It is nearing the end of June, and you know what that means — the end of the fiscal year for many nonprofits. Leaders at organizations across the region are in the final weeks of securing funding to balance their budgets, completing programming ahead of the summer months, and making plans for the new year that starts when the calendar flips to July.
It is also the time of year when the game of musical chairs commences as staff departures are announced. Chief executives and nonprofit leaders in charge of programming, operations and development often wait until the end of the fiscal year to make their moves, hoping to minimize the negative impact of leaving in the middle of the year or in the final push at the end of the year. And that means a domino effect that typically ripples into the early fall.
This annual reshuffling of talent in the nonprofit sector has been increasingly challenging in recent years. Finding great talent for your nonprofit has never been easy, which we’ll get to below, but of late something else is going on. It started even ahead of the onset of COVID-19 but got much worse as the pandemic raged on.
There is a talent shortfall in Charlotte’s nonprofit sector. And it is an active threat that is only growing worse.
We at Next Stage believe it has gotten to a point that it requires calling it out and building a community strategy to address it.
What is Going on Here?
In 2021, Next Stage discontinued its search service line. While the company is proud of the many chief executives it helped to source for area organizations, it was clear that the challenges facing talent recruitment were making it difficult for us to be successful with it.
One big reason was executive compensation. We published our Nonprofit Executive Compensation Study in 2020 to help the boards of area organizations understand that a significant shift in perception about base salaries, benefits and pay-for-performance needed to take place. It was difficult to help organizations trying to fill chief executive roles of a departing longtime leader when the target salary was 20-30% below market rate.
But compensation is just one of many hurdles local organziations face in attracting talent. We have a number of theories for why we think this challenge exists:
- Too Few Feeder Institutions – As I have said many times when discussing this topic, the NC Triangle region is robust with young professionals in their first decade of work who are willing to take nonprofit salaries to fight the good fight. That is because the Raleigh-Durham-Chapel Hill region’s talent base is fed by incredible higher education institutions. The Charlotte region’s nonprofits struggle to channel talent in a similar way. UNC Charlotte’s MPA program can only be counted on to do so much in a city this fast-growing.
- Nonprofit Leader Exhaustion – The lack of plentiful young professionals willing to take on Associate and Manager-level roles inside local nonprofits (and the annual churn that the competition for these roles produce) means department heads are consistently required to dip down to do the work of their absent direct reports. Over time this creates an exhaustion for the chief executive that can result in decreased productivity, which in turn challenges the organization even further to solve its talent challenges.
- Dire Need for More Professional Development – Given these challenges, smart organizations focus on retaining the talent they have and growing it into the future roles that will be needed down the road. Organizational approaches to professional development vary widely and are rarely connected to whole-organization succession strategies. And while other cities have institutions dedicated to delivering that programming – e.g. a Center for Nonprofits attached to a college or university – Charlotte lacks this as a dedicated resource across all areas of the nonprofit business model. We think this needs to change.
- Increased Competition from the Private Sector – Local nonprofits are not the only institutions struggling to sustain a workforce. We have noticed a marked increase in the number of employees at nonprofits who have left the sector behind for roles at area companies – a skimming of talent that only further challenges small and mid-size organizations downstream.
There are many other contributing factors, but these four combine to make for a very difficult environment for talent acquisition and retention.
So… Uh, Hey Josh, Got Any Tips?
It is a testament to the success of our past marketing efforts that I still get calls from board leaders and chief executives inquiring about search services. While we no longer provide it, we are empathetic to the challenges these folks face and do our best to provide support where we can. That includes featuring job openings in our well-read weekly newsletter for free.
The advice I give most board chairs or chief executives that call includes the following:
- Hire a Search Firm – Organizations that try to go it alone are far less likely to achieve success than those who hire experts. Search firms have the dedicated team, network and processes needed to contend with the great odds outlined here. Even better, consider engaging an interim executive who can give your organization the time and expertise to make good decisions on behalf of the organziation you serve.
While there are many strong firms across the state, we tend to send our referrals to Armstrong McGuire, which has differentiated itself in our market with strong placements and interim management services. - Get Relational – If you can’t hire professionals to do it for you, it is critical that your nonprofit commit human resources to relational outreach. The days of posting a position opening on jobs boards and seeing high-quality candidates come your way are over (if they ever really existed). We are hearing horror stories of organziations receiving zero qualified applicants – none, zilch, nada – through highly trafficked sites like Axios. The only way to find talent is to conduct direct outreach to both gatekeepers (people who know people) and potential candidates themselves. This is a time-consuming activity that is absolutely essential.
- Consider Recruiting From the Private Sector – The search referrals I receive most often these days are about talented people in private sector roles who are ready to make a transition to social good. I readily take these calls because I believe they are a key to solving our nonprofit talent shortfall. While compensation is often a barrier, I have increasingly encountered driven individuals who are eyes wide open about the pay divide and are called to make a career change that aligns to their value system. This has only increased since 2020 disrupted the status quo and caused people to reexamine their lives and choices. We have to be capable as a sector to receive this interest, offer training to overcome gaps in experience, and rebuild the talent bridge that served our community so well over the last four decades. Many of Charlotte’s top nonprofit leaders once upon a time left the private sector for a life of nonprofit service.
- Promote from Within – The worst time to be contemplating your nonprofit’s succession strategy is when a longtime staff leader announces a looming departure. Many nonprofit employees leave the organizations they are in because they hit a ceiling under a chief executive who is still years away from retirement. Organizations too often avoid these critical discussions, believing perhaps that it invites outcomes that are inevitable anyway. While nonprofits must be careful not to anoint successors, grooming internal talent is a smart way to ensure the organization has strong options when they need them rather than watch institutional knowledge continually walk out the door.
Building a Community Strategy
The tough thing to hear is that this is just the beginning. The talent challenges we are experiencing in the nonprofit sector will only get worse as aging Boomers exit the sector altogether and the competition for talent becomes even more pronounced. I’ve found myself using the term ‘existential crisis’ a lot lately, and while I am sometimes accused of hyperbole, I think it is an apt description.
All of these barriers to talent recruitment and retention are set against the backdrop of incredible challenges, of a community struggling to recover from a global pandemic that is having devastating impacts on families and children in disinvested neighborhoods. Economic mobility has become a focus of the private sector as a strategy to mitigate future workforce challenges of their own. But, the organizations they are counting on to implement that programming are deficient of the human resources needed to make it possible.
We need to get this on the table and start working together to solve it.
The only way to address this is via collaboration. At Next Stage, we are eager to do our part. Are you interested in joining an effort to strengthen the nonprofit sector through a community-wide talent strategy? Let’s talk.
