How COVID-19 Will Change Non-Profits and the Wider Impact Industry

As the word is slowly but surely locking down, it starts to sink in that we are in an unprecedented situation that could easily (and probably will) shift into a global humanitarian crisis.

This is a time when we need the impact industry to be strong, focused and ready to get things done. Alas, this crisis has caught impact implementers — and funders — as unprepared as it caught everyone else.

Let’s have a closer look at what is going on in the impact industry at this time.

Chasing the COVID-19 cash

For starters, most field operations are disrupted, dramatically reduced or stopped altogether. Every non-profit in the world is currently “workshopping” ways to pivot their operations and models into some sort of COVID-19 response, desperately trying to stay relevant.

This is obviously the right thing to do — anyone who can add value to the global response should do it without any hesitation. It is also a survival strategy, as organizations realize that their regular funding is drying out and operational realities on the ground are changing fast.

A Scramble for Technology

Those that can are now looking at ways to automate as much of the manual work that they used to be comfortable with (M&E and paper forms, anyone?). Monitoring as well as operations professionals are now rushing to roll out technologies that will hopefully allow them to achieve results with less boots on the ground and whilst working virtually.

This is great news for innovators who have been struggling to “sell” their various technologies to conservative, tech-skeptical “let-me-tell-you-why-this-won’t-work” non-profits. It is also great news for tech-savvy organizations that have been investing in exponential technologies over the last few years and are now ready to scale without large operational infrastructure needed.

Rough Times Ahead for Non-Profits

The painful truth is that many non-profits will not make it out of this crisis.

Also, most of the ones that will survive will be forced to change and come out at the other end as differently geared organizations.

As impact executives are scrambling to understand their options, here are some high level things to consider:

  • Immediately and continuing in the next few months, there will be an increase in COVID-19 related donations;
  • Sadly, much of these funds will be spent unwisely
  • COVID-19 funding-fatigue will kick in sooner or later, which means that most organizations will actually struggle with funding in the long run;
  • Meanwhile, the boost of COVID-19 activities will have a negative impact on everything else. In particular system change stuff will suffer. As we speak, thousands of projects across the world are being stopped or repurposed due to operational challenges as well as uncertainty.
  • Sadly, those problems are not going away — the negative impact will reemerge and when it does, most organizations will be ill prepared.
  • Thankfully, the few organizations that will stay focused on their mission through this crisis will have their hands full when all is said and done.

The State of Private Funding

Organizations that depend on private funding will find themselves very soon at a cross-road. At first, there will seem to be a surplus of donations, due to two specific reasons:

  1. People’s concern with the virus and its impact will increase individual and corporate generosity short term; and
  2. An increase of older people making more wills with charities in mind ;

The bad news is that this crisis hits at a time when the fundamentals of most donation-receiving organization are already very week (the large majority of their donations come from people over 50 which questions their viability in the long term).

This crisis will accelerate the inevitable as people will become desensitized from the ongoing crisis pretty much at the same time as the economic recession will hit hard.

This will lead to a steep decrease in donations exactly when these organizations will need cash the most. To make things worse, most donations will stay local as donors feel they need to support their own hard-hit communities first.

It will be brutal for global impact organizations. More so in the very likely scenario that the Corona Crisis will transform into a humanitarian emergency in Sub-Saharan Africa or other regions with high population density and weak public health systems.

The State of Institutional Funding

Meanwhile, organizations depending on institutional funding will soon encounter their own problems. At first, project cycles will be delayed due to institutional donors’ own internal challenges. This may look like good news: organizations will have more time to reorganize and mitigate their own internal impact. They will use the opportunity to reduce spending and make the good cash last longer.

In the short terms, institutional donors will do what everyone else is doing: they will repurpose as many of their resources as possible to the Corona response. This repurposed money will head the way of the least resistance, probably in the budgets of incumbent organizations with agreements and funding mechanisms already in place. This is good news for some of the incumbent recipients that will manage to pivot their activities.

However, as everyone will try to go back to some sort of normal, grant-making institutions will face a new reality in which amounts and types of available funds will change profoundly.

Political agendas of pretty much every country will change as internal investments and trying to soften the huge economic blow will have take precedence over any other spend. Global impact funding will be the first to suffer. Amounts available will further be reduced by political pressures to increase budget allocations elsewhere.

Is there a Silver Lining?

Fortunately there is opportunity. A silver lining. These are times for insurgent impact organizations to shine and set themselves apart.

The crisis hits at a time when we have an unprecedented understanding of the importance of environmental and social impact as an integral part of any profit making business model.

The appetite for impact is at an all-times high. That means basically there is a huge “demand” for impact, even as the “supply” of positive impact delivered traditionally is dramatically reduced by the factors described above.

This is a once-in-a-generation entry point for insurgent impact providers. The time when innovative, tech-driven business models can scale and perhaps replace the struggling, incumbent models.

Impact investing in particular will enter a growth phase as the asymmetry between impact needed and impact delivered meets an acceleration in technology.

Either way, the whole industry is changing profoundly. If you are part of it, you better put your seat-belt on, it’s going to be a rough ride.