularly in this day and age, have a scarcity value, and they just make the recipient feel better than any other form of communication. So send them the email, absolutely. Make the phone call, absolutely. But for God’s sake, send them a little handwritten note, or a typed note with a handwritten P.S. on it. That’ll make them feel special.

But also ask them, “How often do you want to hear from us?” There’s nothing that turns off donors more than getting besieged. “Hey, I sent you folks a $5,000 check in December last year. Why am I hearing from you in March? I give to you once a year. So I don’t want to hear from you more than once or twice a year.” Because they start feeling then that they’re just being a checkbook that’s taken for granted, as opposed to an individual with individual desires. And they want you to honor their individuality. Now I know that’s hard. But again, if you are a smaller nonprofit, you don’t have an unlimited number of large givers, and it’s worth your while to figure out how they wish to be contacted, and the periodicity with which you contact them and honor that.

Q: How can nonprofits continue to cultivate relationships with new donors that started giving during the height of the pandemic?
My guess is you can’t keep them all. Because again, my suspicion is that people during the pandemic were saying, “I’m changing my charitable patterns. I need to support my community.” Again, I think the food banks are a wonderful example. The needs of food banks skyrocketed, and donations to food banks skyrocketed. And as things return to normal, I think giving patterns will revert to what people are most comfortable with. So it’s a blend of social service organizations, arts and cultural organizations, and disaster relief organizations. The usual blend that most households have. So number one, don’t waste time trying to keep everybody you got because it’s not going to work. I think number two, part of the message needs to be “We are massively grateful for the support you gave us during the pandemic. Now our needs are continuing. In fact, the populations we serve were vulnerable to begin with, but with the absence of federal and state and local relief programs, maybe that need has become more pronounced.” Again, don’t couch it as “Give us more money.” Just tell people that the service you’re providing, the needs are still there and why. Or you could just say, “Look, we’re serving the same population, but our costs to serve have gone up.”

Q: It seems that development and fundraising have shifted over the past few years. What do nonprofit leaders need to do in order to handle the complexity of this environment now and into the future?
We’ve seen a lot of nonprofits try and recast themselves, which is that they’re focused on much more diversity, equity, and inclusion. They’re focused more on addressing a whole range of societal issues. And I encourage folks to think carefully about how they go about doing that. Which is that you may attract new donors, but you may also suddenly discourage your existing donors. I’m giving to the food bank because people are hungry and they need to be fed. I’m not giving to the food bank because it’s going to address systemic racism in our society. I may be all in favor of addressing systemic racism, but I don’t want to be told that that’s what the food bank does because, in my simple viewpoint, the food bank is there to feed the hungry. So it’s very easy for nonprofits to be caught up in the message of the moment, the message of the year. Don’t forget what your underlying mission is. And you need to be true to your underlying mission because that’s what’s drawn your donors to you in the past and what will continue to draw donors to you in the future.

Q: Is there anything else you want to add that you think is critical for nonprofits to understand?
If you’re a small nonprofit, remember there’s no shame in being a small nonprofit. But you have limited resources. Focus on what works. Try to expand what already works. There are all these innovations that we read about in fundraising all the time. But if you don’t have the resources to invest in those innovations, don’t do it. Because you’re just going to waste the limited resources you already have, and that’s not going to do anybody any good. And let’s stay true to our missions. And don’t let our missions be held hostage to one political wing or the other. Feeding the hungry is not a political act. It’s a humanitarian act. And I think just focusing on that, focus on the humanitarian efforts that allow us to attract donors of all stripes and persuasions, and stay true to our initial mission.

Looking for more? Listen to Nicole and Jeremy’s recent conversation on the Grow Your Giving podcast:

About the Community Foundation’s relationship with Vanguard: The majority of Greater Kansas City Community Foundation’s investment pools are made up of passive investments provided by Vanguard. The Community Foundation’s investment committee prefers Vanguard for two reasons: its ability to track its benchmark with very few errors, and low expense ratios so the majority of the returns accrue to pool participants rather than the investment manager.