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To Ensure Nonprofit Well-Being, Invest in Wages, Workload, and Working Conditions

Date: June 6, 2024

Rusty Stahl

Founder, President & CEO, Fund the People

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Funders are finally noticing the flashing red lights of growing burnout across the nonprofit sector. And there’s a growing trickle of philanthropic response.

But grantmakers are missing the fundamental connections between their own funding practices, how grantees can compensate staff, why burnout is on the upswing, and how all of this damages the ability of grantors and grantees alike to achieve their shared goals.

Two new studies from the Center for Effective Philanthropy (CEP) offer a plethora of juicy information about the crisis facing America’s nonprofit workforce — and how much funders do or do not care to address it.

I want to briefly share three reflections in response to these reports. First, burnout is extremely serious, but it is a symptom, not the problem. Second, funders must support better nonprofit wages to address nonprofit well-being. And third, funders who believe their effectiveness is not impacted by grantee burnout (which apparently is many, as you’ll see below) will hoist themselves with their own petard.

1. Burnout is the visible symptom of an invisible problem. Funding for ‘well-being’ is a band-aid. Funders need to address the underlying problem.

In the funding community, the terms “burnout” and “well-being” are being discussed as if they are the problem and the solution, respectively.

But burnout is a symptom of a larger underlying problem: a chronic deficit of investment (by foundations, government, and donors) in America’s amazing nonprofit workforce, which has been compounded by contemporary crises, most notably the nonprofit working conditions created by COVID-19 pandemic. (It sure feels good to be largely past the pandemic, but the nonprofit workforce is still reeling in the aftermath, with staff having gone through major trauma and teams still shattered by working remotely.)

Too often, funding for well-being is a band-aid that stops the bleeding after the wound has been inflicted. But it doesn’t address what is causing the wound. As scholar Dr. Christina Maslach, professor emerita of UC Berkeley has been saying for years, burnout is not only a matter of individual behavior, it’s a problem grounded in the working conditions of organizations.

While support for nonprofit well-being is being deployed largely through ‘supplementary grants,’ the primary grants they are supplementing are often part of the problem that the well-being grants are meant to address.

The 2023 State of Nonprofits report from CEP found that a bundle of staffing issues compose the number one issue facing nonprofits: the challenge of supporting the organizational workforce. This ‘bundle’ of issues includes staff burnout, compensation, recruitment, and retention.

The 2024 report finds that “nearly a quarter (23 percent) of respondents say that more staff left than typical, and the most common reasons for these departures included: organizational inability to provide competitive pay or lost funding (55 percent); organizational inability to provide competitive benefits … (29 percent); and staff stress and burnout (29 percent).”

While burnout is the eye-catching headline that leads funders to invest in well-being, nonprofit executives are clearly stating that the salaries and benefits combined are a much more significant driver of turnover than is burnout.

2. Funders must address nonprofit wages in order to support nonprofit well-being.

Not only is wages a major issue parallel to well-being, but the study demonstrates the direct line from funding practices to nonprofit wages to nonprofit workload, to nonprofit burnout, to less quality and quantity of services.

As the report authors write, “At a time when burnout in nonprofit organizations continues to be a widespread concern, leaders facing budget deficits are contemplating difficult trade-offs. ‘We won’t replace unfunded/reimbursed positions that become vacant; we will continue to keep caseloads too high,’ one leader says. Another leader simply explains, ‘We have cut staffing, which has addressed budget issues but not burnout.’”

As these testimonials show, nonprofit financial health does not equal human health. And programmatic health depends on human health. A smaller team with a bigger workload per-person can address short-term financial solvency — but it decreases the quality and quantity of programs and services for communities, and it increases the likelihood of employee burnout. This is low-road nonprofit economics that results in a downward spiral. Funders who ensure or allow this to continue are guilty of creating sweatshop nonprofits.

I am cognizant that funders find it challenging to address grantee wages for a variety of reasons. No one funder can or should be responsible for fully funding great salaries and benefits of all the staff needed in an organization. But all funders can and should contribute toward this end. And I’ll offer some ideas about why and how.

Burnout is based in part on carrying an unrealistic workload. This workload is based on understaffing. Understaffing is based on how funders define, incentivize, and restrict the dollars that compose nonprofit budgets. If funders can change their funding formula, then they can change grantee staff workloads, and they can stop the cycle of burnout and harmful turnover.

To change the funding formula, funders must abandon their beloved myths of “overhead” and “indirect” costs, and instead recognize that teams of nonprofit workers form the bedrock of organizational effectiveness. While there is not large-scale data on this, a pilot study shows that in many nonprofits, people costs can compose a significant majority of the total operating budget. Yet the old way of funding demands that most of grant funds be spent on program costs, and the smallest amount possible be spent on people costs. By flipping the funding formula, funders can align their grant budget proportions with the reality of actual grantee budgets.

When you deploy a significant percentage of dollars in each grant for salaries, benefits, human resources, and staff development, I’m willing to bet you will begin seeing dramatic increases in staff well-being, financial health, and programmatic results.

3. Funders are aware of the burnout crisis but think it doesn’t impact their ability to achieve results. This is delusional and harmful to both nonprofits and their funders.

CEP’s grantmaker study finds that 58 percent of funders say grantee staff burnout is not at all or only slightly impacting their foundation’s ability to achieve their mission. 37 percent say it is moderately impacting their ability. How misguided, short-sighted, and wrong-headed this thinking is. Incredibly, only 5 percent of funders think it is significantly impacting their ability to achieve their mission. I predict that this view of nonprofit people as disposable will fuel the fire of burnout across foundation-funded nonprofits, and rapidly diminish the ability of these foundations to achieve their missions.

The thing that makes it difficult to address this problem is that the people who experience the pain directly (nonprofit workers) don’t have the hard power to change the circumstances. And the people with the hard power to change the circumstances (funders) don’t directly feel the pain.

So nonprofit leaders who are personally and organizationally feeling this pain must communicate their needs to funders in blunt and forthright fashion. They must become the best advocates not only for their programs, but for their people. This is the only way that the funding community will really change at scale.

Excellent funders who strive to listen, understand, and respond to their grantees are more apt to take action to address well-being and wages. They must become evangelists to their fellow funders.

There are still too many funders who do not care or, if they do care, have no clue how to really address wages, workload, and well-being in their grantees. Those who don’t care might consider consulting with or making room for people who understand the issue from lived experience. And I would invite those who are concerned but not sure what to do to consult the resources listed in CEP’s new Research Snapshot, including Fund the People, or contact me.

Because the future of effective philanthropy is going to be all about investing in the workforce and people-systems of nonprofits and social movements to build people power for the long haul.

Rusty Stahl is founder, president, and CEO of Fund the People, host of the Fund the People Podcast, and faculty of the Funding that Works Academy. Find him 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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