Venture Philanthropy Partners: Investing in Social Change.


Investing in Nonprofit Talent—It's Not Overhead, It's Essential

As I talk to nonprofit executives, I am continually reminded by how tough it is to lead a nonprofit organization in today’s environment. The findings of a survey by CompassPoint Nonprofit Services, the Annie E. Casey Foundation, and the Meyer Foundation of 6,000 next generation nonprofit leaders released last week further underscore these challenges. Ready to Lead? Next Generation Leaders Speak Out portends a serious leadership crisis within the nonprofit sector. Baby boomers are retiring and emerging leaders are thinking twice about filling the void, citing crushing workloads, low salaries, and a lack of career progression. Executive directors are burning out and heading for personal greener pastures in the private sector and government where they can find higher pay and more comfortable lifestyles. And this talent shortage becomes even more acute when you look at the relatively small numbers of nonprofit executives and board members from diverse ethnic and racial backgrounds.

We can throw up our hands in a panic or we can find ways to attack the crisis head on. One place where we might look for some solutions is corporate America. There has been a great deal of debate and angst within the nonprofit sector about the merits of applying business management practices in the nonprofit sector. To be sure, these practices don’t always translate. However, when it comes to recruiting and retaining top talent, the private sector has some valuable lessons for nonprofits. All of us—funders and nonprofit executives and Boards alike—would do well to heed some of them.

The first and perhaps most important lesson is that it is important for organizations to make investments in recruiting and retaining talent. Talent is the secret sauce in making any enterprise—whether for-profit or not—effective. To paraphrase Jim Collins, author of Good to Great, you have to have the right people on the bus, and, once you do, they will figure out where and how to drive it. With the wrong people, you just can’t go very far.

Finding and keeping good people is no accident. Private sector businesses take great pains to do so and invest substantial funds in hiring recruiters, creating human resource departments that not only lead and support recruitment efforts but also oversee retention programs including benefits, training, and so on. It’s an ongoing process and it takes a dedicated and consistent effort to manage this process. Many nonprofits often don’t have even one dedicated human resource professional to focus on these important activities. Sometimes the Executive Director or other staff without proper human resources training and experiences take on these responsibilities in addition to their other work. Adding this capability is often seen by funders and nonprofits themselves as “overhead” and detracting from program work. The philanthropic sector must support nonprofits in building the infrastructure needed to manage these activities.

Second, corporate America offers a wide variety of training to help employees develop and enhance their skills so that they continually learn and grow. Few nonprofits offer regular training. To be sure, cost and time are factors that inhibit the development of nonprofit training programs. But the cost of losing good people is even higher.

Third, the private sector has created very effective mentorship programs where junior-level employees are paired with more experienced employees to learn specific skills, to help prepare them for leadership roles, and to help guide them through the organization culture. Nonprofits would be well served by creating mentorship programs.

Fourth, private sector businesses have created incentive programs such as bonuses and merit increases and offer other benefits to reward and motivate high-performing employees to move forward. The survey found that nonprofits are well behind business in creating these programs and many times the culture of nonprofits discourages people from asking for more money. Those who do are often made to feel less committed to the cause. The reality for many younger workers is that they have substantial student loans to pay off while struggling to keep up with rising costs of living. They can’t pay the rent from their cause. And longer-term employees have made significant sacrifices for years and are now concerned about retirement.

Fifth, while far from perfect, corporate America is by far more diverse than the nonprofit sector. Corporations like Marriott and IBM not only have HR departments but also have senior staff whose sole purpose is to figure out how to create and nurture a more diverse workforce. As private sector business and nonprofits alike face a shortage of workers due to a smaller number of next generation employees, no one can afford not to create a diverse workforce. The private sector responds to customer demands. As their customer base has become increasingly diverse, they have become diverse as well. For nonprofits, diversity is even more important. At a time when racial and ethnic minorities represent a fast growing segment of our population, nonprofit organizations haven’t made enough progress in creating executive management teams and boards that represent the communities they are serving.

The challenge isn’t that there aren’t enough leaders of color—rather, it is connecting this leadership talent with the nonprofits who need it. Business has gone to great lengths to build networks where it can connect with diverse populations. That is why senior corporate executives every year log frequent flier miles visiting colleges and universities, reaching out to professional societies in search of diverse and talented individuals. The nonprofit sector should emulate some of these tactics, and funders should invest in helping nonprofits undertake these kind of initiatives.

All of this is why I am very proud of VPP for helping to create the African American Nonprofit Network (AANN). AANN is a 501(c)(3) nonprofit organization dedicated to increasing the representation of African Americans in leadership and advisory positions within the nonprofit sector of the National Capital Region, particularly in organizations that serve children, youth, and families. Since 2006, VPP has invested $500,000 plus strategic assistance to launch and grow AANN. Last month, Maxine Baker, who headed Freddie Mac’s corporate philanthropy efforts for more than a decade, came out of retirement to join AANN as Executive Director. All of us at VPP hope that AANN will serve as a model and inspiration for others to create networks to bring more diverse talent into the sector. In its short history, AANN has demonstrated the viability of its model. It has grown from a group of 10 volunteers to now include almost 30 core members who are local and national leaders with experience in both the nonprofit and for-profit sectors. It has already sourced several African Americans into senior leadership positions in nonprofit organizations in the National Capital Region and helped source 20 African Americans who now serve on nonprofit boards in the Region. It has also developed a base of approximately 1,000 active participants that continues to grow. AANN has also made connections to search firms, nonprofits, and affinity groups.

The “Ready to Lead” report should be a wake-up call for all of us, including funders. The bottom line is that attitudes within and outside the nonprofit sector have to change. As the report noted, we tend to undervalue nonprofit work and the people who do it. Corporate America has long realized that to make money you need to invest money. If our nonprofit sector is to thrive, we must invest in people and give them the support they need to do the good work that they want to do and from which we, as a society, derive great benefit. As VPP has learned, investments in building the infrastructure of nonprofits are critical to their survival and increasing the results for the communities they serve. It take more money and time to build strong, effective, and sustainable nonprofit organizations then most are willing to dedicate. This isn’t overhead—it’s essential to make sure that nonprofits can deliver on their missions.

- Carol Thompson Cole