Nonprofits have always had to react swiftly to changes around them, bobbing and weaving through challenges and opportunities. Reallocating staff and other resources after losing a grant, shifting program delivery after a public policy change, and overhauling operations in response to a crisis like the pandemic all seem like common experiences.

Recently, these shifts have seemed even more significant. Over the past year, our Bridgespan teams have worked with more than 200 nonprofits, large and small, and have heard leadership teams talking about:

• Structural financial fragility—going well beyond the financial insecurity of the sector—is being driven by permanent changes in revenue sources and higher costs.
• Government funding volatility, in particular, is now the norm, with dramatic cuts and delayed payments affecting revenue and cash flow.
• Demand for services is increasing at the same time, because the same shifts affecting nonprofits—like rising costs and decreases in government services—are impacting communities.
• A more challenging political, legal, and regulatory environment is an existential risk for some nonprofits.
• AI is changing the way nonprofits approach operations and program delivery, but it is advancing at a pace that is often hard to keep up with, fund, and adopt responsibly.
• Workforces are feeling strained by these pressures, exacerbating burnout, retention challenges, and capacity gaps.

While the scale and nature of these changes are alarming, many nonprofits are meeting them with a natural resilience and operational agility. What’s especially interesting are the two paths that nonprofits seem to be taking—and, in some cases, choosing between—in response to these shifts.

1. Protect What’s Most Important

Some nonprofits see this as a moment to defend and protect—taking actions that preserve what matters most to their communities and stakeholders. There are several protective actions that may be especially important for nonprofits to take, depending on the kinds of change they are experiencing:

Refocus on core impact. Organizations are getting clearer about what matters most to pursue their missions—what their core outcomes are, and what they do uniquely well—and concentrating resources there. There are a variety of tools for thinking about core impact, including theory of change and intended impact, and adaptive strategic planning. None of them necessarily provide definitive answers, but the kinds of questions posed during the planning process may prove valuable as new challenges and opportunities arise.

Rethink funding strategy. Nonprofits are looking anew at the ways they fund their operations. They may not be able to rely on old sources returning and may need to build new fundraising capabilities. This doesn’t mean going in a lot of different directions at once but rather focusing and building the capabilities to do one or two things really well to attract the dollars needed to achieve their aspirations.

Plan for uncertainty and risk. Leaders can think through downside risks, bring in legal support earlier, and use scenario planning to ensure that their core work and communities are protected. Scenario planning can be especially useful because it provides a structured process for identifying potential future scenarios, assessing their implications for their work, and preparing for key strategic decisions and actions. The value of scenario planning comes in mapping out those difficult decisions ahead of time, rather than trying to figure things out when anxieties are likely to be high.

Strengthen communications and engagement. Staff, board, funders, community members, and other stakeholders may all be aware of changes in the environment and wonder what the organization is going to do in response. In times of organizational stress, it’s especially important to clarify and communicate how the organization is responding, how it will continue to focus on its core impact and values, and what changes may be in store.

2. Dream of a Different Future

Some nonprofits see this as a moment of necessary evolution, a time to peer around the corner toward a future that might look very different from today. For these organizations, protecting the core may not be sufficient or even possible. For them, it may be the right time to try other options:

Innovate thoughtfully. If an organization’s current impact or operating model may no longer be viable or sustainable, it may be time to experiment. We are seeing more organizations develop an “Engine 2”—an innovation that builds on their core assets but deploys them in very different ways. While this can be a powerful way to navigate new frontiers, it also requires agility, creativity, and change management.

Build new capabilities. Doing things differently often requires investing in new skills and infrastructure—especially related to data, technology, and AI—to enable new ways of working. AI is here to stay, though responses in the social sector have been mixed. Some organizations are charging ahead; some are cautiously experimenting; some are overwhelmed. Many simply don’t have the knowledge, infrastructure, or funding to explore AI in a meaningful way. Yet while barriers to adoption are real, they are not insurmountable. With the right investments, partnerships, and commitment to capacity building, nonprofits can shift from a reactive to a strategic use of AI or other technologies.

Explore new organizational models. Shifts in the environment may make this the right time to consider partnerships, mergers, or alternative structures. Interestingly, organizations are considering new models not just in response to external challenges but also out of a desire to increase their impact. (For the story of one such merger, see this webinar.)

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While it might seem valuable both to protect the core and dream of a different future, there’s an inherent tension between the two. Do we double down on the tried-and-true or invest more energy and money in innovation? Doing both might seem prudent, but likely difficult given limited time, resources, and attention.

What we’re sure of is that the most effective leaders will keep watching, talking with peers, and adjusting as the picture changes. The harder trade-off—protect or dream, and how much of each—is one that many of us in the sector are sitting with, too.