I’d like to share a few thoughts regarding challenges in the non-profit marketplace.
Inflation rates by month in 2021 and 2022.
With the welcome news last week that inflation figures for October came in lower than expected, a little sigh of relief spawned a nice market response. The belief is that the Fed’s rate hikes are beginning to temper inflation at last.
That’s all good and well. May the situation continue to improve. It would help all of us. The reality is inflation is still high. It has been for some time, and this isn’t expected to get back to a normal range soon.
Consumer Price Index - 12-Month Percentage Change
As of October 2022
Heavy inflation makes budgeting and planning very difficult for the non-profit sector. Increased costs leaves less money for mission. And labor costs typically are more than half of a non-profit budget. In a time when many organizations are struggling to find talent, this is a complicating factor.
When it comes to building high-performance leadership and fundraising teams, we are seeing mounting challenges in the marketplace.
Issue 1:
Most non-profit organizations are not in a position to increase labor budgets by 7 and 8 percent (current and recent inflation rate) annually. Currently, many organizations are offering 2 percent cost-of-living increases. There is a gap between increased inflation and an organization’s cost-of-living allocation. This creates dynamism in several ways.
According to a survey by BDO conducted earlier this year, nonprofit organizations were increasing their compensation budgets by an average of 4.4% this year to try to keep up with inflation. But that is not enough, and talent is looking to move to a new organization where they can see their earnings increase by 9.7%, according to the Pew Research Center.
Some organizations have been able to find ways to increase salaries or promote talented team members. This seems to us to be happening more frequently in the last 6 -9 months. That’s good for the organizations that can muster retention salary increases or promotions.
The increase in promotions as an internal retainment strategy is a good one, but it creates a challenge for organizations recruiting top talent for open positions. Here are some ideas that can help:
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For employees who commute, consider gas cards, parking vouchers, or passes for public transportation.
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Look at your budget mid-year to see if it’s feasible to make a mid-year pay adjustment.
Issue 2:
Organizations moving to fill open positions (especially in the mid-level range and higher) are finding they have to offer salaries higher than they projected in order to recruit good talent. This creates budgetary pressures, and sometimes, imbalances across the organization. What more can the organization offer?
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Better benefits, i.e., more time off, flexible schedule, remote work.
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Look at ways to provide onboarding incentives and allowances.
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Create a robust bonus structure when revenues and KPIs are achieved.
Issue 3:
Finding top candidates today requires more research and outreach than ever before. Nonprofit organizations that use internal recruiters are finding those recruiters are stretched thin as they try to fill more vacancies than usual, and each vacancy is requiring more effort to complete. Too many searches are failed or incomplete. How can your organization ensure it is recruiting top talent?
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Get clarity on the position, expectations, and requirements.
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Align with a national search firm that has a robust research department, which includes up-to-date salary information for the positions you are searching for.
There are recruitment firms who can be great allies, who value your mission, who will go deeper into the market to find the right candidate, and who will do it at a better value than other firms.
The Batten Group, has a distinguished record of doing just that. Please reach out to me if you’d like to discuss trends and issues in building and retaining high-performance teams.
