Dear Nonprofits: Invest in Your People, Or Fail

It’s no secret that I’ve been harping on nonprofit turnover and culture for a good while now. Just scroll through the Lean Nonprofit blog, and you’ll find example after example of my highly opinionated ranting about our high turnover, lack of succession planning and staff development, and seeming inability to hire from within.

As such, you won’t be surprised when I tell you this: If you fail to invest in your people, you, your organization, and your mission will fail. Our staff turnover rate is an indicator of our health as a sector. It tells us whether people are happy, progressing, and succeeding in their work. It tells us we are able to pay people fairly for their contributions to our mission, and that they feel at least generally fulfilled by their work. At this point, our health is just as bad as it was last year when I told you all about the Circle of Strife.

The 2016 annual Nonprofit Employment Practices Survey results were released in April, to the same groans, weeping and gnashing of teeth they elicited last year. This time, though? This time, I have to admit: I think nonprofits are truly out of their minds when it comes to handling retention and planning for the future.

Last year, our turnover rate was 19%. This year, it’s 19%. Again.

The overall turnover rate across all industries in 2015 was 16.7%. This difference is meaningful. Our turnover rate is more than 2% higher than the overall rate (which includes us, mind you).

Incidentally, this year, 84% of nonprofits report that they do not have a retention strategy.

Let that sink in.

OK. Thoroughly horrified? Good.

Over the next year 76% of nonprofits say they don’t plan to invest in taking the time to create a formal retention strategy.

Dude! Do you have any idea how much this costs you every year? Do you realize how many donor dollars are flushed down the proverbial toilet every time staff leaves your organization?

Let’s start here.

Center for American Progress produced a study in 2012 that pegs turnover costs at four different levels. 

For jobs paying $30,000 or less, the cost is 16.1% of the annual salary.

For jobs paying $50,000 or less, the cost is 19.7% of the annual salary.

For jobs paying $75,000 or less, the cost is 20.4% of the annual salary.

For executive jobs and those requiring specialized skills and experience, the cost is upwards of 213% of salary. This is not a typo. Two-hundred-thirteen freaking percent, you guys! That’s a lot!

So. Let’s come up with a nice, simple scenario. Imagine you run a nonprofit that has 10 employees. If you have a turnover rate of 19%, that’s about 2 employees who leave each year. Now, if that’s the lower wage program employee, which is the hardest to keep, assuming their salary is $32,000 a year, you’re looking at about $12,608 in hidden costs. That’s bad enough, in and of itself. But! It gets crazier. If the Executive Director and Development Director both left, and they both make about $85,000 a year, say, you’d be looking at $362,100 in hidden costs to replace these positions.

These numbers are drastically different - but here’s what they have in common: they are significant sums of money; and, they are hidden costs. Turnover stays under our radar because we don’t actually write a check to pay this expense. We don’t have to fill out any forms to create a purchase order to cover the cost of paying for turnover costs. We don’t think of it as real money. The only problem with this way of thinking is: IT IS REAL MONEY.

What’s the biggest way we can steward donor dollars by making changes right now, today? Handling our turnover problem. We need formal retention plans. We need to invest in our people. We need to take our people seriously and pay them what they’re worth. We need to ensure that they receive the recognition, training and support they need in order to be successful. We need them to want to stay!

Retention is a development issue. It’s a responsibility issue.