What’s Ahead for Talent in the Nonprofit Sector?

by Michelle Tafel , Principal, Organizational Consulting

This is the fourth in a series of blogs based on findings and insights from our 2023 ED/CEO Survey.

At DRG, we have a unique view of the nonprofit sector as we help clients with executive search, executive coaching, and an assortment of HR/Talent/Leadership engagements. This vantage grants us access to boards at work during moments of transition and organizations catching up to major transitions or preparing for them—and we see the issues that EDs and CEOs are grappling with every single day.

There are a few trends taking shape in our sector:

Nonprofits are rethinking how policies can reflect values and how values can inform policies—in a big way.

DRG is being asked more and more to help clients conduct HR policy and practice reviews with a critical eye toward racial equity. Living the value of equity means showing up through rethinking compensation, reconsidering policies and practices, increasing transparency around pay bands, and undertaking a slew of other projects that often boil down to “how can we live our values?

The shift toward a world where organizations understand that how they treat staff and how they define and implement policies are a huge part of how they live their values. If you find your organization skating on the surface related to your DEI efforts, now is the time to ask about concrete work you can do to advance efforts and live your organization’s values internally.

Hiring and retaining top development staff remains an elusive goal.

CEOs who took our 2023 Survey of Nonprofit Leaders named development/fundraising as an almost universally understaffed function.

We know nonprofits face a common challenge unique to our sector: the beneficiaries of the organization’s services are distinct from the entities that fund the organization (often, but not always—shout out to the fee-for-service successes out there). This makes fundraising teams essential to the lifeblood of any nonprofit organization. And when we don’t have the right leader in place, in the short term, we see EDs and CEOs adding a greater share of the fundraising work to their plates, putting the organization at risk on two fronts: 1) burnout for the top leader and 2) creating the real financial risk of not raising the funds needed to sustain the organization’s work.

There are ways to mitigate these risks: 1) invest in your next generation of development talent; 2) whether working with a firm or hiring on your own, be picky about the right person for the right moment when recruiting (make sure they are signing up for what you need!); and 3) leverage outside experts for special projects to build capacity.

Impending turnover among senior teams poses significant risk.

As I discussed in my blog Dear Board Members: What Your CEO Isn’t Telling You, there will always be turnover at nonprofits—and for senior leaders, there remains a dearth of planning for this turnover. There are significant financial and opportunity costs that arise from turnover. Some turnover is inevitable, and some is preventable (think compensation, culture, job scope, professional development, and manager relationships). For any flavor of turnover, a solid succession plan for all senior leaders is a must-have. It’s your insurance policy or contingency plan ready and waiting for you when you need it.

The influence of compensation on recruitment and talent acquisition remains a top concern and pain point for leaders.

Admittedly, DRG’s sample is completely biased: by the time an organization has decided to call in reinforcements related to a compensation study and benchmarking (often accompanied by a compensation philosophy and sometimes a benefits benchmarking engagement), they are prepared and even expecting to pay their employees more. Every day, we work with clients who seek to become more competitive in their pay to attract, retain, and reward their team—and most often, they are looking to anchor their pay at the 50th or 75th percentile of the market.

The data we see when we ask a broader array of organizational leaders is telling. Compensation and Benefits for staff shows up as the #2 concern despite 81% of the same group of leaders claiming that staff are slightly satisfied, satisfied, or very satisfied with their compensation. The anxiety is palpable.

The fundamental value proposition for nonprofit employees has shifted over the past 5-10 years. It used to be that doing “good” and investing in culture was an excuse to underpay staff. More and more organizations are learning that staff expect fair pay and a semblance of work-life balance. So, make the tough choices about what you can afford to do and what impact you can have, knowing how your funding and ability to compensate staff interact.

Read more from the DRG Blog.