When the Money Runs Short: How Underfunding Quietly Erodes Nonprofit Culture.

They wanted to lead a solution or change in their community, or whatever their nonprofit stands for. But leading scarcity becomes what we spend most of our time doing. Leading staff to ration their time. Raising money to ration dollars. The Structural Trap Nobody Talks About: Honestly giving employees less praise and recognition than they deserve. Your nonprofit starts to become something different than you thought you were building. It’s no secret that nonprofits receive restricted dollars. Funders provide dollars for a specific cause or population.

They will never give your nonprofit enough to pay your staff who oversee that program. There isn't enough money to pay for your supervisors who make sure your staff doesn't burn out. Or money to hire someone to help with HR issues before your staff member leaves. Many nonprofits try to lower their administrative percentage. I'm sure most have heard of the "Overhead Myth". What Underfunding Actually Does to Your People: Funders and donors judge your nonprofit on how little you spend on overhead. Lower overhead percentages suggest your nonprofit cares more about the cause and that staff and operations aren't as important. We have been working to change the mindset that low overhead equals a successful nonprofit. Some funders have come around to this idea, but many nonprofits are capping their indirect costs in their grants to remain competitive. This creates more issues than we know about. Your nonprofit starts to starve. You aren't paying your staff enough to retain them. You can't fill positions because you have to use your restricted funds for your program. People start to burn out. Staff turnover increases, and your nonprofit suffers from this starvation. There will always be more to do than money. Your program manager will have to take on the duties of the position you couldn't fill. Your development director will have to do everything their development coordinator does, plus maybe more. Your Executive Director will become your HR department and oversee all of your employees’ needs. Your staff will keep picking up the slack and feel like they should be doing more. When You Cannot Reward the Work, Trust Breaks. At some point, it becomes normal for your employees to be overworked and take on too much. Your employees won't be getting paid market-rate salaries and benefits to match. If they have a bachelor’s degree or higher, they are probably underpaid compared to their private sector counterparts. Once they start feeling this and their significant others notice. They will want more recognition from their organization. After a while, they will start to feel that your organization does not appreciate them. They will tell you that they love working for the mission. 

They love helping your clients. But something will feel different. If your organization gives small bonuses and recognition for big achievements, your employees will start to feel undervalued. They put in hours overnight and on the weekend to get your new program off the ground, and you reward them with a $500 bonus? That will send your employees a message that your organization doesn't value their time. Same goes for promotion. If your organization doesn't have the money to promote staff to higher levels, they will feel underappreciated. The Quiet Costs That Show Up Later: Either they leave your organization, or they stay but aren't as engaged as they once were. Nonmonetary recognition, when your organization is short on budget, can do more harm than good. Giving your staff pizza after they went above and beyond to reach a goal can make them feel unappreciated. When your nonprofit starts to lose staff. it comes with a high cost. You will be losing valuable information that took your employee time to learn. Your staff will take that with them when they leave. Your employees will burn out, and you will see the effects. They will start missing deadlines and have less patience.

Your employees won't come to the table with new ideas. They will just go with the flow and accept the information they are given. Staff will begin to resent admin and vice versa. Both sides will feel the other isn’t doing their job. Your program staff will think admin doesn't understand what they deal with day to day. Your admin staff will feel that their work isn't important because it’s labeled as overhead. Once your employees start to feel guilty for working for your organization, things can start to fall apart. Managing Scarcity Instead of Mission: They may feel they shouldn't ask for a raise because clients are suffering. Once this starts to happen in your organization, it’s time to act. If your organization is going through these issues, your employees will become distracted. Your Executive Director will be worried about having money to keep the lights on. Your board will be focused on how much money your nonprofit has in the bank. Your supervisor will not have time to supervise their staff properly. All of these will distract your employees from your mission. What You Can Actually Do: You can take steps to build your organization's culture when you are facing scarcity.

Make sure that your employees know what they are being paid. Create a salary scale you can explain to employees so they understand why they are paid that amount. Even if your organization does ’t have a large budget, it will help employees understand why they are paid what they are. If your organization doesn't have the budget to recognize your employees financially, find other ways to show them you value their time and hard work.

Maybe let them work from home or give them more flexibility in their schedules. Ask your board to help raise funds for your nonprofit. Many board members know people who can help increase your unrestricted funds. Educate your board members on the starving cycle your nonprofit is in. Talk with your funders about how much money you need to run your organization. Many funders will allow you to increase your indirect costs or give you more unrestricted funds. You just have to ask. If your employees are overloaded, find ways to redistribute that work to other employees. Make sure that everyone knows what is going on with your organization. Organizations that hold culture together through scarcity are ’t the ones that pretend scarcity is ’t there. They name it, share it, and refuse to let it become the only story being told.