By Phil Dearing, Co-Founder at Second Day
The topic of salary came up recently while I had a few friends over for dinner. One makes $250K as a technical product manager, yet he feels considerably underpaid considering his skill set could increase his company’s revenue by millions of dollars per year. Then the conversation became a bit awkward when my female friend began sharing. She is about to receive a master’s degree in social work. She gets paid $20 per hour to help students with significant learning challenges stay in the classroom. She still lives at home, must take out more loans, and will likely never make one-fifth of what our product manager friend brings in.
This dinner conversation reflects conditions that run across the entire non-profit and social impact sectors. There is a stark difference between how nonprofits and for-profits operate. For-profits focus on growing strong, robust businesses to increase revenue year after year. Nonprofits are resource-starved and then get blamed when they fail to perform up to expectations. An investor in a for-profit startup asks, “what resources are required to do this job well?” Most foundations ask their nonprofit partner “what is the most you can do with $20,000?” In the desperation to secure funding for a competitive grant, many grantees send in proposals asking for the bare minimum required, rightly terrified that listing their true costs may result in losing the grant altogether. Over half of nonprofit internships are unpaid. Promotion tracks are slow or non-existent. Many seasoned nonprofit executive directors make less money than a 22-year-old engineer.
A Bridgespan analysis of five major foundation portfolios found that grantees verified indirect cost rates exceeded the foundations’ allocations by an average of 17 percentage points1. In terms of total cost coverage, this means that the participating funders paid an average of 88 cents for every dollar of grantees’ actual expenses, creating a shortfall of roughly $12,000 for every $100,000 worth of work executed by the organization.
Why should you care? Perhaps you feel stirred by a sense of injustice or concern about those who work for so little, make great sacrifices, yet fight so hard to stay afloat. While these are legitimate reactions, you should also care because growing, recruiting and retaining talent are the basis of growth in every sector. You should care because most people working for nonprofits will tell you that the talent drain is severe. This leads to incompetence, poor performances, and a costly turnover rate in the U.S. and around the world. This perpetuates crime, injustice, climate change, inadequate education and any other causes that concern you.
This is why I’ve committed myself to a career that invests in people as a pathway for real change. This is why organizations like Leaderosity and others invest heavily in training the next generation of leaders. This is why organizations like Fund the People work hard at changing the narrative from how we can save money to how we can curate talent and capacity.
So much energy is focused on the WHAT of social change. People are hungry or struggling with housing. International conflict or a crumbling civic culture surge to the forefront. Hateful policies are enacted or natural disasters strike. Health emergencies surge and state violence lingers. These are emergencies that rightly dominate headlines.
However, putting out fires is not enough. If we are serious about making progress as a society, we must spend more time focused also on the HOW. The capacity of the government to implement new policies quickly matters. The ability of nonprofits to attract top researchers, development officers, and managers matters. Including folks with lived experience in decision-making matters. But if current practices of underfunding people and institutions serving the greater good survive, we will not make the changes our society so desperately needs. We will continue to operate as a sector primarily driven by charity and good intentions rather than justice, solidarity, and bold actions. But if we give the resources required by investing in people and increasing the capacity of inspired changemakers, there’s no limit to what they can do.
1. https://www.bridgespan.org/bridgespan/Images/articles/ending-the-nonprofit-starvation-cycle/momentum-for-change-ending-the-nonprofit-starvation-cycle.pdf
Phil Dearing is a Co-Founder at Second Day — focused on the WHO and HOW of social change. This article is part of Propel Philanthropy’s Collaborative Media Campaign to increase appreciation, understanding, and support for broad-impact organizations.