Nonprofit Human Capital Management in the 21st Century
Disturbing trends for leadership in the nonprofit sector
Nonprofits are facing a human capital crisis, the likes of which have not been seen in the United States in many years. Though there are an increasing number of nonprofits, there is a critical shortfall in the number of new and emerging leaders for the 21st Century. Within the next ten years, much of the current senior leadership in the sector will retire, and there are grave concerns about who will replace these leaders. Very little money is spent on staff education and retention programs, so there are few emerging leaders with the skill sets and nonprofit experience requisite to effectively running an organization. Also, the salary levels and compensation packages are not rising rapidly enough to lure top level talent into the sector. Though solutions have not been identified as of yet, it is very important to understand the basic reasons for this critical need within the sector. The following are two key trends that are about to have alarming consequences for the nonprofit sector as a whole.
Trend #1: Many baby boomers are retiring, creating a leadership drain on many organizations
There are approximately 77,000,000 in the US, the generation born in the optimism and relief of the end of World War II. The baby boomers are now beginning to retire in huge numbers. This trend will have a massive impact on the nonprofit sector, where many of the heads and executives within nonprofits are from the baby boomer generation. There simply aren’t enough people available to replace them as they leave the nonprofit sector. There are 2 main reasons. The first is that there just aren’t as many people, as the baby boomer generation was one of the largest in history. Secondly, according to Cheryl Taylor, president of the Foellinger Institute, a main issue is compensation. These days, more and more people are pursuing undergraduate and advanced degrees, and thus are saddled with more debt than previous generations. This makes a career in the nonprofit sector a more difficult decision to make.
Trend #2: Not enough is being spent on recruitment and retention
Nonprofits must deal with better informed donors with greater access to information than ever before. Donors and the public can within minutes find information regarding an organization’s overall budget as well as program and overhead expenses. Many organizations have eliminated staff training and retention budgets, to improve their image to the public by spending more on program delivery. Another reason for the elimination of such programs is that turnover in nonprofits has always been high, so organizations shouldn’t invest a great deal in workers who will not stay with them longer than 3-5 years. Though reducing or ending staff retention and education programs has been effective in the short term for improving the ‘bottom line’ of nonprofits, the consequences are about to surface. The lack of staff education and training has exacerbated the move of individuals out of organizations, as they are often not equipped with the skill sets needed to succeed in their positions. More critically, with many leaders on the verge of retiring, few organizations have groomed the next generation of leaders to take over. According to “The Nonprofit Sector’s Leadership Deficit”, a recent study by the Bridgespan Group, the sector could experience a senior leadership shortfall of over 1,000,000 people by the year 2016. The study cites several reasons for this shortfall: the baby boomer retirement trends, sector growth, lack of internal training and retention programs, and the lack of career mobility of current leaders.
There are other reasons for the shortfall of accomplished and experienced leaders in the nonprofit sector. It is not clear yet if the majority of organizations will be able to identify and implement the necessary best practices to succeed despite the leadership gap. To avoid a crisis like this in future generations, nonprofits must actively educate their donors on what is required and needed to run an effective organization. Nonprofits must also bring together all their stakeholders to determine an appropriate baseline for staff training and education as well as appropriate compensation. Current levels are clearly not sufficient to maintain healthy organizations and improve the lives of Americans. The essential first step is creating a better educated public regarding the training needs of nonprofit organizations.