2023 Digital Transformation Trends for Nonprofits

Staying Ahead of the Curve

Introduction

Welcome to our annual report about key trends in the nonprofit technology sector.

The past year has been a period of transition and adaptation for nonprofits, as organizations have navigated a rapidly changing landscape of data, technology, and talent. Despite the challenges, nonprofits are now looking forward and thinking strategically about how to best leverage technology to achieve their goals.

Data: Quality and Security Over Quantity

When analyzing trends impacting nonprofits’ technology strategies, data has always been an important consideration.

However, this year, we have decided to give extra attention to data as we see significant shifts in how organizations approach it.

Technology and people factors are just as critical as data strategy. But, the changes in how nonprofits are managing and utilizing data our first item of note.

Let’s dive into the data topics for 2023.

To start, imagine you are about to move into a new house.

Do you pack and move every single belonging, only to wonder later why you brought over that dusty trinket?

Or do you take the move as an opportunity to declutter and let go of items you no longer need?

Data management is much the same.

It may be tempting to hold on to every piece of data your organization has ever collected just in case. But nonprofits are realizing the drawbacks, including increased effort and cost. Many nonprofit technology experts are taking a more strategic approach to data migration.

Heller Tip:

Even if you are not changing your systems, these principles are still applicable. Consider conducting an audit and cleaning your data to realize these same benefits.

Key Trends

There is a greater emphasis on data certainty and accuracy over volume.
Clean data is usable data. It may be tempting to put off data cleanup, but we encourage nonprofits and educational institutions to tackle this task before bringing data over into the new system.
Organizations have been collecting more data than ever about their donors, volunteers, and other stakeholders. This “more is more” approach to data collection resulted in massive amounts of information. But even if this data is reliable and tidy, it may not be relevant to your goals. Consider how you plan to use the information to make the best decisions about what data to retain.
Data security and compliance continue to be a top priority for organizations – special consideration should be given to anything that could be considered sensitive information.

Benefits of Strategic Data Management

Lower costs.
As nonprofits continue to look for ways to do more with less and cut unnecessary costs, strategic data management is an attractive promise for leadership. Depending on a CRM system’s fee structure, organizations could end up paying a considerable amount for data storage. By cleaning your data and thinking intentionally about what data you keep, you can save valuable dollars for your organization.

Better performance.
Bogging down your new system with an overwhelming amount of data can lead to sluggish performance. Running reports may take longer. Thinking “clean and lean” will help to ensure that your systems are running optimally.

Greater results.
We encourage our clients to tidy their data before moving it into a new system and establish ongoing data maintenance protocols to ensure that systems are supporting organizational goals.

Storage and Security

Storing and Accessing Data

When it comes to managing and storing large amounts of data, the key is to have data available to the right people at the right time to do their jobs and make decisions. Right now, organizations have several options to choose from when storing data. A caveat to this, however, is that data does not necessarily need to be stored in one place or in a single system.

A popular method is to use data warehouses and data lakes for long-term storage. A data lake is a vast repository of raw data that can be stored for future use. A data warehouse is a more structured approach, where data is cleaned and processed, ready for analysis.

But what if you need quick access to your constituent data for personalized marketing and fundraising efforts? This is where a customer data platform (CDP) could come into play. CDPs aggregate data from various systems within an organization to create a centralized profile of each constituent, making it easily accessible for highly personalized marketing and fundraising campaigns.

How is a CDP different from a CRM?

Read more about CDP >

Security & Privacy: Protecting Stakeholders’ Data

If you are concerned about data security for your nonprofit organization, you are not alone. With cybercrime on the rise, nonprofits are increasingly becoming targets due to the sensitive data they store. However, here are steps you can take to protect your data and safeguard your organization’s reputation.

Prioritize security when making technology decisions. Choosing commercial-grade products from reputable providers can ensure that your data is well-protected. Additionally, by being strategic about which data you retain, you can reduce the risk of sensitive information falling into the wrong hands.
Privacy and consent are also crucial considerations for nonprofits. With stricter regulations and increased public awareness of data privacy, it is essential to have strict processes in place to protect personal information and comply with regulations.
To ensure data security, it is important to establish a strong data governance policy that defines what data is being collected, how it is stored, and what information is considered personal. This is especially important when using multiple systems that may be collecting different data points, as it ensures that stakeholders’ preferences are observed across all platforms.

Tools and Technology

Building for Success in a Complex Environment

Nonprofits are complex. Most organizations that we work with have at least the following core functions (and more) that require many products and solutions to support their work: mission delivery, fundraising or advancement, marketing and communications, finance, and human resources. Technology implementations have high stakes, and the success of a project is often determined before it even gets off the ground.

The most successful implementations have a thoughtful planning component which includes evaluation and selection of their technology. Having a clear vision up front, especially when covering multiple functional areas, can elevate the overall success of a technology implementation project, regardless of what tools you are implementing.

At Heller, we work with organizations to ensure their technology implementations are set up for success. We advise on ways to define expectations and establish clear goals, so that the implementation can meet the organization’s needs and achieve desired outcomes.

Ecosystem is the New CRM

Selecting software is no longer just about selecting a single product to replace another. Today, it’s about aligning technology with organizational goals and selecting a mix of tools that work together to achieve the mission more effectively, even if not all software products are implemented immediately.

Gone are the days of the CRM system as a “single source of truth” with a “360-degree view of your data.” Some nonprofits are actively choosing a CRM approach because of particular business considerations, but forward-thinking organizations are considering their goals and selecting an ecosystem of technologies that fit their specific needs.

The optimal approach is to build your ecosystem on a strong foundational layer that allows for the integration of various functional areas through pre-built applications, direct API connections, and custom configurations.

Salesforce for Nonprofits and Microsoft Cloud for Nonprofit are two powerful and secure enterprise-level technologies that support this approach. Platforms also offer development tools to build deeper customizations.

However, transitioning to an ecosystem approach means managing multiple vendor partnerships and requiring more sophisticated expertise for configuration and maintenance. Organizations without in-house expertise should consider managed services to ensure success. Additionally, personalizing constituents’ experience still requires bringing information from different systems together, which can be achieved through data warehouses, data lakes, or customer data platforms (CDPs).

The Story of Two Giants: Salesforce & Microsoft

Microsoft: The Tipping Point. We have been discussing Microsoft’s development of nonprofit offerings for some time, but it was in the past year that the nonprofit market’s appetite for Microsoft reached the tipping point. Microsoft is a world-class, highly secure technology option that provides significant discounts for nonprofits, remains invested in the nonprofit sector, and is a leader in artificial intelligence (AI) innovation. We often recommend that nonprofits build their technology stacks on Microsoft when it is the right fit.

Salesforce: What’s Next? Salesforce.org has established a strong presence in the nonprofit market over the years. However, as organizations evaluate their technology options, some may be proactively seeking alternatives. The past year has brought challenges for the company and the integration of Salesforce.org, the nonprofit arm, into the larger commercial organization is expected to continue to have an impact on the nonprofit sector in 2023. And in early 2023, Salesforce announced a vision for a new Nonprofit Cloud. The new Nonprofit Cloud will provide a new offering for nonprofits to consider when examining if Salesforce is the right fit for their organizations.

In the course of the year, Blackbaud has made some incremental changes to some of its products and retains some of its legacy clients, but we are also continuing to see users of Blackbaud Raiser’s Edge migrating to Salesforce.

Technology Assessments and the RFP Process

Ecosystems are continuing to become more sophisticated and there are many options to choose from amongst tools, apps, and customizations. Nonprofits are increasingly seeing the value of working with our team through a technology assessment, a broader approach, to bring into focus what an organization is trying to accomplish. The RFP can be a deliberative part of a technology assessment, but sometimes the RFP cannot do all the work.

A technology assessment is a more holistic way to think about your technology strategy, focusing on the organization’s goals and objectives rather than evaluating individual software products. This is a collaborative and in depth-process that considers various technology approaches to achieve organizational goals, works through the implications and tradeoffs of different combinations of software solutions, and develops a technology ecosystem strategy with the right mix of tools. The assessment gives you clarity on what you want from new technology and allows you to approach the marketplace in a way that gives you meaningful information. At times, organizations have opted to forgo the RFP process altogether. Instead, they have direct conversations with technology providers. On the flip side, other organizations can focus the RFP on the content that is most important to them after going through a technology assessment.

While we do not endorse any specific products, Heller experts do share their opinions based on more than 25 years of experience in helping nonprofits select, implement, and use the software. Organizations benefit from our experience and guidance in navigating the complex landscape of technology options.

People: The Impact of Technology on Staffing

The past three years have brought significant changes and challenges, leading to a need for highly qualified and strategic staff. This shift toward professionalization in nonprofit technology staffing has resulted in a pool of specialized talent that requires a different approach to management and recruitment. As we enter 2023, nonprofits must understand these dynamics and adapt their hiring strategies to attract and retain top talent in the field.

In recent years, Salesforce expertise emerged as a career path in the nonprofit sector. Many professionals see nonprofits as an opportunity to gain valuable and marketable experience in the field. The good news for nonprofits is that there is a rich pool of talent available, with an additional influx of experienced professionals entering the field after the recent layoffs from the tech world. However, managers face the challenge of how to retain staff as attractive opportunities abound.

In our experience, employees who administer enterprise technologies are not satisfied with just mastering their current responsibilities. They are more likely to seek out ongoing professional development opportunities, certifications, and new challenges. As a manager, it’s important to be prepared to support the development and professional growth of your team to retain motivated talent.

Heller Tip

At your nonprofit, consider providing your team with access to support for the most technically challenging parts of their roles. This balances costs by leveraging your current staff while also ensuring they are using their time and talents most effectively, and that they feel supported along the way.

Minimizing The Impact of Staff Attrition

19%

Annual turnover rate in the nonprofit sector.

(source)

16 months

Average time development staff stay in their roles.

(source)

Retaining staff is a critical challenge for many organizations, particularly in the nonprofit sector where the estimated annual turnover rate is 19%, higher than the all-industry average of 12%. Development staff, who play a key role in building and maintaining donor relationships, often have an even shorter tenure, staying in their roles for an average of just 16 months. To mitigate the impact of staff transitions, organizations can leverage technology to ensure continuity and efficiency. Technology and knowledge management can help you hold onto your institutional knowledge and minimize the impact of staff turnover.

Here are a few tips on ways you can leverage your technology to help you manage staff attrition:

Train multiple staff members in key functions and processes within your technology systems to ensure continuity in case of staff turnover.
Establish data entry guidelines and protocols to ensure that data is entered consistently and accurately.
Implement a comprehensive technology training program to provide new staff with the skills they need to quickly get up to speed and feel confident in their roles. This will help to minimize disruption and ensure that the organization continues to run smoothly.

The Impact of Change Management

Staff can be tempted to leave during critical changes at your organization. Change management has been proven to reduce disruption and improve retention during these periods.

AI: Navigating in the Age of Artificial Intelligence

Artificial intelligence (AI) is making headlines, and with the release of ChatGPT from OpenAI in late 2022 and Google’s recent release of Bard, its capabilities have been further amplified. However, with new technology, there comes a sense of uncertainty and apprehension about its implications. Here at Heller Consulting, we see AI as a powerful tool that opens a new world of possibilities for nonprofits to work more efficiently and effectively.

In reality, AI is a computer’s ability to gather and process data to perform tasks that mimic human intelligence. This could include things like speech recognition, decision making, and language translation. It’s something we’ve been experiencing for years in our daily lives. But with the latest generations of AI tools becoming increasingly sophisticated and impressive, it’s time for nonprofits to start investigating its capabilities.

Where can nonprofits start?

Content generation and segmentation are two areas we see AI having an immediate and positive impact on nonprofits. With AI tools, you can generate fundraising appeals that you can edit and send out, saving you valuable time that can be better used elsewhere. You can also use AI to process large amounts of data and make your fundraising and marketing campaigns more targeted with segmentation.

What's happening with AI in the technology world?

In March 2023, Salesforce announced Einstein GPT, which delivers AI-created content that adapts to changing customer information and needs in real time. The same month, Microsoft announced Microsoft 365 Copilot, which is embedded in Microsoft 365 apps (including Word, Excel, PowerPoint, Outlook, and Teams) to create AI-generated content. With the growth and evolution of products for nonprofits from both companies, we expect to see AI developments, such as specific use cases for nonprofits, coming from them soon.

There is no need to rush into using AI simply because it's the latest hot topic.

As with any technology, it is important to be mindful of how you are using it and what it can help you to accomplish. We also urge caution when it comes to AI. Inaccuracies, plagiarism, and biases are potential issues that may arise depending on where and how AI tools acquire and process data.

As new AI companies emerge, it’s crucial to choose reputable AI tools and companies you can trust.

A good approach is to look into the AI capabilities that might start to be available in the technology you already have. Get started by using these capabilities to automate and simplify mundane tasks so that your staff members can focus more time on building relationships with donors, volunteers, and other constituents.

What's next?

In 2023, it’s important to keep in mind the shifting landscape of nonprofit technology. Our observations of key trends in the industry suggest that these changes will continue to evolve in the coming year. However, we anticipate that new developments and announcements will also shape the direction of nonprofit technology. At Heller Consulting, we are committed to sharing our expertise and insights with the nonprofit community and will continue to update this guide as new information emerges.

Heller Consulting empowers organizations with technology strategy, CRM planning, implementation, and change management services. Since 1996 we have been providing targeted solutions that are customized based on your unique organizational needs and work with you to find creative ways to make that positive impact. After working on over 3,000 projects, one thing hasn’t changed—our passion for helping clients utilize the right technology strategies and systems to significantly expand the impact of their vital missions. Our team of experts understands specific technology challenges and is dedicated to finding solutions that help organizations succeed by aligning technology with your strategic goals.