Thriving nonprofits need thriving talent. Nonprofits must often compete with for-profit and other nonprofit institutions to attract and retain employees who can deliver on their strategic goals. Even as they face complex challenges, nonprofits can provide distinctive environments for high-performing, mission-driven talent.
Nonprofits pursuing the greatest short- and long-term impact should build on these strengths and focus on improving organizational health to retain talent and sustainably advance their missions.
The benefits of organizational health
Attracting and retaining high-performing talent is important for all organizations. However, nonprofits have a unique imperative to deliver long-term social impact amid complex social, environmental, and resource constraints that make talent retention even more critical.
Attrition can be costly to lean nonprofits, diverting resources from driving programs to managing turnover. There is risk of losing institutional knowledge, community relationships, and beneficiary trust when staff departs. These dynamics can also reinforce a cycle of burnout.
Our 2022 research found that organizational health—an organization’s ability to align on strategic goals, execute with excellence, and continually renew itself—has a significant impact on retention for nonprofits. Staff at the least-healthy nonprofits are about 2-3 times as likely to be at risk of leaving their current organization within the coming year as peers at the healthiest nonprofits (Exhibit 1).
Organizational health is tied to staff’s perception of how well the nonprofit delivers impact. Within the healthiest nonprofits, 91% of talent on average believe their nonprofit’s programs are “extremely effective” at achieving its mission, compared to 60% in the least-healthy ones. When talent doesn’t believe this, they are 10 times as likely to plan to leave the organization in the coming year as peers who do.
Poor organizational health also signals a talent drain from the sector. Staff in the least-healthy nonprofits are almost twice as likely to be at risk of leaving the nonprofit sector altogether in the coming year compared to those in the healthiest ones (19% vs 12%, respectively). This mirrors patterns during the height of the pandemic. It is a loss that the nonprofit sector—and the communities it serves—cannot afford.
The six power practices
Nonprofits can improve organizational health by regularly actioning several practices. While there are 52 management practices that determine health in nonprofits, our 2022 research found six “power practices” that have an outsized influence (Exhibit 2). Scores on these power practices are more predictive of being in the top or bottom quartile for organizational health. These practices should be reinforced in any nonprofit.
Across all six power practices, the least-healthy nonprofits underperform the healthiest ones by nearly 40-55%, suggesting an opportunity for nonprofits with lower scores in these areas to learn from peers who do well (Exhibit 3).
Described below, these six practices can be improved through structured, consistent efforts to embed them into nonprofits’ ways of working. In many cases, nonprofits can strengthen these practices without additional resourcing.
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Clear mission and strategy
- 1. Strategic clarity: Creating a plan with specific goals, targets, and milestones that is tied to the vision.
- 2. Clear mission: An organizational mission is clearly understood and drives daily work.
Example: A nonprofit conducts a yearly organization-wide “visioning exercise” to discuss where they see the organization in five years and how they will measure impact. The exercise incorporates creative activities and group discussion. Program and support team staff attend to ensure inclusion and alignment. External experts are often invited to introduce new perspectives.
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Empowering and inspirational leaders
- 3. Inspirational leaders: Exemplifying what’s valued, providing praise, and generating meaning for employees.
- 4. Personal ownership: Feeling personally obligated and invested in achieving performance objectives.
Example: A nonprofit introduced five-year professional development plans that enable staff and leadership to have structured, forward-looking discussions about staff’s aspirations and passions. Professional development plans helped reinforce ownership mindsets among talent, who could see how their development links back to delivering the organization’s goals.
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Efficient decision-making processes
- 5. Decision processes: The organization’s decision-making processes help the organization reach the best decisions efficiently.
Example: A nonprofit developed its own unique project management methodology with a well-defined governance structure and decision-making processes to enable the organization to act nimbly on new opportunities.
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Creative work environment
- 6. Creative and entrepreneurial: Protecting time to support creativity and encourage initiative taking.
Example: A nonprofit employs design-thinking principles and develops multiple “prototypes” for solutions to various problems. Time is dedicated in monthly meetings to discuss the previous month’s learnings and new ideas from the team. Ideas are refined through discussion to decide if the organization wants to “prototype” a solution going forward.
The path forward
Organizational health matters for talent retention in the nonprofit sector and can help nonprofits become better at doing good. Nonprofit leaders have a no-regrets opportunity to improve organizational health by focusing on these six power practices. Doing so can enable nonprofits to better retain talented, mission-driven staff so they can best serve their communities.
The authors wish to thank Anne-Marie Frassica, Sarah Gitlin, Nasrin Nouri, and Andrea Olmos for their contributions to this post.