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Funders, Listen Up: It’s Time to Invest in Nonprofit Workers

Date: June 27, 2023

Rusty Stahl

Founder, President & CEO, Fund the People

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The Center for Effective Philanthropy’s new report, State of Nonprofits in 2023: What Funders Need to Know, reveals that the inability to invest in support systems for staff is the primary challenge facing nonprofits today, according to nonprofit leaders themselves. Further, it shows that this is the case even in the context of trust-based grantmaking and balanced budgets.

The research findings shine a bright light into a deep, dark hole in philanthropic practice.

On one side of this chasm is a chronic and urgent need for investment in grantee staff and the overall nonprofit workforce.

On the other side is the significant value created by investments in nonprofit workers, which Fund the People recently documented via an analysis of data from a dozen evaluations in The Foundation Review.

In the middle – where there should be a robust philanthropic practice – is the void.

To wit, grantmaking that addresses the financial health and programmatic health of grantees will not be as successful as it ought to be if it does not address the human health of grantees.

CEP’s research indicates that the important reform agendas that have garnered widespread interest amongst many funders in recent years — such as funding ‘full costs’, pursuing trust-based philanthropy, and other such ideas — have yet to adequately address the specific and pressing needs of nonprofit staff.

In fact, research shows that every time nonprofits have the opportunity to raise the issue of philanthropic under-investment in nonprofit workers in the safety of anonymized data, they do so. This can be seen by tracing the findings of CEP’s surveys on nonprofit needs across time, as I will attempt to summarize below.

A decade ago in 2013, CEP released Nonprofit Challenges: What Funders Can Do, one of their early such surveys. In response to the findings, Linda Wood, who was with the Evelyn and Walter Haas, Jr. Fund and one of the most thoughtful leadership-focused funders in the field, wrote on this blog: “Are we funders listening closely enough? How should we respond when a respected national survey finds that almost 75% of nonprofit executive directors are asking for more support to develop their leadership?” The findings indicated that nonprofit leaders felt funders did not understand this need.

In 2018, CEP’s report Strengthening Grantees: Foundation and Nonprofit Perspectives found that:

  • “Nonprofits most desire help in fundraising, staffing, and communications. Fundraising, staffing, and communications are areas nonprofit CEOs say their organization most commonly seeks to strengthen—and there may be more need in particular for staffing and communications support than foundation leaders realize.”
  • CEP asked funders and nonprofits for the top six organizational functions that are most in need of strengthening in grantees. Nonprofits listed “Staffing” as the 2nd highest priority at 37 percent (2nd only to fundraising which got 42 percent). “Staffing” did not appear at all in the funders’ top six responses.

This brings us to the 2023 version of this report, released just days ago. Unlike 2018, the latest version of this survey shows that, coming out of the pandemic, the number one need and priority of nonprofit executive directors is: investing in their workers and their staff support-systems.

The message running across these three reports, and most significantly in this latest data, is a clarion call for funders to focus on human capital issues in their grantees.

Unfortunately, too many funders still do not seem to hear the message.

In response to the chronic deficit of investment in nonprofit professionals, and the current crisis in staffing, philanthropic support for the grantee workforce must become a basic building block of equitable, effective philanthropy.

It’s not about finding more money, getting new grantees, or creating new training programs. Rather, it’s about how you deploy your existing funds to your existing grantees, so that they have the incentives and opportunities to support and develop their employees.

It is time to bridge the gap between the dire need and great possibilities of talent-investing. It is time for funders to listen and, at long last, respond to what nonprofit executives have been saying for at least a decade and are practically shouting into the void: focus your support on your grantee’s staff.

Rusty Stahl is founder, president, and CEO of Fund the People and host of the Fund the People Podcast. You can follow Rusty on Twitter at @rustystahl and the organization at @fundthepeople.

Join us at CEP2023 to hear more about this topic and recent research from Fund the People in a breakout led by Rusty, “How Can Funders Best Support Nonprofit Workers in the Age of Burnout?“.

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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