ASU Lodestar Center Blog

Current nonprofit sector research and recommendations for effective day-to-day practice from ASU faculty, staff, students, and the nonprofit and philanthropic community.

Wednesday, June 15, 2022 - 10:42am

Two people connecting puzzle pieces

Illustration by Yuxin Qin

Jade Gale

posted by
Jade Gale
Fall 2021 Alumnus, ASU Master of Nonprofit Leadership and Management

Skilled talent and leadership are pivotal to growth, sustainability and success. Human capital should be viewed as the most important resource and be supported as such. However, if boards and upper management do not prioritize human capital recruitment and retention with proper funding, then the result is often high turnover rates and lack of skilled leaders.

Compensation

If a nonprofit wants to achieve the full scope of capability, then they must have the skilled talent that can reach it by providing a fair and competitive compensation in an already stressed environment. New York University professor Paul Light writes, “(Nonprofit) Employees are members of a first-rate workforce often employed in second-rate organizations with third-rate equipment.” A first-rate workforce that is not provided with first-rate support at the very least needs adequate compensation in the form of competitive pay, flexible hours, paid time off, redefined work environment or college debt relief. Benefits like these can be the difference in recruiting and retention efforts, despite potential short falls elsewhere in the organization.

Human resource investment

If an organization is willing to invest in a positive and extensive support structure, it is likely leadership will follow. Reciprocation is key to mutually advantageous relationships. Investing into a strong human resource department can be the difference in support that current and potential leadership needs to feel valued. Additionally, a robust HR team can establish a strategic management and recruitment plan that simultaneously generates higher acquisition and retention rates.

Recruiting strategy

A sound recruitment strategy serves multiple purposes in the acquisition of skilled talent. It analyzes current internal and external data to determine needs, wants, efficiencies and inefficiencies, develops impactful employee value statements, and determines the most cost-effective ways to source candidates that fulfill organizational needs. The Nonprofit Employment Practices Survey, administered by Nonprofit HR, found that 64% of the nonprofits surveyed did not have a formal strategy for recruiting employees, and 56% indicated that they had no structured plans to create one. Acquiring skilled talent with sub-par to no recruitment strategy leaves the leadership of an organization in the balance. “Hiring qualified staff within limited budget constraints continues to be the top talent management challenge for nonprofits for the sixth year in a row.”

Recruiting diverse leadership

A byproduct of low overhead spending and reduced recruiting efforts is demographically underrepresented leadership in the sector. “As the U.S. becomes increasingly diverse, the percentage of people of color in executive director/CEO roles has remained under 20 percent for the last 15 years,” according to research studies. Leadership rich with perspective is one that makes well-versed decisions that wholly pursue a mission. “A diverse board of directors can bring a realistic view of the community, strengthen the organization's connection and credibility to its constituency, improve fundraising and assist with grants distribution. In essence, it makes the group more effective at carrying out its mission."

Retention

If an organization invests in recruitment, then it is pivotal to equally invest into retention or the prior investment will be a waste of resources. Factors that contribute to retention include region, motivation, mentoring, communication, employment status, human resource practices, job satisfaction and security, compensation package, and leadership impact. Employees that are satisfied with their organizational culture, their work life balance and compensation package continue their employment with the organization. Thus, retention hinges on commitment to these factors and in return, can generously impact recruitment. Organizations that provide a suitable work environment typically attract better candidates.

Dismantling the overhead myth

“Overhead ratio” refers to the amount of money a nonprofit spends on its mission vs. money spent on overhead costs. Overhead costs include things like rent, employee salaries, administrative costs and bills. The expectation created by donors and third-party watchdog organizations is that less than a quarter of funds be spent on overhead. As a result, the Nonprofit Starvation Cycle begins where organizations do not spend enough on overhead costs to work effectively, and therefore, do not make enough to increase fundraising or bring in more donors. Eventually they stagnate, decline, then dissolve. Furthermore, the pressure created from unrealistic operation expectations cause underreporting and falsified financial documents.

To acquire skilled talent more effectively, organizations need to invest adequate overhead spending into human capital and the support structure it needs. Jeanne Bell writes, “Each potential candidate brings a unique existing set of relationships and competencies. These relationships and competencies may derive from well beyond a staff member’s employment history to his or her lived experience and past and current volunteerism, board service, or activism. Further, staff will continue to nurture their forms of capital while working with a given organization and, obviously, beyond their tenure there, as well.”

Jade Gale is a 2021 graduate of the Master of Nonprofit Leadership and Management program at Arizona State University. He is a native Colorado Springs, Colorado, resident. He received his undergraduate degrees in Politics and Government and Environmental Studies with a water emphasis from Western Colorado University. His goal is to create and operate his own nonprofit in the future. Jade is currently a Restaurant Leader for Raising Cane’s Chicken Fingers and enjoys spending time with his wife and two dogs. 

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