Nonprofits in the Race Against Inflation


Rising inflation is putting the squeeze on just about everyone these days. In March, the U.S. inflation rate jumped to 8.5%, the highest rate in over 40 years. What does this mean for the average person? Put simply, their purchasing power has plummeted. Spiking gas, food, and housing prices are destabilizing household finances, pushing more and more individuals to rely on nonprofits for basic necessities. At the same time, the very organizations providing these necessities have felt their own budgets constrained by skyrocketing costs. As prices rise at an ever increasing clip, nonprofits may feel like they are falling behind in the race against inflation. So, what can they do to keep pace with rising costs?

Before getting into some solutions, let’s take a deeper dive into the problem itself.

Since the start of the pandemic, demand for nonprofit services has risen, a phenomenon which has recently been exacerbated by inflationary pressures. The 2021 Nonprofit Leadership Survey Report found that 53% of organizations had experienced an increase in demand for their services in the year leading up to the survey. Fast forward to 2022, and even families that emerged relatively unscathed from the pandemic have been pushed over the financial edge by rampant inflation, further intensifying reliance on nonprofits such as food banks and housing organizations.

Nonprofit organizations have struggled to keep up with rising demand, and inflation has even caused many of them to cut back on services or place new clients on waiting lists.

One reason for this is staff shortages. Feeling the effects of inflation themselves, nonprofit employees have started to demand higher wages. However, due to the fixed nature of nonprofit income (think grants and government contracts), there is often little wiggle room to raise salaries, which has led many of the sector’s employees to flee in search of higher paying positions in government or private industry. A recent survey by the National Council of Nonprofits found that nearly 80% of nonprofits were unable to fill open positions due to salary competition.

Another reason for the difficulty meeting demand is the higher costs of inputs such as food, transportation, and building materials. Many food banks have been forced to reduce their purchases of higher ticket staples such as meat and dairy products to cope with surging prices. Habitat for Humanity, facing increases in land prices coupled with shortages of labor and building materials, has scaled back construction of new homes at a time of unprecedented need for affordable housing.

To make matters worse, rising inflation will likely have a negative impact on fundraising efforts, further shrinking already constrained budgets. As inflation pushes the value of individual donations down, fundraisers may feel compelled to seek larger donations. This may prove difficult as everyday donors, paying more for basic necessities, find they have less and less discretionary income to devote to their favorite causes. At the end of last year, some U.S. experts had already predicted a continued decline in mid-level giving due to tax policy, a trend that will likely be reinforced by current economic conditions. Further north, a quarter of Canadians surveyed anticipated donating less to charity in 2022 than in the previous year.

So, how can nonprofits cope with these interconnected challenges? Is there any way to catch up in the race against inflation?  

By addressing each of these challenges, nonprofits can at least offset some of the most insidious impacts of rising prices.

First off, to prevent staff shortages, executive directors should make every effort to ensure that staff salaries stay ahead of inflation. To keep up with rising staff costs, those lucky enough to have an endowment should meet with their financial advisor to inflation-proof their portfolio.

Directors who are unable to raise wages due to external constraints can try offering non-financial rewards to loyal staff, including flexible schedules and remote work options. While perks such as these may not completely offset cost of living increases, they will allow employees to eliminate extraneous commuting costs, achieve a better work-life balance, and perhaps move to a location with a lower cost of living.

Another strategy for dealing with dwindling staff, and meeting demand for services, is to increase reliance on volunteer labor. Organizations such as VolunteerMatch can help nonprofits recruit volunteers who are passionate about their cause. The VolunteerMatch interface allows organizations to post volunteer opportunities, find volunteers with specific skillsets, manage communications, and even request donations from volunteers, who are more likely to give than non-volunteers.

Organizations can also expand their volunteer base by getting creative about the types of volunteer opportunities they offer. Consider creating opportunities that also benefit the organization’s constituency. For example, Salem Harvest allows volunteers to take home a portion of the fresh fruit and vegetables they harvest for local food banks, provided that the food goes to needy populations. Thus, volunteering provides these individuals an opportunity to meet household needs while also giving back to their community.

In terms of dealing with rising costs, directors managing foundation grants may consider having a conversation with their program officer about how inflation is affecting their project budgets. As foundations have become more flexible in the wake of the pandemic, it may be possible to come up with a joint solution to this challenge. 

Organizations can also offset rising prices for goods and services by expanding their fundraising efforts to include in-kind and product donations. Many corporations offer these types of support. Carriers such as Alaska Airlines provide in-kind transportation, while retailers such as Big Lots donate gift cards and merchandise. Corporate giving programs are also a great way to connect with a pool of potential volunteers, including highly skilled labor. Many of these programs include employee volunteerism as a formal component of their community efforts.

Nonprofits planning to upgrade their technology might look into TechSoup, which provides discounts on refurbished computer equipment as well as software from brands including Microsoft, Adobe, Intuit, Zoom, and more.

As the price of consumer durables continues to rise, nonprofits should also consider soliciting donations of goods rather than cash from their supporters. For example, KCRW, a public radio station in Los Angeles, regularly asks its members to donate their used cars, motorcycles, or boats. The station then auctions these items or sells them to dealers, using the proceeds to fund its operations. As the price of used cars has jumped over 40% since last year, this is one way that organizations can use inflation to their advantage.

Finally, to cope with projected decreases in mid-level giving, nonprofits should expand their efforts on both ends of the giving spectrum. This might mean soliciting a greater number of smaller donations, or starting a major donor program. Utilizing the latest fundraising technology, such as donor management or customer relationship management (CRM) software, can boost an organization’s chances of success in this area. Again, TechSoup offers this type of software at a discount to nonprofits.

While inflation is a challenge for every organization, nonprofits can employ strategies to make sure they keep pace as best they can. After all, in an ideal world, eventually the tortoise beats the hare in the race against inflation.

Action steps you can take today
  • Click on the links above to learn more about how inflation is affecting nonprofits, and what nonprofits can do about it.
  • Visit the TechSoup website to receive discounts on computer equipment and software.
  • Log on to GrantStation, or sign up for a GrantStation Membership, to research in-kind and product donation opportunities.