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Rising costs, shrinking donations, and hostile federal policies have left many nonprofits stuck in reactive mode. Discover how this mindset is quietly sabotaging resilience—and how some leaders are breaking free.
When Managing Your Nonprofit for Resilience was released in 2022, I highlighted the scarcity mindset as a key challenge undermining nonprofit resilience. How has the landscape evolved as of mid-2025? Unfortunately, many external trends have reinforced the pressures that feed a scarcity mentality, as explained below.
In the nonprofit context, a scarcity mindset is the pervasive belief that resources are always painfully limited, so the organization must operate in perpetual austerity. This outlook breeds a “make do and do without” culture that focuses on short-term survival at the expense of long-term strategy. Nonprofit leaders with a scarcity mentality often feel they can only manage basic needs for today, believing they cannot plan or think about the future because urgent deficits consume all their attention. If any of those phrases sound familiar, your nonprofit may be victimizing itself with this scarcity framing.
The impact on operations, strategy, and culture is significant: organizations often fail to invest adequately in infrastructure and staff development, postpone innovation, and avoid reasonable risks that could further their mission. Research on scarcity shows that constantly fixating on what you lack impairs decision-making and encourages short-term fixes that undermine long-term well-being. In practice, this means a nonprofit stuck in scarcity mode might forgo investing in a new case management system or staff training, choices that save a few dollars now but hinder efficiency, resilience, and growth down the line.
A scarcity mindset can create a culture that promotes overwork and burnout. When leadership operates under the assumption that “there’s not enough to go around,” they may expect employees to take on too many responsibilities and neglect self-care in pursuit of the organization’s mission. Over time, this contributes to high staff turnover and low morale, high burnout conditions that sap an organization’s strength.
Moreover, scarcity thinking often leads nonprofits to see other organizations as competitors rather than collaborators. If you’re convinced resources are a zero-sum game, you become reluctant to share ideas or partner up, fearing that another nonprofit will “steal your funding”. This isolation undermines collective impact and innovation. In short, scarcity mindset traps nonprofits in reactive, risk-averse patterns by cutting costs, avoiding investments, and deferring strategic moves, which ironically leave them more fragile and less able to fulfill their missions over time.
(It’s worth noting that scarcity mindset underlies phenomena like chronic underfunding and the “nonprofit starvation cycle,” but here we focus on the mindset itself and the internalized beliefs driving those behaviors, rather than rehashing the mechanics of underfunding addressed in earlier challenges.)
Has scarcity thinking disappeared? Far from it.
The past few years have been turbulent for nonprofit finances. Inflation and rising costs have hit operating budgets hard, just as some revenue streams tightened. Total charitable giving fluctuated; notably, contributions from individuals have decreased more than any other source of revenue recently, leaving organizations anxious about meeting growing community needs. Demand for services has indeed grown. Over three-quarters of nonprofits saw increased demand for their programs in the last year. Yet resources haven’t kept pace. The Nonprofit Finance Fund’s 2025 State of the Nonprofit Sector Survey found that almost half of nonprofits lack sufficient funds to deliver their programs and services. In fact, more than 90% of nonprofit leaders in a national panel study said they were worried about financial uncertainty heading into 2025. This pervasive uncertainty makes it tempting to hunker down and hoard whatever resources you do have.
Human capital is a casualty of the scarcity mindset, and recent trends reflect that strain. Coming out of the pandemic era, nonprofits struggled with workforce shortages and burnout. Surveys in 2023 showed that over half of organizations had more vacancies than before the pandemic, leading to longer waitlists and reduced services in fields like healthcare and human services. There has been some improvement by 2025; the number of nonprofits reporting staffing shortages dropped by about 15% in two years, indicating some roles have been filled or adjusted.
But that statistic is a double-edged sword, as many groups addressed hiring shortfalls not only by recruiting talent, but also by eliminating positions and programs. In fact, by early 2025, three out of four nonprofits had cut staff or services to cope with financial and workforce constraints. Such cuts alleviate budget pressure in the short run, but they also reflect a retrenchment that can feed a scarcity loop (fewer staff to do the work, remaining staff more stretched, etc.). Nonprofit employees continue to cite burnout and low compensation as top concerns, and leadership pipelines are shaky. Over 75% of organizations report difficulty recruiting senior leaders. These conditions have kept many nonprofits in survival mode, doubling down on “doing more with less” even as that approach becomes unsustainable.
If you have been faithfully reading this series of blog posts, you might reasonably counter that adopting a scarcity mindset is simply a reasonable adaptation to reality. Nonprofits have, in fact, been chronically underfunded. This leads them to prioritize immediate needs over sustainability. The starvation cycle is real and pernicious. Nonprofit leaders have often felt they must be guarded about their communications.
On top of all of that, as I have covered ad nauseam elsewhere on this blog, the federal government has turned against the nonprofit sector. As the Urban Institute reported, these moves have created a “state of uncertainty for nonprofit organizations nationwide,” with some nonprofits suddenly seeing government funding paused and others left in limbo about pending grants. There have even been discussions within the administration about challenging the tax-exempt status of certain nonprofits and universities. All of this adds up to a federal landscape that feeds the scarcity mindset. Nonprofits are bracing for cuts and feeling under siege, which naturally might prompt even more cautious, austere management choices. (On the flip side, it also underscores why resilience and risk management are so critical – more on that shortly.)
The core challenge of the scarcity mindset remains as relevant in 2025 as it was in 2022, arguably even more so. The evidence suggests that many nonprofits are still caught in a cycle of constrained thinking, and by some measures, the situation has worsened. Consider a few data points. As of this year, 42% of nonprofits report lacking adequate finances or resources to meet their mission. Nearly 68% say in the same report they expect to cut programs or services in the next year or two – a striking figure that speaks to prevailing pessimism about growth. In other words, a majority of organizations are planning for contraction rather than expansion.
Likewise, an independent 2025 sector report found that almost half of nonprofits couldn’t fully fund program delivery and had to scale back, and 75% have already reduced staff or offerings to cope. These are symptoms of a continued or even intensified scarcity mindset: when leaders feel they have no choice but to continuously tighten belts, it indicates the cycle is still in force.
Moreover, nonprofit executives themselves voice greater anxiety about financial sustainability today. The Urban Institute’s latest trends study shows an overwhelming majority of leaders are preoccupied with balancing rising demand and falling funding, and feeling “vulnerability in a shifting funding landscape”. That prevailing sense of vulnerability is precisely what fuels scarcity-driven decision-making, such as hoarding reserves, under-investing in growth, etc.
We also see the toll in the workforce, persistent burnout and turnover point to organizations stretched thin. If anything, the strain of the past few years has made many boards and CEOs more risk averse. After navigating a pandemic and now facing economic and political uncertainty, it’s understandable that some default to a play it safe, spend less, and avoid new initiatives mindset. In that respect, the scarcity mindset can become more entrenched under prolonged stress.