New research on COVID-19’s impact on the nonprofit sector finds that if organizations want to find a way forward, they must first look back at how they have weathered the pandemic thus far. While the past 15 months have been a challenge for every sector, O’Neill IUPUI assistant professor Marlene Walk is optimistic about the future of nonprofits.
“It’s very interesting how nonprofits rose to the challenge while still serving those in need,” Walk says. “For many smaller nonprofits, this was a survival situation for both their clients and them as well.”
After analyzing data and examining trends, Walk has three pieces of advice for nonprofits as they navigate the return to work and the future of their organizations:
- Ask employees their opinions, for instance, of remote work and whether it can/should continue.
- Determine what organizational practices can be improved upon.
- Evaluate which new technologies adopted during the pandemic can be institutionalized.
Walk and O’Neill student Abby Klippel worked with North Carolina State University’s Mandi Stewart and University of Wisconsin Green Bay’s Kerry Kuenzi to analyze 77 COVID-19 impact reports collected through the National Council of Nonprofits. These reports detail how nonprofits have operated since March 2020. The data analysis covers more than 23,000 nonprofit organizations across 43 states.
The team released its updated report on May 5, 2021, focusing on three areas of impact: financial indicators, human resources and employees, and the most common COVID-19 concerns.
Organizations in 13 states answered questions about their most pressing issues. Among them, finances were the most common COVID-19-related worry for organizations in nine of those states.
Nonprofits in eight other states ranked struggling with how to safely offer their services during a global pandemic as their top concern.
Lastly, nonprofits in six states were primarily worried about their own organization’s human resource considerations—such as their employees’ job status, salaries, and overall well-being.
The human toll
That third area is Walk’s primary research focus—the employee side of the equation.
Previous studies from Johns Hopkins University showed the nonprofit sector lost about 13% of its workforce from March 2020 to February 2021.
“That mirrors what we see in our research,” Walk says. “It will take years for that workforce to recover that number of lost workers.”
She says while large organizations will likely be fine, how smaller organizations handled the pandemic will have a big impact on their future.
“We’re really interested in the employee perspective,” Walk explains. “How do they perceive their organization’s changes? If a nonprofit laid off 20% of its workforce, how does that impact those who are still there?”
Their research found that many nonprofit workers saw their hours reduced, their pay cut, and—in some cases—their jobs put on hold or eliminated. Much like in other sectors, many also saw a shift to predominately remote work.
“These organizations need to look at what worked well from an employee perspective, not just a financial perspective,” Walk says. “Our fear is that employees may feel this pandemic was such a critical incident—and that their employer didn’t handle it well—that they will choose to leave.”
Another report Walk is working on—due out later this year—seems to also show the other side of the spectrum.
“Our initial research is showing that some employees have doubled down on their commitment to the nonprofit sector,” she says. “It really depends on how they were personally affected by COVID and how they think their organization handled it. Was their psychological contract—those unwritten expectations of their organization—violated? That has a big impact.”
When it came to the financial impact of COVID-19, Walk admits the team wasn’t surprised by the findings. Many organizations reported individual donations and membership fees were down. In fact, 90% of responding organizations in Nevada saw individual donations plummet and 68% of nonprofits in Texas saw a decline in earned income.
Grant revenues were down as well. Nearly 35% of respondents in Texas reported a delay in grant processing, which can affect cash flow. About 16% of those in Connecticut saw a reduction in state grant funds.
But one of the hardest-hit areas were arts-related nonprofits.
“It’s important to keep in mind that nonprofits are really diverse,” Walk says. “How an organization was impacted really depends on what types of nonprofits we’re looking at. The arts sector was hit very hard because they often have outward-facing events as a main source of revenue. Having concerts virtually is just not the same.”
In fact, 90% of West Virginia’s responding nonprofits reported cancelling events due to pandemic precautions, while the same was true of 25% of nonprofits in Alabama and Georgia. Reports like these indicate that the arts sector is the slowest sector to recover, with studies projecting it will take at least 18 months for it to bounce back.
Walk stresses that it’s important to focus on more than earned income, though. She uses social services as an example of organizations that were hit from both sides.
“Social service organizations had to adjust to drops in volunteers, increases in demand and expenses to provide for clients, and shifts in procedures due to distancing and cleaning requirements,” she explains.
Respondents in Missouri indicated an average expense increase of $302,417 per nonprofit during the study period, while Pennsylvania respondents indicated a total estimated $95.3 million in additional operating costs.
Between the numbers, Walk sees signs of hope and further proof that the nonprofit sector is resilient and capable of adapting to change.
She points to the increase in collaboration, resource sharing, and partnership development during the pandemic that helped nonprofits survive and serve their clients. Some smaller nonprofits even added health care to their employment packages, which would be a positive trend—if it sticks around.
“There will be collateral damage, unfortunately, but I tend to be more positive than negative,” Walk admits. “I think the sector as a whole will recover and continue its mission to serve.”
To read the full article and access the data tables, visit States of COVID-19: Synthesis of State-level Nonprofit Reports on the Impact of the COVID-19 Pandemic.