The last five years of economic and political turmoil have created some major shifts in the nonprofit landscape, particularly around staffing and compensation. Issues like a lack of labor supply and inconsistent funding from the federal government have forced nonprofits to adapt, reallocating more resources towards training and retention, and to engage in proactive recruitment strategies in anticipation of staff turnover. There has also been a shift towards long-term planning and away from overly-ambitious short-term goals, as organizations of all sizes brace for the possibility of more turmoil.
Nonprofits and other mission-driven organizations work in a wide range of different industries and capacities, and many of these trends do not apply equally across all nonprofit types or roles. Moreover, there are a large number of important and developing considerations that could impact the sector, including conflicts in the Middle East, supply chain disruptions creating inflationary pressure, and the ongoing drop-off in donations to nonprofits. Despite these potential shifts, it can be helpful to assess which trends might apply to your organization and how you can adjust your goals to account for these changes:
Nonprofits have maintained pay raise parity with other sectors
Despite the significant drop-off in federal nonprofit funding, nonprofit organizations have seen wage increases of 4.8%, which is comparable with the private and public sector. Although the actual wages still lag behind the other sectors, this parity does indicate that a large number of nonprofit organizations have chosen to tackle the persistent labor shortage by increasing wages. However, this could also indicate an increasingly unequal hiring and retention process that favors nonprofit organizations which are large or well-funded enough to compete but which limits smaller, less robust organizations.
Turnover persists as a significant issue for nonprofits of all sizes
Although the amount of staff turnover varies from organization to organization, it is a persistent issue at most nonprofits, with nearly half of nonprofit employees reporting a desire to move on, and a quarter of these expressing that they would be churning out of the nonprofit sector altogether. Turnover issues are less significant at more well-funded organizations, which indicates that wages are a significant factor, but its overall persistence in the nonprofit sector suggests that issues like burnout, work-life balance, or other organizational concerns might play a significant role as well.
Nonprofits are diversifying their approach to staffing and retention
In addition to increasing wages, many nonprofits are also confronting the issue of churn with other methods, including proactive recruitment, which involves recruiting for anticipated future needs rather than backfilling. This approach can help preserve team continuity, as the organization does not task the rest of the team to “pick up the slack” when a team member leaves, which can contribute to burnout.
Another approach is to invest in a values-based retention strategy which gives team members a more direct perspective on the impact of their work and which offers greater schedule flexibility, organizational transparency, and more control over the specifics of their working conditions and work-life balance. These efforts can be particularly helpful for recruiting and retaining younger team members, who reportedly value feeling a “purpose” in their work as highly as material considerations like wages or benefits.
Inflation is hitting nonprofits from multiple angles
Although inflation rates have come down a lot from their highs at the end of the COVID-19 pandemic, they still present a major risk for nonprofits, as inflation can exert downward pressure on donations and apply major upward pressure on wages. This means that even the attempts to raise wages mentioned above may not have the necessary impact, as the cost of living continues to rise, and more organizations may struggle to maintain these increases as donations decrease.
Nonprofit organizations are trying many different methods to counteract this, including offering non-compensation related benefits like remote work or generous leave policies. On the donation side, many organizations are leaning into a diversified approach to fundraising, one that taps into multiple different funding sources rather than relying on donations from an increasingly budget-conscious public. Some organizations are experimenting with a “subscription model” for donations which takes smaller amounts on a monthly basis, as this can reduce fundraising costs while also allowing people to donate a larger amount over a long period of time.
AI recruiting is popular but results are mixed
HR teams are adopting AI at high rates, including in the nonprofit sector, because it has proven effective at lowering time-to-hire, automating time-intensive and repetitive tasks, and extending the capabilities of the HR team. However, AI has been less effective at automating some of the most challenging and important bottlenecks in nonprofit hiring, like sourcing good candidate pools, identifying the qualitative characteristics that indicate that someone is suited for nonprofit work, and improving staff retention.
While volume and speed are both invaluable in a recruitment drive, the challenges of staff turnover and the labor shortage can’t always be solved through these means alone. There is also a growing concern over the algorithmic replication of bias, which has resulted in state-level legislation aimed at holding organizations which demonstrate this kind of bias accountable. The promise of AI as a tool to meet staffing challenges relies on it being a force multiplier, but the downsides can be significant.
Another key dynamic is the pressure to recruit and train staff who are able to fully utilize AI. Some organizations are using this as an incentive to reduce turnover, giving their existing team members tools and resources to learn skills around AI, digital security, or other popular new tools. Although this offers potential benefits, many employees report significant burnout, as the pressure to rapidly adopt these new skills erodes their work-life balance.
Navigating these trends requires nonprofit leaders to resist the temptation of one-size-fits-all solutions. The organizations best positioned for long-term stability are those treating staffing and compensation not as a cost to be minimized but as a strategic investment: competing on wages where possible, building cultures that retain people even when wages can’t, recruiting ahead of need, and approaching AI as a supplement to sound HR judgment rather than a substitute for it. In an environment defined by uncertainty, the nonprofits that thrive will be the ones that plan deliberately, adapt continuously, and keep their people at the center of that work.
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The information contained in this article is not a substitute for legal advice or counsel and has been pulled from multiple sources.
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