The nonprofit sector is built on human resources (HR): the energy, efficiency and passion of its employees. Strategic human resources management (SHRM) is a fundamental factor in making the best use of these resources.

SHRM is the intentional application of formalized policies and practices that create organizational successes by investing in the human capital of employees. It is widely acknowledged that HR management is an integral component of any successful business. However, small nonprofits face complex challenges in accessing and implementing SHRM. But nonprofit leaders at all levels can still pursue SHRM systems, even with limited time and resources. Thus, it is critical to innovatively explore how small nonprofits can succeed in SHRM.

CauseIQ identified that small organizations make up a majority of the nonprofit sector. Approximately 80% of all nonprofits have zero employees and almost 40% who do have paid staff, employ less than 10 people. 83% of nonprofits have an annual operating budget of only $250,000, according to the National Council of Nonprofits. With an overwhelming number of employees seeking to leave the nonprofit sector by 2025, the concerns surrounding HR practices in small nonprofits are more critical than ever.

Small nonprofits have limited financial resources to invest in SHRM education and implementation. They lack the robust nonmonetary resources that larger counterparts rely on to gain SHRM insight, experience, and training. The organizational structure of small nonprofits also produces unique challenges. Organizations with small staffs create an organizational culture that is reliant few individuals. While proper HR systems are critical to supporting small staffs, the nature of these organization often leads them to rely on informal HR practices. Small nonprofits are also heavily reliant on volunteers, creating the need for a sophisticated HR system that can be applied to both volunteers and paid employees.

A dangerous cycle is found where these systems lack. In a 2020 paper, Philip and Arrowsmith identify that the lack of intentional HR management systems leads to added challenges in employee retention. Without SHRM systems in place, organizations with already limited financial resources attract higher rates of employee turnover, creating added onboarding costs. Meyer and Leitner in 2018 identified a correlation between the abundance of HR practices and the amount of innovation present. They also suggest that organizational innovation can be tied to the success of nonprofit organizations, through productivity and mission-based goals and objectives. With so much resting on HR, it is key to find innovative ways for small nonprofits to be successful in implementing SHRM.

Solutions

A sector-wide solution must be pursued, creating a shift in attitude toward SHRM within small organizations. Basic SHRM training for CEOs and executive directors should become standard and be viewed as an ongoing learning process that is key to the organizational health and success. However, on an individualistic level, small organizations can focus on the following aspects to be successful in SHRM given the added barriers:

• Perform assessments of current HR practices and policies, paying particular attention to the level of formalization present.
• Reallocate financial resources to emphasize the critical nature of SHRM and its value when applied to employee retention and satisfaction.
• Create innovative ways to achieve SHRM success, utilizing collaboration with community partners and fellow small nonprofit professionals.

Creative paths to success are key in achieving the needed SHRM success given the presented challenges. One such innovative tool is a SHRM-focused co-op of small nonprofits. Where small nonprofits struggle to find the proper resources to create SHRM policies and practices, a co-op of like-minded organizations can mirror the power and resources of a large organization. The advantage of a co-op, rather than a partnership or outsourcing, is that small organizations can cater the layout to best fit their needs, scope of practice, budgets, and resource capacities. A co-op has the capabilities to share tangible resources, such as pooling financial resources to invest in a SHRM consultant, as well as non-monetary resources, such as HR contacts, insights learned from past experiences or knowledge from continuing education amongst leaders.

A group of this type creates opportunities for growth in SHRM formalizations through peer-reviews and collaborations on policies, employee handbooks and hiring practices. With the common goal of expanding SHRM resources, small nonprofits involved in a co-op can overcome challenges that were formally only achievable by their larger counterparts. These changes among individual small organizations are important to creating the necessary shift in the overall attitude toward SHRM within the nonprofit sector.

Kelsey Duman is a 2021 graduate of the Master of Nonprofit Leadership and Management program at Arizona State University. She resides in Albany, Oregon, and has served in a number of roles in the nonprofit sector over the past decade, focusing on organizations that serve people living with Type 1 diabetes. She is currently the director of operations for the Gales Creek Camp Foundation, which provides summer camp experiences for youth with Type 1 diabetes.

Learn more by enrolling in the Optimizing Human Resource Strategies in Nonprofits Certificate from the ASU Lodestar Center's Nonprofit Management Institute. This four-course program can be completed in less than three months.

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