Opinion: Nonprofits experiencing workforce crisis

Dan Prater

Springfield is home to many wonderful nonprofits doing important work. The metro has more than 3,200 registered organizations, according to IRS filings, including well-known social service groups like Habitat for Humanity, the YMCA and Boys & Girls Club, private universities, two major health care systems, and foundations. Also in the mix are tax-exempt entities, such as electric cooperatives, credit unions and associations.

Although the organizations differ in size and purpose, nearly all of them share a similar struggle: finding enough employees to fill critical positions.

Staffing struggles
Using feedback from FORVIS LLP trainings and surveys, nearly 5,000 representatives nationwide in the nonprofit, education and public sectors ranked the workforce/staffing issue as their most urgent challenge. Over 36% of those surveyed in the nonprofit sector rated it as the No. 1 challenge.

Workforce issues include difficulty attracting/recruiting quality candidates; high turnover; limited staff capacity; maintaining adequate staffing levels; and shortage of available workers.

These are punctuated by the fact nearly 3 out of 4 organizations have job vacancies, according to the FORVIS 2024 State of the Nonprofit Sector Report. The nationwide survey of more than 325 nonprofit leaders found that 74% of responding organizations are struggling to fill positions. Health, education and human services have the highest levels of vacancies within the industry.

Possible causes
There are six key factors contributing to the industry workforce crisis. Some are new and some have existed for decades.

1. Pandemic. The COVID-19 pandemic is partially responsible for the current crisis. Even though many lost jobs have been filled, the nonprofit sector hasn’t fully recovered. Some employees have left the sector and some have realigned priorities to better balance their work and personal lives.
2. Employee compensation. The nonprofit sector is sometimes referred to as the voluntary sector, mostly due to the earliest days of our nation when charity or community service was accomplished primarily by volunteers. Although plenty of organizations still use volunteers, today’s nonprofits are more likely to be operated by paid staff. But the idea that doing social good should be accomplished solely by unpaid volunteers still persists. This underlying notion has led to nonprofits and government sectors frequently paying wages far below other industries. The compensation disparity has become more prominent in recent years as for-profit companies have aggressively raised pay and benefits to attract talent.
3. Funder priorities. Foundations and private donors are eager to support new programs and services but may be reluctant to provide support for indirect expenses, also called overhead. As a result, organizations are hesitant to allocate money toward activities that fall outside of the program/services category – including training, human resources, marketing, technology, etc. – for fear they will lose funders’ confidence and support. Pressure to under-fund these activities has led to poor recruitment, inadequate employee training and development, and noncompetitive salaries and benefits.
4. Stress and burnout. Nonprofits experience high turnover and low retention rates due to heavy workloads and emotional demands. FORVIS’ 2024 nonprofit study found more than 70% of organizations saw an increase in requests for help in the previous 12 months. The constant pressure of trying to keep pace with the demands for help and the emotional toll of working face-to-face with individuals in traumatic situations has contributed to burnout and high turnover.
5. Executive transitions. This year represents a milestone. It is called Peak 65, the year when more Americans reach the traditional retirement age of 65 in the same year than at any other time in U.S. history. This means that in 2024 about 12,000 people – including many in nonprofit leadership – reach the traditional retirement every day, according to the Kiplinger Retirement Report.
6. Talent development. A global human capital study by Dayforce Inc. found that 74% of organizations often or always hire external candidates for leadership roles as opposed to promoting from within. When nonprofits fail to invest in mentoring and development, high-potential leaders aren’t given growth opportunities and don’t see a future with their organizations.

Response
If organizations are to survive and thrive, the call to action is clear. Nonprofit leaders, boards and funders must focus on five key areas:

• Providing competitive salaries and benefits.
• Improving workplace culture and diversity, equity and inclusion.
• Caring for their employees’ health and well-being.
• Offering advancement opportunities.
• Allocating resources toward general operational costs.

Dan Prater is a senior managing consultant at FORVIS LLP. He can be reached at dan.prater@forvis.com.