Defining the nonprofit sector is not simple. There are hundreds of variations in size and scope. FORVIS works with a wide range of tax-exempt entities throughout the country. Although the organizations differ in many ways, they share similar struggles.
This article—the first in a series—highlights the most prominent challenge organizations are facing at this time. Future articles will explore other major challenges and strategies organizations are developing to remain sustainable and effective.
Information is based on data from survey responses in FORVIS’ 2024 State of the Nonprofit Sector Report and feedback from thousands of participants in our webinars.
Workforce Crisis
One of the most critical and widespread challenges facing the nonprofit sector is an inability to adequately staff their organizations.
With data from nearly 5,000 representatives in the Nonprofit, Education, and Public sectors, the workforce/staffing issue was ranked as the most critical challenge for all three.
| Nonprofit Sector | Education Sector | Public Sector |
|---|---|---|
| 2,525 respondents | 956 respondents | 1,316 respondents |
| Ranked as #1 industry challenge by 36.15% | Ranked as #1 industry challenge by 42.14% | Ranked as #1 industry challenge by 28.18% |
Workforce issues include:
- Difficulty attracting/recruiting quality candidates
- High turnover
- Limited staff capacity
- Maintaining adequate staffing levels
- Shortage of available workers
Nearly three out of four organizations have job vacancies.
The magnitude of this problem was revealed in FORVIS’ 2024 State of the Nonprofit Sector Report. A nationwide survey of more than 325 nonprofit leaders found that 74.2% of responding organizations are struggling to fill positions. Health, Education, and Human Services have the highest levels of vacancies within the industry.
Possible Causes
There are six key factors contributing to the current industry workforce crisis. Some are new and others have existed for decades.
1. Pandemic
The COVID-19 pandemic is partially responsible for the current crisis. More than 1.5 million employees who worked for organizations providing direct services were laid off or had their positions eliminated.1 Since that time, the health environment and the economy have improved and most of those positions have been filled.
Yet the nonprofit sector has never fully recovered. Some employees have left the sector, transitioning to different fields. Some have returned, but with a new outlook. Having experienced personal crises, they have re-examined their priorities and have new expectations for balancing work with their personal life.
2. Employee Compensation
The nonprofit sector is sometimes referred to as the “voluntary” sector, mostly due to the earliest days of our nation when charity or community service was accomplished primarily by volunteers.
Although plenty of organizations still use volunteers, today’s nonprofits are more likely to be operated by paid staff. But the idea that doing social good should be accomplished solely by unpaid volunteers still persists. This underlying notion has led to nonprofits and government sectors frequently paying wages far below other industries. The compensation disparity has become more prominent in recent years as for-profit companies have aggressively raised pay and benefits to attract talent.
3. Funder Priorities
Another factor contributing to the nonprofit workforce crisis is funder priorities. Foundations and private donors are eager to support new programs and services but are often reluctant to provide support for indirect expenses—also called “overhead.” As a result, organizations are hesitant to allocate money toward activities that fall outside of the program/services category (including training, human resources, marketing, technology, etc.) for fear they will lose funders’ confidence and support.
Exacerbating the problem, charity watchdog groups frequently rank or score nonprofits on their program versus overhead spending ratio. The less spent on overhead the better, they say.
This pressure on nonprofits to underfund these activities has led to poor recruitment, inadequate employee training and development, and noncompetitive salaries and benefits.
4. Stress & Burnout
Nonprofits experience high turnover and low retention rates due to heavy workloads and emotional demands.
A 2022 study by McKinsey2 found that about one in four employees were experiencing burnout, and this has resulted in six times more employees wanting to quit their jobs.
In the past year, the demand for nonprofit assistance has risen as individuals and families cope with soaring inflation and other stressors. More than seven out of 10 organizations saw an increase in requests for help in the last 12 months.
The constant pressure of trying to keep pace with the demands for help and the emotional toll of working face to face with individuals in traumatic situations have contributed to burnout and high turnover.
5. Executive Transitions
This year—2024—represents a milestone. It is called Peak 65, the year when more Americans reach the traditional retirement age of 65 in the same year than at any other time in U.S. history. This means about 12,000 people every day will reach the traditional retirement age in one year.3
The well-documented retirement trend has impacted many organizations whose leaders are in the Baby Boomer age group.
6. Talent Development
According to a study by a global HR company, 74% of organizations often or always hire external candidates for leadership roles as opposed to promoting from within.4
When nonprofits fail to invest in mentoring and development, high-potential leaders aren’t given growth opportunities and don’t see a future with their organizations.
The majority (62.6%) of organizations participating in the 2024 State of the Nonprofit Sector Report indicate they have not developed a leadership mentoring program to identify and prepare high-potential employees for leadership positions.
In ongoing efforts to help nonprofit organizations stay informed on the latest trends and tackle current and future challenges, FORVIS will be releasing our “2024 Nonprofit Trends Series” over the coming months.
In this article, we’ve identified six major causes of the nonprofit industry workforce crisis. The next article in this series will explore steps organizations are taking to overcome this nationwide challenge. If you have any questions or need assistance, please reach out to a professional at FORVIS.
- 1Center for Civil Society Studies Archive, Johns Hopkins University, ccss.jhu.edu.
- 2“Addressing Employee Burnout: Are You Solving the Right Problem?”, mckinsey.com, May 27, 2022.
- 3“Turning 65 This Year? Here Are 10 Key Things to Know,” kiplinger.com.
- 4“Is Succession Planning the Secret to Employee Retention?”, ceridian.com, May 25, 2022.