Where the Money Went: Why Nonprofit Growth Stalls

Most nonprofits believe they have a fundraising problem.

Donors are changing. The donor base is aging, younger generations are giving differently, and competition for attention has never been greater. Those are all real challenges, but in my experience working alongside ministries, charities and nonprofit organisations, they’re often symptoms of a deeper problem.

Millennial and Generation Z donors expect more transparency than ever before. They’re no longer satisfied with an annual report filled with aerial photography and headline figures. They want to know the real impact of their gift. “I gave $400. What kind of an impact did that have?”

For many organisations, answering that question isn’t easy. It can take weeks of work, multiple staff, complex spreadsheets and data from different systems,  yet the answer is often still little more than an estimate. Many identify this as a fundraising problem, but there is often a structural problem that is limiting these organisations.

What follows describes the perfect storm. It’s unlikely to find any individual NGO dealing with every one of these issues at once, and an organisation carrying one or two can still be doing excellent work. Read what follows as a lens you can use to evaluate your own organisation.

What younger donors want

Transparency is the usual one-word summary people focus on. While that’s accurate, it’s far too narrow to describe the shift taking place across the fundraising and nonprofit sector.

This younger generation tends to give to projects. A water well, a classroom, a delivery of equipment, a defined deliverable with a beginning and an end. Project-based giving means restricted funds. Restricted funds mean you need to know what each project costs, track spend against it, and report transparently and faithfully. Most ministries and nonprofits I have looked at have a chart of accounts built around programs and a donor database built around people, with no dependable join between the two.

McCrindle Research  found younger Australians are more likely to give in response to a specific need than through a structured giving plan. This has led to more one-off donations and fewer long-term giving relationships. 

What I find interesting is that subscriptions have become part of almost every aspect of daily life, yet that mindset hasn’t translated into charitable giving. While I can’t fully explain why, I can see the impact on organisations. Predictable, relationship-based income gives way to campaign-driven fundraising that must be won again and again. Forecasting becomes more difficult, and so does managing cash flow. On top of this, the new generation of donors expect evidence. Photographs, coordinates, names, dates, an outcome measured rather than asserted. Previous generations often gave because they trusted the organisation or the people leading it. Today’s donors increasingly expect that trust needs to be supported by evidence.

Proof is produced by systems.

Put those together and they describe a fairly specific kind of organisation. That is, one that can cost a project, move money into it, and show a result inside a few weeks. Which is an operational capability well before it’s a fundraising one. So why do so few nonprofits have it?

Visionaries and Integrators

Gino Wickman splits founders into two types. The visionary sees the thing that does not exist yet and inspires others to believe in it. The integrator turns that conviction into a process and worries about cost, capacity, and operational details. The Silicon Valley version is the “Rainmaker” founder with the commercial relationships to make the business succeed and the technical co-founder who makes the product amazing.

Almost every nonprofit starts with a visionary. It has to. Somebody has to be able to describe a school that isn’t built yet vividly enough that a stranger pays for it to be built. The visionary creates the initial momentum that others will gather around.

The problem is, in a nonprofit setting where every dollar is taken captive to the mission, it’s rare that an integrator is ever added to the team and this means that the visionary is often operating in both roles. This works for a while because the whole operation can fit inside the visionary’s brain, until it can’t.

When Vision Stops Being Enough

Then the visionary reaches capacity.

More staff, more programs, several funding streams with different reporting obligations, donors who have never met you, partners who want numbers before they will commit. Each of those is manageable on its own. Together they change what the job is. The organisation now has to measure things it never measured, because trust between people has been replaced by evidence between institutions.

This is where visionaries start to lose their grip. So they often try to compensate by leaning into their areas of strength, the vision and the relationships, because that is what has always worked. Unfortunately, they are now trying to solve a problem that is well outside of their area of strength.

This is where many organisations plateau. The visionary finds their own personal limits and operates within them. For the organisations who diagnose this stage correctly and seek to bring an integrator into the organisation, they give themselves a chance at building something truly scalable. Often, however, the integrator they bring in looks and sounds considerably different to the rest of the team and that produces its own problems.

The Leader Nobody Wants to Hire

Eventually, the organisation hires a capable operator. Within weeks they’re asking about unit costs, data quality, program evaluation and whether certain activities are delivering the outcomes they are meant to.

The team often recoils.

“This isn’t who we are. It feels corporate, cold and far removed from our mission.”

It’s a legitimate concern. Measuring sacred work can feel as though it diminishes it. That instinct comes from a good place, but it can also be misplaced. Good systems don’t replace mission, they strengthen it. 

Eventually, the operator either leaves or conforms to the status quo, and everyone congratulates themselves on having protected the culture.

But if the organisation navigates this tension well, a new challenge quickly emerges: how do you fund the systems and people needed to support nonprofit growth?

The Overhead Trap

In the early days the founder could say that every dollar given went straight to the work. That makes sense, it’s a compelling statement, there was barely any institution to fund and donors loved hearing it.

Growth makes that sentence false. Systems cost money and so do the people who run them. The moment an organisation gets large enough to need those things is the same moment that simple fundraising story stops being available.

Eventually you have to admit to your donors that some of their gift feeds the machine that makes solving problems at this size possible. That’s what enables an organisation to reach five hundred people instead of forty. 

There Is Hope for Nonprofit Growth

All of these problems are solvable. For example, Scott Harrison solved the overhead dilemma for charity: water by creating two completely separate funding streams: a group of private donors fund all operations and all public donations go directly to impact.

I share this to highlight that whilst all of these problems are very real, innovation and technology can go a long way towards solving them. These are exactly the problems that my team and I wrestle with on a daily basis. 

There are so many new solutions being made available all the time, thanks to advances in technology and organisational innovation. The unfortunate news is that there are thousands of nonprofit organisations out there who could be benefiting but just don’t know the solutions exist.

If you are feeling that anything in this article has described your organisation, please set aside some time to explore the options available to you. Technology won’t solve every problem facing nonprofits. But when it’s paired with clear strategy, good systems and strong leadership, it can remove many of the barriers preventing organisations from achieving their mission.