As part three of our series, we turn to people. Money may be the traditional first and most accurate answer when asking what is worrying nonprofit leaders; however, staffing and talent are close behind. In most organizations, these two topics are really the same issue.

Nonprofits do not execute their missions in the abstract. They do it through people: executive directors, program staff, development professionals, finance teams, case managers, teachers, clinicians, administrative staff, volunteers, and board members. When those people are stretched too thin, burned out, inexperienced, or simply gone, the organization and its mission suffer. Lack of financial resources and investment directly bears on the attraction, development, and retention of talented staff members.

Over the last year, we have heard a consistent theme from our nonprofit clients: “We need excellent people. We cannot always pay what the market demands and struggle attracting and retaining talent. On top of that, the work is getting harder.” That can be a challenging triad to manage.

The Private Sector Competition Problem

Nonprofits have always competed with the private sector for talent. The degree of competition and the breadth of the positions affected are maybe a little broader now. Nonprofits have often hired less experienced personnel at somewhat of a bargain and then faced salary competition only to lose some of these people to for-profit employers. From an anecdotal perspective, we are starting to see some of the same salary and retention challenges at more senior levels within nonprofits. Your nonprofit should not sleep on the risk of losing C-suite-level personnel and senior employees who are highly skilled in finance, human resources, information technology, development, compliance, communications, data management, and program leadership to better resourced for profit institutions.

Traditionally, individuals who rose to those levels within the nonprofit sector tended to stay attached to such mission driven organizations, but you cannot assume the past is prologue here. While nonprofits may be able to recruit individuals who are mission-driven employees for less than a private sector salary, that strategy has its limits. Employees still have rent, mortgages, student loans, childcare costs, elder care obligations, transportation costs, and health care concerns. Mission matters, but so does employee compensation.

We are seeing this pressure most acutely in roles where the employee has a readily marketable skill set outside the nonprofit sector. A well-qualified controller, HR director, grants manager, cybersecurity professional, or operations leader may love your organization’s mission, but if the private sector offers materially higher pay, more predictable hours, better benefits, and less emotional wear and tear, nonprofits are at risk of losing the prospect to a different employer.

This does not mean nonprofits must simply throw in the towel. It does mean, however, that boards and C-suite leaders need to be honest about the market competition they face. “We are a nonprofit” is not a compensation strategy, nor is it a panacea in today’s labor market.

The Other Side of the Current Market

There is another side to the story. Many younger employees are looking for meaningful work. Many are openly skeptical of purely corporate career paths and want to see a connection between their work and a larger social good. That can be a genuine advantage for nonprofits. In some cases, nonprofits may be seeing a deeper bench of younger, hungry employees entering the workforce with energy, adaptability, and a willingness to take on responsibility early.

We are also facing an economic environment where younger people just starting employment are facing real headwinds in securing jobs. Whether this current state of affairs is a side effect of AI or a symptom of broader prevailing market trends, the economic data points to this being a hardcore reality as opposed to just anecdotal vibes.

Nonprofits have often reached to younger employees to bridge their hiring needs. Nonprofits often provide direct access to leadership, broad exposure to operations, and meaningful responsibility earlier than larger private companies. That can be a recruiting strength. “Come here and matter” is a real message.

To make this strategy work, your organization’s culture needs to be built in this direction. If a nonprofit recruits young professionals with the promise of meaningful work, but then gives them unclear direction, weak supervision, poor technology, chaotic funding, constant crisis management, and no career pathway, that promise will collapse quickly. Younger employees may be mission-driven, but they are not endlessly patient. Nor should they be.

The organizations that will do best are the ones that treat early-career employees as an investment, not as cheap labor. Training, mentoring, clear performance expectations, visible advancement opportunities, and basic managerial competence matter enormously to making this strategy viable.

Brain Drain and the Leadership Gap

Another issue we are seeing across the sector is a generational shift in leadership. The silent generation and baby boomers have carried enormous institutional knowledge inside many nonprofits. Some founded organizations. Some professionalized them. Some built donor networks, government relationships, program structures, and board cultures over decades.

As those leaders retire or reduce their involvement, a great deal of history can walk out the door with them. That is not a criticism. It is a reality. Many of these leaders have given years, often decades, of service. The issue is whether the organization has planned for the transition. In many cases, it has not.

Compounding this issue is the smaller size of generation X compared with the boomer generation. There are simply fewer mid-career leaders available to absorb all of the senior roles opening up across the sector. As a result, younger employees are often being pushed into larger roles faster. That brings opportunities and risks.

On the opportunity side of the equation, new leaders may bring fresh ideas around technology, communication, workplace culture, collaboration, data, and program delivery. They may question assumptions that should have been questioned years ago. They may be more comfortable building partnerships or using tools that older leadership never fully adopted.

The same dynamic opportunity for change brings risk. Some emerging leaders have never managed through serious economic turbulence. Look around your organization: what percentage of your workforce began working after the last economic downturn? There is an entire cohort of workers that has never lived through a real downturn, COVID short-term blip notwithstanding.

Most of these employees will have never had to make hard layoff decisions. They may not have managed grant disruptions, dealt with aggressive government oversight, handled board conflicts, or navigated public controversy. Some have not yet developed the judgment that comes only from having lived through difficult periods. That does not mean they cannot lead. It means boards must stop pretending succession will take care of itself and develop the talent and systems to manage that process.

Succession Planning Cannot Be Ceremonial

For nonprofits, succession planning should not be a board document stuck in a binder that gets updated once every few years and ignored. It should be a live operational issue. Boards should be asking regularly:

1. Who are the likely successors for key leadership roles?

2. What institutional knowledge is concentrated in one or two people?

3. Which donor, grantor, government, or community relationships are dependent on a single individual?

4. What training do emerging leaders need now?

5. What happens if the executive director, CFO, development director, or program lead leaves with 30 days’ notice, or less?

Those questions are not academic. They are risk management. We also encourage nonprofits to think beyond the CEO or executive director role. The quiet departure of a finance manager, grants administrator, HR lead, or longtime program director can be just as destabilizing. In some organizations, those are the people who actually know how everything works.

Burnout Is Now a Governance Issue

Burnout is not just an HR problem. It is a governance problem. When employees are operating in constant crisis mode, mistakes increase. Compliance suffers. Customer service suffers. Program quality suffers. Managers become reactive. Good employees leave. Remaining employees absorb more work. Then they leave too.

Nonprofit boards should be careful not to romanticize sacrifice. There is a long tradition in the nonprofit world of praising employees for doing more with less. Sometimes that praise is sincere. Sometimes it becomes a substitute for solving the actual problem. If an organization’s staffing model depends on employees regularly working beyond capacity, the model is broken.

Economic challenges and performance pressure are real. Many nonprofits are facing increased demand for services, uncertain funding, higher costs, and greater oversight. But those realities make burnout more dangerous, not less. Leaders need to manage around the threat. That may mean narrowing programs. It may mean pausing initiatives. It may mean saying no to grants that do not actually cover the cost of performance. It may mean investing in administrative capacity that donors do not find exciting but that the organization badly needs. It may mean having hard board conversations about what is sustainable.

Retention Is About More Than Pay

Compensation matters. We do not want to be dismissive of that. But employee retention is about more than just pay. We see nonprofit employees more likely to stay with an organization when they have competent supervision, reasonable flexibility, clarity about work priorities, a voice in decisions that affect their work, a realistic workload, professional development, basic respect, and confidence that leadership is telling the truth about the organization’s condition.

The last point is more important than it might seem. Employees can often handle bad news, but they do not handle spin well. If your organization’s funding is uncertain, say so. If the organization may need to restructure, communicate that carefully but honestly. If the organization’s mission is changing or employee performance expectations are in flux, explain why. Employees are adults. Treating them that way is usually the better retention strategy.

Employment Law Still Applies in Crisis Mode

One final legal point. Staffing pressure does not suspend employment law compliance. Nonprofits under stress still need to properly classify and pay employees under federal and state wage-hour and wage payment laws, manage overtime, handle leave and accommodation requests, prevent workplace harassment and discrimination, document performance issues, and conduct terminations carefully. The risks of an organization of making a legal mistake proportionately increase when organizations are moving fast or operating under financial stress.

Layoffs, furloughs, reduced schedules, reorganizations, and leadership transitions all carry legal and practical consequences. The same is true when volunteers, contractors, interns, or temporary workers are used to fill HR gaps. The desire to keep the mission moving is understandable. But good intentions are not a defense to wage-hour violations, discrimination claims, retaliation claims, or contract disputes.

Closing Thoughts on Staffing and Talent

The nonprofit sector continues to face some real challenges in attracting and maintaining talented employees. The organizations that fare best will be the ones that tell their workers the truth about compensation, build leadership pipelines, manage burnout directly, preserve institutional knowledge, and treat staffing as central to mission rather than as overhead to be minimized. That requires meaningful and ongoing board attention. It requires executive discipline, and it requires investment. And, in many organizations, it requires a cultural shift away from heroic exhaustion and toward sustainable workforce performance expectations.

For more information or help with nonprofit workforce strategies, training, or legal compliance, please feel free to reach out Timothy Hughes at (703) 526-5582, thughes@beankinney.com or Doug Taylor, at (703) 526-5586, rdougtaylor@beankinney.com. We work with nonprofits throughout Virginia, Maryland, and the District of Columbia.

This article is for informational purposes only and does not contain or convey legal advice. Consult an attorney. Any views or opinions expressed herein are those of the author and are not necessarily the views of the firm or any client of the firm.