Report Finds a “Crisis” of Nonprofit Workforce Shortages

Nonprofits faced significant workforce shortages last year, continuing a years-long trend that has left the nonprofit sector in a “crisis” that is hurting the individuals and communities they serve.

Those are among the findings of a new report, 2023 Nonprofit Workforce Survey Results: Communities Suffer as the Nonprofit Workforce Shortage Crisis Continues, recently released by the National Council of Nonprofits.

The report, based on a survey of some 1,600 nonprofits across the United States, builds on a 2021 survey conducted while the COVID-19 pandemic still loomed large that identified workforce shortages as a major and widespread problem among US nonprofits.

When nonprofits cannot hire enough employees to provide vital services, the public suffers.

This latest 2023 nationwide survey found that those problems persist, despite more attention paid to the problems in the past couple of years:

Collectively, the data confirm that nonprofits are still enduring a shortage of employees and, as a natural consequence, the public continues to suffer because fewer employees mean reduced capacity, longer waiting lists for services, reduced amounts and types of services provided, and sometimes a complete end of needed services (ii).

The consequences of this persistent challenge go beyond the workplace itself, the report notes, extending to the quality and quantity of services being provided by nonprofits:

When nonprofits cannot hire enough employees to provide vital services, the public suffers. Data from this survey and others show that along with increased demands for services, there are longer waiting lists, reduced services, and sometimes elimination of services. When any of those happen, the ripple effects cannot be ignored: communities lose access to food, shelter, mental health care, and other vital services on which people depend (iii).

Among the report’s key findings:

• Nearly three out of four nonprofits surveyed reported job vacancies.
• Nearly half of the nonprofits reported greater workforce shortages than before the COVID-19 pandemic, and three out of 10 reported longer wait lists for their services.
• The nonprofit jobs most commonly going unfilled are those in public-facing capacities, such as direct service workers.
• Nearly three-fourths of respondents cited salary compensation as a major challenge in recruiting and retaining employees, while 50 percent additionally cited stress and burnout among employees.

Digging into the Numbers

The most significant factor contributing to workforce shortages identified in the survey was salary compensation.

Workforce shortages themselves erode the nonprofit workforce as job vacancies shift workload burdens onto remaining staff.The report finds that salary compensation was particularly challenging for smaller organizations, namely those with an annual operating budget of less than $5 million—which, the report notes, make up 97 percent of all charitable nonprofits. Providers of human services accounted for one-third of all nonprofits reporting salary compensation as a challenge in recruiting and retaining workers.

Unsurprisingly, budget constraints were the second-most cited challenge, with an obvious line to be drawn between budgets and salary compensation. Budget constraints were particularly challenging for the smallest nonprofits, those with operating budgets between $100,000 and $500,000, with nearly three in four reporting that their budgets constrained their ability to staff their operations.

Stress and burnout, reported by half of respondents as contributing to workforce shortages, were part of what the report identifies as a “vicious cycle,” in which lack of resources and staffing causes undue burden on existing staff:

Workforce shortages themselves erode the nonprofit workforce as job vacancies shift workload burdens onto remaining staff. When an employee leaves, their responsibilities get transferred to at least one person, creating heavier loads that add stress, fueling further burnout. When nonprofits cannot hire employees soon enough, the onus on remaining employees makes it more likely that they, in turn, will leave the organization. These strains are especially heavy as the public’s demand for more services continues to rise (13).

The report also faults insufficient funding by funders and grantmakers as a contributing factor to this pattern of burnout:

Challenges arising from government grants and contracts…typically extract a personal toll on employees because agreements to provide essential services to the public often do not pay the full costs to deliver those services, impose excessive bureaucratic burdens, and cause financial strains by delaying payments (13).

Possible Solutions

Nonprofits, the report notes, have been dealing with workforce shortages for some years now, and responded to the survey with examples of practical solutions they have implemented or were considering implementing.

Nearly two-thirds of responding nonprofits had raised salaries, for example, and more than half had implemented remote work policies.

Governments routinely set artificially low limits on how much they will reimburse.

The survey identified other strategies being employed to retain or recruit employees including:

• Providing more benefits
• Awarding one-time bonuses
• Implementing DEI trainings and strategies
• Offering career advancement opportunities
• Expanding mental health benefits and wellness programs

The report also notes that survey respondents “recommended numerous systemic reforms that would help many organizations,” including “adopting a focus on equity, expanding the professional pipeline through educational programs, confronting burnout through wellness programs, and encouraging funders to cover the full costs of programs” (iv).

Notably, the most “robust” area of recommendations identified in the survey revolved around calls to reform the grantmaking processes of government entities, at all levels, that fund nonprofit services:

Charitable organizations continue to point to problems with government grants and contracting as exacerbating the nonprofit workforce shortage crisis.…Governments routinely set artificially low limits on how much they will reimburse nonprofits for salaries for employees doing the work governments have hired nonprofits to perform. These and other government-nonprofit grantmaking and contracting problems generate significant employment barriers for certain parts of the nonprofit community” (15).

Among the potential solutions highlighted most prominently in the Council’s report is the need for funders to fully fund the programs they want to see succeed:

Perhaps the most common grievance of charitable nonprofits working pursuant to written agreements with governments is that governments—which cover the costs plus pay profits to for-profit entities—regularly fail to cover the costs nonprofits incur, whether those costs are called indirect costs, overhead, administrative costs, or…true costs (31).

These “true costs,” the report states, can include everything from physical infrastructure to costs associated with reporting and compliance requirements imposed by funders themselves.

The NCN has prepared state-specific reports for the 23 states with at least 25 survey responses.

The nonprofit sector is not alone in facing workforce shortages in recent years: a relatively robust US labor market has placed strains across sectors. But, as this report emphasizes repeatedly, the consequences of such shortages for the nonprofit sector have “ripple effects” that go far beyond any individual organization, to society itself.

Fewer workers in the nonprofit sector translates to reduced services—an outcome that deprives some of the country’s most vulnerable populations of much-needed aid. Solving the nonprofit workforce shortage, the authors argue, is central to the ability of members of this sector to achieve their vital missions.