Periods of funding uncertainty have become a familiar feature of nonprofit operations. For some organizations, recent reductions or delays in government funding have introduced new financial pressure. For others, the challenge has been rising costs, tighter grant requirements, or a mismatch between staffing models and available resources. While funding volatility is not new to the sector, the scale and pace of recent changes have caused many nonprofit leaders to take a closer look at staffing levels, role design, and employee performance.
As organizations assess sustainability in a more constrained environment, difficult personnel decisions often follow. Hiring freezes, restructures, and terminations are never taken lightly in mission-driven organizations, where relationships, institutional knowledge, and values play a central role. At the same time, delaying difficult decisions can introduce its own forms of risk. Understanding those risks, alongside the risks of acting too quickly, can help leaders make more informed choices that align with both their mission and their obligations as employers.
Below are several common assumptions that contribute to delayed termination decisions, along with considerations that may help leaders evaluate whether delay is serving their organization as intended.
Assumption: Terminations inevitably damage team morale
There is no question that terminations can affect morale, productivity, and emotional wellbeing. Remaining employees may experience anxiety about job security, concern for a departing colleague, or uncertainty about the organization’s direction. These effects are real, and they are often a major reason leaders hesitate to move forward with a termination, particularly when the employee is well-liked or long-tenured.
At the same time, morale is influenced by more than the act of termination itself. Prolonged performance issues, unclear expectations, or uneven workloads can also erode trust and engagement over time. When employees perceive that underperformance is tolerated indefinitely, it can create frustration among high performers who feel they are carrying a disproportionate share of the work.
In some cases, delaying a necessary termination in an effort to preserve morale can have the opposite effect. Teams may sense uncertainty or avoidance, which can undermine confidence in leadership. Clear communication, consistency, and transparency often matter more to morale than the absence of difficult decisions. While terminations should always be handled with care and respect, decisiveness paired with thoughtful communication can sometimes stabilize a team rather than destabilize it.
Assumption: Delaying termination reduces legal risk
Another common belief is that additional time, documentation, or process will necessarily reduce the risk of legal exposure. Many organizations extend timelines in order to gather more evidence, place an employee on a performance improvement plan, or demonstrate good faith efforts to correct issues before termination.
Understanding the legal landscape is essential. Wrongful termination claims often arise from allegations of discrimination, retaliation, breach of contract, or violations of state or federal labor law. Strong documentation, consistent application of policies, and compliance with applicable laws are all important components of risk management.
However, delay alone does not guarantee protection. In some situations, extending employment can introduce new complications. Inconsistent feedback, shifting performance expectations, or allowing an employee to continue performing critical work can weaken the narrative that termination was necessary. Timing can also matter. Terminations that occur shortly after protected activity, even if unrelated, may receive heightened scrutiny.
Performance improvement plans are a good example of this tradeoff. When well-designed and implemented with genuine intent, PIPs can help employees succeed and provide clarity around expectations. When poorly executed or used primarily as a formality, they can feel punitive and may increase tension rather than reduce it. The effectiveness of a PIP depends heavily on clarity, support, and the organization’s willingness to accept improvement if it occurs.
Assumption: Keeping someone longer improves outcomes for everyone
Leaders often hope that additional time will produce a cleaner outcome, whether through performance improvement, voluntary departure, or better organizational readiness. In some cases, that hope is justified. In others, delay simply extends the period of uncertainty.
Retaining an employee who is not meeting expectations can carry direct and indirect costs. These may include continued compensation and benefits, management time spent addressing issues, and reduced productivity within the team. There may also be opportunity costs, such as delaying restructuring or reallocating resources to higher-priority work.
There are also situations where keeping an employee through the completion of a major project feels practical. However, doing so can complicate later decisions. If an individual is entrusted with critical responsibilities, it may be harder to argue that their performance was insufficient. This does not mean that completion of work precludes termination, but it underscores the importance of aligning actions with stated concerns.
Assumption: A complete plan must be in place before action
Nonprofit leaders are often accustomed to deliberate decision-making, particularly when resources are limited and margins for error are small. Planning for knowledge transfer, workload redistribution, and service continuity is prudent. However, planning can become a source of delay when it aims for certainty that may not be achievable in advance.
Some operational adjustments only become clear after a termination occurs. Interim solutions, cross-training, or revised priorities may evolve in response to new realities rather than preexisting plans. In these cases, waiting for a perfect plan can postpone necessary change without meaningfully improving outcomes.
That said, acting without preparation carries its own risks. Legal compliance, communication strategy, and basic transition considerations should always be addressed before a termination takes place. The question is not whether to plan, but how much planning is proportionate given the costs of delay.
Weighing delay against action
Termination decisions rarely present a risk-free option. Acting too quickly can expose organizations to legal, cultural, or operational harm. Acting too slowly can drain resources, create uncertainty, and limit an organization’s ability to adapt.
Leaders benefit from evaluating both sides of the equation. Questions worth considering include: What is the ongoing cost of maintaining the status quo? What risks does delay introduce? What risks does action introduce? How do these risks align with the organization’s mission, financial outlook, and values?
Approaching terminations as a decision to be evaluated rather than a failure to be avoided allows leaders to act with greater clarity. It also supports more honest communication with staff, boards, and stakeholders about why difficult choices are sometimes necessary.
Support and perspective
Navigating terminations requires balancing compassion, compliance, and sustainability. Organizations do not have to make these decisions in isolation. Advisors with nonprofit experience can help leaders assess options, understand tradeoffs, and approach decisions in a way that reflects both legal obligations and mission priorities.
For nonprofit leaders facing complex staffing decisions, informed evaluation is often the most valuable tool. When leaders understand the full range of risks and options, they are better positioned to make choices that serve their organization and the communities they support.
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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.
