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Social Enterprises Are Starting To Suck Up All The Talent From Nonprofits

These four charts explain the issues nonprofits are having in hiring.

Social Enterprises Are Starting To Suck Up All The Talent From Nonprofits
The number of organizations expecting to hire dropped 7% year-over-year, while it rose 4% among social enterprises. [Photo: Asanka Brendon Ratnayake/Getty Images]

The Trump presidency has caused nonprofit donations to surge, with more people giving in ways that protect social justice, equality, and women’s rights, all of which appear threatened by the administration’s agenda. So you might think that nonprofits themselves, flush with cash, might be staffing up quickly to take advantage of the climate and the financial infusion.

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But according to a new report, while 51% of all nonprofits expect to increase their staff size in 2017, they might have trouble filling those roles with the best candidates. More than half of the sector doesn’t have a formal procedure in place to recruiting top talent, and most groups don’t see the need to change that either, according to the 2017 Nonprofit Employment Practices Survey, a report from Nonprofit HR, a human resources firm.

The analysis is built on a survey of 420 groups within the sector. While the number of organizations expecting to hire has actually climbed for the last few years, this year it didn’t. (See the chart below.) According to the report’s fine print, the number of organizations expecting to hire dropped 7% year-over-year, while it rose 4% among social enterprises in the private sector. And that changes the stakes of the hiring game a bit. It’s no longer nonprofit versus nonprofit. Not surprisingly, “nonprofits are facing increased competition for talent from the corporate sector, driven in part by the growth of . . . purpose-driven businesses,” notes the report.

[Image: Nonprofit HR]
One reason for the nonprofit slowdown might be that employers are hedging against a potential shortfall that might arise if charitable giving shifts as a result of Trump’s tax plan. But, as another chart shows, most places still aren’t equipped to take on corporate counterparts: 64% of nonprofits don’t have a formal talent acquisition strategy to make compete against traditional companies, a concept so foreign that many had no idea if it was an existing practice or not.

[Image: Nonprofit HR]
As the breakdown below illustrates, finding qualified staff is a huge challenge for these groups, as is paying for them with an often limited budget. So you’d think groups would make an extra effort to keep their best employees. That’s certainly not the case when it comes to diverse workers.

As Fast Company has reported, many organizations face the sad paradox of supposedly being committed to a better world while struggling with internal racial bias and LGBT discrimination. The hiring report confirms that’s unlikely to change soon: Only 35% of these organizations have formal diversity, equity, and inclusion strategies, which would likely limit their ability to attract a diverse talent pool.

[Image: Nonprofit HR]
Overall, the industry generates about $4.5 trillion in funding from donors, fundraising, and grants. Yet just 1% of that is spent on finding, and supporting talent—and far less (about $450 million combined) on leadership development.

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[Image: Nonprofit HR]
Salaries, of course, are typically included as part of an organization’s operating costs. For nonprofits trying to up their pay, that’s meant struggling against the persistent Overhead Myth that funders should back projects for direct cause work as opposed the institutional costs that, over time, may do more for a group’s ability to grow smartly and generate even more social impact.

Toss in the fact nonprofit workers are generally underpaid compared to for-profit peers (NPO leaders make about 25% less across the board), and you’ve got an industry poised for disruption, and not necessarily in a good way. Here’s some free advice: “If your nonprofit hopes to keep up with increasing competition for talent, you must make the appropriate financial resources available to support your people,” the report notes.

About the author

Ben Paynter is a senior writer at Fast Company covering social impact, the future of philanthropy, and innovative food companies. His work has appeared in Wired, Bloomberg Businessweek, and the New York Times, among other places.

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