Why the new generation of workers and donors means that non-profits need to push ahead with digital transformation

All the twists, changes and shake-ups we’re experiencing in the non-profit sector? They’re symptoms of what I would call the impending ‘second revolution’ in audience and organisation management. 

This is a continuation of the seismic change that Steve Denning dubbed the ‘Copernican revolution in management’. So-called because it mirrors the discovery of Polish astronomer Nicolaus Copernicus. He realised the universe revolves around the sun, not the Earth. And, with the emergence of social media (Web 2.0, anyone?), we realised that audiences do not revolve around brands. Instead, brands revolve around audiences. Thanks to technology, and in particular social media, this major cultural change finally made audience-centricity part of our thinking.  

The revolution in audience and organisation management I think we’re tackling right now was also brought on by technology. This time, we’re navigating the imminent shift between generations raised in a time before social media (boomers, Generation X) and those who only know life with smartphones, social media and technology (millennials, Generation Z). And of course, with our Copernican audience-centric mindset, this shift is under the spotlight.

When I spoke to colleagues in the sector about why we’re stuck in the process of digital transformation, conversation turned to our fundraising and organisational models. Is our non-profit model now flawed? How do we adapt to the new market and the new generation of donors? How will we survive?

Let’s explore the changes and challenges we face as this ‘second revolution’ in audience and organisation management takes hold. 

A changing demographic

Boomers are making way for a younger generation who have a completely different approach to life. In general, young people have less disposable income than previous generations did at their age. With what they do have, they prioritise personal happiness. Having grown up in an era of social media, they are used to having a voice. They’re aware of their personal brand and how the organisations they support contribute to that. 

So how can we make our cause relevant to this different audience? Particularly if our cause is currently less pertinent to younger millennials and the TikTok generation (like, for example, Alzheimer’s or assisted dying)? We need to learn to speak their language, instead of relying on tactics that worked for their parents and grandparents. 

How will new generations give?

As donor demographic changes, we also see shifts in the patterns of giving. Over the years, we’ve weathered ups and downs as the world around us changed. But in the international development sector, the overarching trend for some time has been a small yet steady decline in donor numbers.  Older generations of donors are passing away. Their legacy income will eventually run out or, even go directly to their millennial or Gen Z family. 

To survive this decline, we need to adapt for the new generation of donors. Looking at the way people interact with retail brands helps us understand their behaviour around parting with money. Younger generations are more astute when it comes to their expectations of and trust in brands. Just as they research a product before they buy, we might suppose they’re more likely to question whether their donation represents value for money. 

The consequences of this way of thinking could be a massive challenge  to the charity sector. If our donors focus only on return on investment, humanitarian situations have no problem satisfying their criteria: where £5 will feed five people or buy five malaria nets, for example. But how does this mindset square up to the reality of non-profit overheads and running costs? 

And what about less straightforward situations, like funding advocacy and campaigning? How do we calculate and report return on investment when it can take 10 years to achieve an outcome with many ups and downs along the way? Once the campaign is won, policy change can have a positive long-term impact on millions of lives. For example, after almost 20 years of campaigning, the Make Poverty History campaign saw many millions more people on anti-AIDS drugs and millions more children in school. But how do you communicate that as a straightforward return on a donor’s one-time investment halfway through the campaign?

This is where honesty about the complexity of the work may play an important role. charity:water has long been a popular example of this. Its honesty about the  delays and failures when building wells helped to build support without damaging their credibility or income from donors. It’s an approach that today’s transparency-loving generations would likely welcome. 

Everyone seems to be a campaigner and activist these days, from Vogue to Unilever. We see the difference between that and our own activism and campaigning. But do our future audiences? Are we in the right spaces, talking their language?

The shape of the new donor funnel

The Vogue Business report on retail trends suggests that millennials and Gen Z engage with brands in a totally different way than previous generations. Traditionally, the customer travelled through a linear sales funnel that included: awareness > interest > action > loyalty. 

According to the report, retailers find success with millennials and Gen Z by engaging on social media. Unlike previous generations, this is a space that satisfies multiple, varied needs and use cases. It’s a place they go to learn, relax, connect with others and keep up to date with the world. This is also a space where they’re open to meeting new brands, supported by strong brand identity, user-generated content and influencers. They care more than previous generations about feeling a part of something, so (online) community building is vital. 

This means that instead of a linear funnel, Vogue Business suggests picturing a circular one, encompassing inspiration > exploration > community > loyalty then back to inspiration. And the definition of ‘loyalty’ is not what you’d assume in the traditional sense. For Gen Z this is about continuously feeling positively towards a brand. 

Having read this, the  question in my mind is: how will non-profits overcome the typical multi-step sign-off and approval process to deliver influencer-led, user-generated and community-building content that fosters such brand loyalty? 

Is our funding model fit for the 21st century market?

What we’re seeing is that donor demographics, giving habits and engagement funnels are all changing. So where does this leave our non-profit model, which relies — in a major part — on individual donations? Will we have enough loyal donors and sufficient funds to continue our important work? 

I discussed this with a few people when talking about why non-profits are stuck in their digital and organisational transformation. We looked at non-profits started in the 21st century, like Change.org, 38 Degrees or the Good Law Project. They function on much smaller budgets than the behemoths of the UK non-profit sector. Almost fully funded by individuals, they’re small, nimble and can respond more easily to market changes.

But is it possible for 20th-century non-profits, some of which are over £100 or £200 million organisations, to switch to this model? 

Here, we might look to the Guardian newspaper for inspiration. It went from being in debt to becoming a solvent operation. How? It reduced in size and replaced its old funding structure based on newspaper advertising with digital income streams including reader subscriptions. They took inspiration from the non-profit sector and went in the opposite direction to competitors who have put up paywalls. By doing that they stayed true to their values and mission to offer high quality journalism freely to the English-speaking world. It wasn’t an easy transformation for the Guardian, but it shows that buying into and working with market change can work. 

What does all this have to do with digital transformation?

To shift towards true audience centricity, when those audiences (both donors and workforce) are increasingly younger millennials and Gen Z, we need to transform our organisations beyond just technology. To stay visible and relevant, we need to improve our skills, ways of working and planning. We need to adopt a mindset where people have a voice and agency, whether audiences or staff. We need to be agile to respond to the complexity of the world around us. 

This is what the collective of  transformation consultants I am a part of has been discussing with the non-profit community since the beginning of this year. We’ve identified a number of issues that are holding the sector back and are looking to co-design solutions with people in the sector like you. This latest LinkedIn post explains where we started, where we got to where we’re going next and how you can get involved. 

And if you have any research on this topic or just want to share your thoughts, challenges, or questions get in touch!