Nonprofit jobs are seldom as lucrative as private-sector employment, which can hinder hiring and retention

There’s a painful truth nonprofit staff are well aware of: They’re working at a discount.

And, while advisers of New Jersey’s nonprofits said it has always been apparent to those entering the nonprofit space that it wasn’t going to be a more financially rewarding career than the for-profit space, inflation has made that truth a more difficult pill to swallow.

Keith Timko.

The upshot? It’s difficult for nonprofits to attract the best talent. Worse than that, Keith Timko of Newark’s nonprofit-consulting Support Center said, there’s a risk of contributing to the exact problem nonprofits are working against: The dilemma of the working poor.

“There’s a significant number of social service nonprofits in which employees themselves qualify for rental assistance or food stamp benefits,” he said. “And there’s something philosophically problematic about running a nonprofit that believes in eliminating poverty and, yet, people working at the organization are paid at poverty wages.”

Nonprofits, already pressed for resources, haven’t been excused from the talent battle experienced by many sectors. Nonprofits are making do, but have concerns about the future — given that they’re often being bypassed by college graduates anxious about the cost of living.

Tara Augustine, CEO and president of the Newark-based nonprofit Youth Consultation Service, or YCS, explained that the distance between nonprofit and for-profit work has become clearer to graduates as job posting websites have demanded more transparency about expected salaries.

“And, if you’re graduating out of NYU, you’re expecting to earn a living wage,” she said. “If the job description presents a wage people don’t think meets their personal needs living in the area, they’re simply not wasting their time.”

Augustine, whose nonprofit runs programs for at-risk children who have special needs and adults with developmental disabilities, is at the same time dealing with a heightened need for their organization’s services locally that hasn’t at all abated since the start of the pandemic.

It’s full circle for an organization founded during the Spanish flu. About 100 years ago, a consortium of Newark churches linked up to provide services to families in that pandemic’s aftermath, forming YCS.

Then and now, Augustine said, families need stable housing and security. In order to help provide that, it needs its workers — all 1,000 of them.

“It’s difficult work, but the great thing is that we have employees who are extremely dedicated,” Augustine said. “They also feel like they’re getting something fulfilling from the job, and that’s what attracts them to do it.”

Augustine added that their nonprofit does its best to stay competitive and offer consistent wage increases.

Dan Kennedy.

Dan Kennedy, CEO of the New Jersey chapter of NAIOP, said it’s as true for that business-focused nonprofit as it is for any philanthropic nonprofit — it can’t match private-sector professional services wages.

But, he’s proud of the fact that he hasn’t lost any employees in his first year at the helm of NAIOP NJ.

Competition from the private sector is always going to be there when it comes to new recruits. Even so, he’s optimistic nonprofits such as his will be just fine.

“Although it’s an important aspect, salary is just one variable,” he said. “We’re thinking about the entire environment of work, making sure we’re emphasizing mental health, benefits and a work environment where they’re feeling challenged and utilized in terms of their talents.”

Leadership factors

Lauren Frary spent many years in the nonprofit trenches. And she brought that veteran expertise to the private sector, to Sax LLP, as a nonprofit consultant and director of strategic business transformation.

Lauren Frary.

Having seen both sides, she’s acquainted with how often trends that are true for for-profit businesses apply to nonprofits as well.

One of those is that senior leaders at organizations are retiring in droves, and, often, there’s rarely a successor prepared to step in. Another is that it’s easier than ever for organizations trying to preserve resources to ask a part-time leader to fill certain executive roles.

Frary said the use of a fractional chief financial officer, an outside expert lending financial know-how to an organization on a contractual basis, has been embraced by a variety of nonprofits across the state. It’s a trend associated closely with startups.

“But, especially for smaller nonprofits that don’t need full-time CFOs, this is a creative alternative to realize cost savings,” she said. “If you’re a more complex organization, receiving a lot of federal and state grants and funds, you want someone managing that. But, even then, you can use a fractional CFO for big-ticket items, such as audits and board reports.”

Dan Kennedy of NAIOP New Jersey, a nonprofit commercial real estate trade association, recently decided to go with a third-party option for certain financial duties through the outsourced accounting company Bookminders.

“We no longer needed someone physically in our office to provide that service, with all the technological advances and tools available to us,” he said. “Taking that role completely remote is a cost savings for us.”

The trend goes beyond finances for nonprofits. Keith Timko, who handles executive transitions and other consulting duties for nonprofits at Newark-based Support Center, said he’s seeing more outsourced technology, human resources and communications functions as well today.

“While there might be some trade-offs to not having these roles in-house, they tend to be compartmentalized anyways,” he said. “I think enough organizations are seeing the advantages of it. I expect we’ll see more of it.”