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Published in Nonprofits

Salary competition adds to staffing challenges for nonprofits

BY Sunday, February 13, 2022 06:51pm

Staffing shortages have become commonplace across industries over the past two years, but the nonprofit sector has unique workforce challenges when it comes to salary competition with the for-profit sector.

Despite the labor challenges posed by the pandemic and economic pressures caused by inflation, West Michigan’s economy has remained strong, which can pose difficulties for nonprofit staffing, said Keith Hopkins, founder of Ada-based Hopkins Fundraising Consulting LLC. 

Faworski, Hopkins, Kuhn

“Anytime the economy’s really strong, some of the better employees get cherry picked by the for-profit world that can offer higher pay or better benefits,” Hopkins said. 

That competitive pay and benefits isn’t always an option for nonprofits that are limited in ways to raise revenue.

About one-third of U.S. nonprofit organizations have a job vacancy rate between 10 percent and 19 percent, according to a National Council of Nonprofits survey of more than 600 nonprofits during the last half of 2021. More than a quarter of nonprofits reported job vacancies between 20 percent and 29 percent, and another 16 percent reported a vacancy rate of more than 30 percent. 

The survey found 79 percent of nonprofits noted salary competition as a challenge to filling job openings. In addition, the inability to find child care, vaccine policies, stress and burnout are also causing staffing issues. 

Kalamazoo Loaves & Fishes Inc. has struggled with staffing amid fluctuating food needs throughout the pandemic, with a recent uptick in demand in services beginning in September because of increasing food costs and expiring unemployment benefits, Associate Director Greta Faworski said. 

The nonprofit tackles food insecurity in Kalamazoo County. The increase in demand it’s experiencing comes while competing with other organizations for workers.

“People can go really anywhere and make a significant wage right now,” Faworski said. Like other industries, Loaves & Fishes has had difficulty finding qualified staff or people who want to follow through with an interview after applying, she added.

‘Great need’ remains 

Meanwhile, for-profit companies can raise prices on their goods and services to in turn raise wages and attract employees. When providing free services, nonprofits have to consider adjusting their existing budget or fundraising to compete, Hopkins said.

The New York Times reported late last year that while nonprofits cut fewer jobs during the pandemic, rehiring struggles persist. Nonprofit employment was nearly 5 percent lower than its pre-pandemic level, while for-profit employment was 1.5 percent below pre-pandemic levels, according to the report. 

Kelley Kuhn, president and CEO of the Michigan Nonprofit Association, noted that nonprofits’ operating funds have often declined during the pandemic. Some nonprofits have seen record years for fundraising, while others are continuing to struggle. A majority of nonprofits in Michigan are also smaller in size, leaving their budgets more restricted. 

“These are grassroots organizations, these are organizations led by people of color, and those are organizations that are not rebounding as quickly as some of the other ones,” Kuhn said. “So, there still remains a great need of support for nonprofits.”

The Michigan Nonprofit Association has surveyed its members throughout the pandemic, finding that office administration roles largely accounted for the staff losses because of a lack of funding, Kuhn said. At the same time, demand for services from those in need increased during the pandemic. 

“That is critical because those are key positions to providing service support to those in need,” Kuhn said. 

Nonprofits also reported a decrease in volunteers, which was largely because of safety concerns during the pandemic. Ultimately, the timeliness of delivering services to people in need was negatively affected between the loss of workers and increased demand for services, Kuhn said.

“Nonprofits got creative and certainly made lots of pivots,” such as forming new community partnerships, Kuhn said. “But I think as the pandemic has continued on, we’re beginning to see the impacts of what’s happening to the human capital.”

The pandemic forced Kalamazoo Loaves & Fishes to completely change its workflow, Faworski said. The nonprofit previously hosted pantry sites where community members could select their own food, but the service changed during the pandemic to involve more pick up and delivery orders. 

During the stay-at-home order in March of 2020, Loaves & Fishes lost longtime volunteers, which required staffers to run the new model, Faworski said. The temporary COVID model has become the new normal for Loaves & Fishes, she added. In addition to more duties for staffers, previous volunteers who are unable to do the physical work of making deliveries or heavy lifting haven’t returned. 

Lifestyle changes, such as returning to school and moving closer to family, also prevented some staffers from returning to work, Faworski said. 

One solution for nonprofits to increase operational funds is to build their endowments via donations to use when needed. But this can be a hard sell, Hopkins said. Nonprofits have to find donors who see the long-term view, he said. 

“When you go to a donor and say, ‘We’d like you to give us some money so that we can put it into our endowment account,’ a donor will say, ‘Well, that’s nice, but I’d like my money to go to use right now,’” Hopkins said. Hopkins said. 

Building endowments can be a bigger challenge for newer nonprofits that may scramble to save money to pay employees more and retain them, Hopkins said. The COVID-19 pandemic also strains nonprofit-donor relationships when fundraising efforts in person might be more successful than those done remotely, Hopkins added.

While any employer will have to consider measures — such as higher pay or benefits — to satisfy workers, nonprofits may have one advantage, Hopkins said.

Nonprofits can say: “We’re not just about money here, we’re about helping people, changing lives (and) providing key services,” Hopkins said. 

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