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Funders: Let’s Stop Making Nonprofits Choose Between Balanced Budgets and Burnout

Date: June 18, 2024

Jamie Allison

Executive Director, Walter & Elise Haas Fund

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As I read the recent Center for Effective Philanthropy (CEP) report on the state of nonprofits, a familiar feeling settled in. The invisible lines between the findings began to form, and a picture not explicitly told in the data emerged.

On the surface, the CEP report describes a nonprofit sector that on the one hand is experiencing increased burnout — something that I hope no funder is surprised to learn, and that all are disheartened by — and on the other hand, finds that nonprofits are experiencing balanced budgets and committed funding. It might seem odd that organizations report both of these things at the same time: burnout, and balanced budgets.

If we stop there, funders may pat ourselves on the back for the parts that seem to be working and commit to tackling burnout. This is a worthy cause, and one that funders must take up. But from talking to nonprofits leaders, there is a deeper story that I invite my fellow funders to explore.

Funder Demands Have Fueled Nonprofit Burnout — and Balanced Budgets

Nonprofit leaders know that they must balance their annual budgets. The report’s finding that two-thirds of nonprofits expect to have a balanced budget or a surplus tracks. But let’s not mistake this as an indication that funders are doing a good job resourcing the sector appropriately. What this data tells me is that nonprofits are doing what they must in order to keep the lights on and ensure that their work continues.

These are the conditions I’m hearing from our grantee partners at the Walter & Elise Haas Fund. They share that across the sector, funders are stepping away, re-prioritizing funding strategies in a post-2020 world, decreasing funding, or not renewing support; this is particularly the case for organizations that have an explicit racial equity focus. As a result, nonprofits are being forced to freeze salaries, lay off staff, not hire for open positions, and strip things like professional development and staff retreats from their budgets. Meanwhile, they continue to deliver on their programmatic mandates with fewer staff, less training, and less time for rest and reflection.

In other words, they’re making it work, but at what cost? That clarifies the picture of the report’s mutual findings: balanced budgets and nonprofit burnout.

Last year, the Walter & Elise Haas Fund launched the Endeavor Fund, with the goal of providing nonprofits enough funding over a sustained period — seven years — so that they could pay their staff well and offer benefits. The Endeavor Fund and similar investments aim to close the kind of gap the CEP research shows, where institutional philanthropy accepts burnout as a natural byproduct of the work. Instead, initiatives like the Endeavour Fund recognize the importance of nonprofit worker well-being, including the need to center racial and gender justice as a component of how nonprofits meet their missions.

At the Fund, we are in constant dialogue with grantees. The groups that most consistently report burnout are mid-sized nonprofits ($2M-$5M) that are led by women of color. Women of color operate in a field with deeply embedded biases and overlapping systemic obstacles. I believe that women of color leaders experience an outsized responsibility to be the best — for funders, for employees, for their communities — and therefore reach burnout more quickly and feel it more acutely. Moreover, these organizations are often nimble and pride themselves on being responsive to community needs and therefore must balance resource constraints, managing growth, and addressing complex stakeholder demands.

I recently received a message from our grantee partner Zoë Polk, executive director of the East Bay Community Law Center. The organization, like many, is experiencing financial hardship but remains committed to valuing staff well-being and program needs. In her update, Zoë also shared this quote from Jennifer Njuguna’s NPQ article, It Isn’t Just Lonely at the Top, It’s Downright Scary: The Reckoning Needed for Black Women Leaders:

“On any given day, there are countless trade-offs, tensions to balance, and difficult choices that must lead to decisions. Trust must include acknowledgment of these, and it must include space for Black women to do, to experiment, to make mistakes, and to pivot, without the automatic penalty of mistrust.”

I am so grateful to have relationships with grantee partners where we can share what is really happening. But is this the state of nonprofits that we, as funders, hope and dream for? One built on “countless trade-offs and difficult choices,” such as balanced budgets or employee well-being?

Four Steps Funders Can Take

We must move into better alignment with nonprofits if we want to see our collective visions for change realized. Here is my advice for funders who believe that philanthropy can do better in supporting nonprofit and community ambitions, without sacrificing well-being.

  1. Invest directly in the well-being of BIPOC leaders. More and more funders are building targeted interventions like support for sabbaticals and wellness grants designated for personal care, not program support. Funders can invest in leadership cohorts for nonprofit leaders such as BoardSource’s BIPOC Leadership Initiative. (Disclosure: I serve on BoardSource’s board). Donors can also provide leadership awards, like the women’s leadership award Walter & Elise Haas Fund board member, Jennifer C. Haas, created, which is entering its second cohort. The first cohort of 12 social justice leaders attended retreats together and received $30,000 over two years to use for their personal well-being.
  2. Create the conditions for better nonprofit job quality for the entire grantee organization. You guessed it, I’m talking about multi-year general operating support grants. A funder’s multi-year commitment to a nonprofit can give them the confidence to make investments in their own staff when they know the resources will be there for more than one or two years. The Walter & Elise Haas Fund is not alone in seeing our role as funding nonprofits to win on their own terms, including our shift from one-year to seven-year grant terms. We also place a high priority on supporting the conditions for high quality, empowering nonprofit work.
  3. Talk to your grantees about their compensation and benefits philosophy. Funders can be the connective tissue that either promotes nonprofit burnout or supports the dignity and well-being of the nonprofit sector and its workers. Let your grantee partners know your desire to support nonprofits paying their employees living wages and providing good benefits and acknowledge that this may result in higher operating costs for the organization. Ask what barriers they face in reaching their goals for staff well-being, and be prepared to respond with you guessed it, step two.
  4. When exiting, be transparent — and generous. Funders change strategies from time-to-time. Develop the kinds of relationships and practices with your grantee partners that honor their time and work. When the foundation plans to no longer support a grantee partner, give them as much notice as possible, and offer exit grants.

Investing in a Healthier Nonprofit Culture and Sector

At the Fund, we have been on our own journey to understanding how best to support nonprofit health and well-being. In 2022, we encouraged our Racial Justice grantees to designate a portion of their $50,000 general operating grant toward leader well-being. In the end, only half did — with most using the funds to support not the leader but the staff overall for things like retreats, staff lunches, and other appreciation or bonding activities. The consistent feedback we got was: thank you for even asking about leader wellness and giving permission to invest in the organization’s people. I would like us to get to a place where our nonprofit partners no longer feel compelled to spend every dollar on programming, even when funding is available for wellness.

Overcoming burnout and building cultures of well-being will take all of us — funders and nonprofits. But as funders we are well-positioned to set the tone for creating a nonprofit ecosystem that operates with care, optimism, and capacity. We must hold two different data points — strong nonprofit organizations and thriving nonprofit workers — and find ways to support them together.

Jamie Allison is executive director of the Walter & Elise Haas Fund. Find her on LinkedIn

Editor’s Note: CEP publishes a range of perspectives. The views expressed here are those of the authors, not necessarily those of CEP.

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