Not-For-Profits: Developing effective corporate partnerships

Nihar Khanna, Tatiana Panfilova
October 25, 2018

Overview

The Not-for-profit (NFP) sector is becoming increasingly competitive as it continues to mature and traditional fundraising sources become more volatile. Corporate partnerships represent a further, often underutilised source of support at a time when many corporates are looking for ways to refocus on their purpose, which NFPs can help them do.

Forming corporate partnerships can be difficult and time consuming. To be successful NFPs need to understand which segments of the corporate sector they want to focus on and how they can provide value to those corporates.

We provide an overview of the corporate partnership environment in Australia, the benefits NFPs can potentially derive from corporate partnerships, and how best to take advantage of the opportunities.

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Why NFPs are increasingly looking to form corporate partnerships

NFP enterprises can be intensely rewarding to be involved with. NFP objectives are often deeply related to people’s values. They offer a way to make a tangible difference that may not always be possible in large bureaucracies, calling to a higher purpose beyond just the individual and monetary outcomes. This is why many people give their time to NFPs for free or at salaries below what they can command working at a for-profit enterprise.

Very few NFPs can rely wholly on volunteers, particularly when they start to grow and take on more complex activities to deliver their mission. Funding their mission and associated activities is a perennial challenge, one that has become more difficult in recent years.

The Australian NFP sector is relatively mature. After rapid growth of 80% between 1990 and 2010, from 30,000 to 50,000 registered NFPs, the total number of NFPs has been more balanced¹. Within that total there is a lot of movement, for example over the period of 2014-2016 an average of 3,015 new NFPs are registered and 3,899 delisted each year². The competition amongst NFPs has remained consistently high and therefore they are increasingly required to become more creative and sophisticated in how they raise funds.

There are three broad groups that fund NFPs: individuals, government, and business.

Individuals are becoming more discerning and demanding. On the surface individuals continue to be generous in their giving. ATO data indicates 35% of individuals give to charities, which is at a similar level to thirty years ago (33%)³. The size of donations has increased to an average of ~$700 per year, a dramatic increase over the $150 average in 1995. The challenge has been the increase in competition between NFPs for that funding over the period, as well as changing consumer attitudes. There is a greater diversity of causes and campaigns that an individual can contribute to, making it more difficult for NFPs to retain donor attention consistently from year to year. Anecdotally several NFPs report that campaigns and events that consistently generated a stable base of funding previously now have a shorter shelf life, with consumers more likely to switch to a different event each year, which makes funding more volatile and require more effort to source.
Government is becoming more disciplined in its contributions. Government spending has increasingly been tied to the outcomes that the recipient NFP generates and its alignment to current social and human focus areas. Over the last decade, government contributions to NFPs have grown by ~60%, from approximately $25Bn in 2006 to $41Bn in 2013⁴. Despite the growth, access to this funding is increasingly volatile – for example between 2014-2016, the Australian government increased funding for social clubs, sports and mental health by approximately 10%, whereas grant-making activities, hospital services and environment activities were all recipients of significantly less funding⁵. Further, NFPs have less certainty about the funding they are getting from government. For example, the introduction of the National Disability Insurance Scheme (NDIS) has resulted in NFPs in the disability services receiving less direct funding.
Business is a material source of funding and it could become bigger. Identifying the exact contribution today of business to NFPs is difficult, with estimates ranging from $12B (FY12-13)⁶ and $17B(FY15-16)⁷. What is more consistent across data sources is that corporate contributions are increasing. With stronger competition for individual donations and increasing volatility in government funding, many NFPs are looking to business not only as a source of additional funding, but also for assistance with the delivery of mission objectives..

As complexity and competition for individual and government funding grows, the NFP sector has the attractions of helping diversify fundraising sources, helping deliver on core mission, and bringing thinking from the corporate world to the operations of NFPs. With an increasing focus within the business community on purpose and employees wanting to have a sense of meaning from their work beyond just their paycheck, the time is right for NFPs to re-examine the potential of corporate partnerships.

¹Source: The Cause Report: John McLeod, JBWere (2016)

²Source: Growth and Change in Australia’s Charities 2014 to 2016: Ioana Ramia, Australian Charities and Not-for-profit Commission (2018)

³Source: The Cause Report: John McLeod, JBWere (2016)

⁴Source: ABS – Australian National Accounts – NPI Satellite Accounts (2008; 2014)

⁵Source: Growth and Change in Australia’s Charities 2014 to 2016 (2018)

⁶Source: ABS - Australian National Accounts - NPI Satellite Account 2012-13

⁷Source: Giving Australia (2016) – Business Giving and Volunteering Report