The Case for Investing in Nonprofit Talent

Adapted from materials created by Jessica Bearman, Mark Sedway, and Rusty Stahl for the Talent Philanthropy Toolkit (Version 1.0)

Between 1992 and 2011, according to research by Talent Philanthropy, foundations devoted less than 1% of grant dollars toward supporting the recruitment, retention, compensation, development, or retirement of nonprofit talent. In fact, the signals grantmakers send often encourage nonprofits to deemphasize staff development and stress programs and projects instead.

Given the power differential between funders and fundraising nonprofits, it will take new attitudes and actions from the funding community to turn this cycle around.

Why Talent Investment Is Important

Talent Philanthropy has spoken with hundreds of nonprofit and foundation leaders to understand their perspectives on investment in nonprofit talent.

What are the top-cited reasons for investing in talent?

• Maximizing results—Intentional investment in employees is the essential ingredient for high morale, productivity, and execution of program strategies.

• Ensuring long-term sustainability—Today’s respected corporations and business thinkers consider investing in employees as essential to long-term mission success and financial viability. This is no longer a question in the business world, but a proven fact.

• Creating great places to work—Investing in talent shapes organizational cultures that build high staff morale, engagement, satisfaction, and performance.

• Harnessing diversity—The United States is becoming more diverse, with people of color becoming the majority a few decades from now and more women and LGBTQ people in the workforce. But the composition of nonprofit executives, boards, donors, and staff is not keeping up with this reality. Lack of attention to these changes is guaranteed to leave nonprofits less attractive to workers and—in the long term—irrelevant.

• Promoting intergenerational collaboration—Career and economic conflicts among the generations are on a low boil in the nonprofit workplace. When we address this conflict, Baby Boomers, Generation Xers, Millennials, and soon Generation Z will increase morale, clear communication, and productivity.

• Clearing the leadership bottleneck—Baby Boomer nonprofit executives are struggling with retirement in part because of the failure to invest in nonprofit talent. They fear that their funders may take a wait-and-see approach rather than investing to help ensure healthy executive transitions, creating a dangerous instability in cash flow.

• Expanding the nonprofit workforce’s value to society—Nonprofits are job-creators, employing 10% of the total workforce. Nonprofit workers also produce immense civic goods and services, far beyond what can be easily measured. As we invest in increased performance, impact, and sustainability among nonprofit professionals, we fuel both the economic and social health.

Overcoming Old Myths

Some funders avoid investment in grantee talent based on myths and misnomers about how the social sector operates. These older ways of thinking are beginning to break down as talent-investing is now seen as a best-practice in philanthropy.

Here are some of the old myths and new responses:

Myth: There is no evidence of the return on investment for funding grantee talent.

The literature on business management shows statistically significant gains in performance, profit, and sustainability for every investment businesses make in their employees. Although there is not the same level of research in the nonprofit sector, recent evaluations of funding efforts by the Barr Foundation, Blue Shield of California Foundation, Durfee Foundation, Haas Jr. Fund, Irvine Foundation, Virginia G. Piper Charitable Trust, and Rasmuson Foundation show that investments in grantee talent yield significant value for communities, nonprofits, and the funders themselves.

Myth: It’s more sustainable to buy programs than to build institutions.

Nonprofit programs and institutions are only as good as the people staffing them, so investing in grantee staff can be a smart investment in better programs and better organizations.

Myth: It’s best to fund programs at the lowest operational cost.

The real costs of running quality nonprofit organizations and programs are higher than project line items, and personnel costs are the highest item for most organizations and programs.

Myth: Nonprofit staff costs are overhead; we are only interested in funding programs and services that directly impact the community.

The costs of a high-performing staff are essential to high-performing programs and cut across all the columns in a budget: program, fundraising, and administration.

Myth: If a funder invests in a nonprofit leader who leaves the organization, we’ve wasted the investment.

Staff naturally come and go from nonprofits. The more an organization is able to support its team members, the more it is able to recruit and retain excellence, build high performance, move underperformers out, and enable staff alumni to lead in other institutions.

Questions for Grantees and Yourself

It’s not easy for nonprofits to talk about their talent investment needs with funders. They may assume that you won’t or can’t assist with talent investments because nothing relevant is mentioned on your website, grantmaking guidelines, application questions, or proposal budget template. They may see talent development as a luxury that comes only after everything else is funded. Or they may feel that funding is in jeopardy if they appear to lack capacity.

The best time for this conversation is when other funding is not in jeopardy—either because you are approaching the nonprofit solely about talent funding or because you’ve already invested in them organizationally or programmatically and are considering the addition of talent funding.

The most important question you can ask your grantee (or potential grantee) about funding is this: What do you and your team need organizationally, professionally, and personally to have the most impact in your work?

Then, to dig more deeply, try these:

• Tell me about your current organizational structure and talent. Where do you feel strongest? Where do you feel you could grow?
• How do your staff learn how to be most effective in their work? Are there internal learning opportunities? External learning opportunities?
• How do you assess staff performance? Are there ways you want to grow or change your current performance management system?
• How do you reward excellence or address poor performance?
• As the organization’s leader, how do you get your professional learning?
• What type of talent investment would make the biggest difference to your ability to achieve your objectives?

Equally important is exploring your own orientation, practice, vision, and next steps around investing in talent, including your own talent. How do you respond to the following questions:

• What do we believe are the benefits to investing in nonprofit leaders and staff?
• What assumptions does our organization make about talent in nonprofit organizations?
• To what extent and in what ways do we already invest in nonprofit talent?
• What has worked well in the talent investments we’ve already made and what has been challenging?
• What do we already know about the talent investment needs of our nonprofit grantees or partners (current and future) and how will we learn more about these needs?
• Given our current funding structure and priorities, what are the potential challenges of including talent investments within the grants we make?
• What is our vision for building our investment in grantee talent?
• What form(s) might our talent funding take?
• What else do we need to learn to move forward?
• Who else needs to be involved in this conversation for it to succeed?

The case for funders to invest in nonprofit talent is also a case for you to invest in your talent. Doing so will likely demonstrate the positive effects of talent investment on performance and impact, and lead you to feel more confident making talent investments in your grantees and championing them in the sector.

Chief Program Officer Hanh Le is our learning maestro, leading our Programs and Services Team and directing our internal learning efforts. Follow Hanh @HanhLeDC and Exponent Philanthropy @exponentphil. 

Rusty Stahl founded Talent Philanthropy to ensure a rising tide of philanthropic investment lifts all boats in the nonprofit workforce. Follow Rusty @RustyStahl and Talent Philanthropy @fundthepeople.