Nonprofit employee retention is a critical component of running a successful organization. Retaining employees empowers nonprofits to grow sustainably and drive greater impact over time.
But nonprofits are notoriously busy and operate on tight budgets. Amid the day-to-day concerns of delivering programming to constituents, raising funds, and stewarding donor relationships, internal priorities like staff retention can all too easily fall by the wayside. This can present major challenges, as poor retention can trigger cascading problems across all areas of a nonprofit’s operations.
Strengthening your organization’s ability to engage and retain talented staff members can (and should!) be viewed as an important investment in your mission.
This guide will discuss the nonprofit employee retention best practices and background you need to begin improving your organization from the inside out. Here’s what we’ll cover:
- Understanding nonprofit employee retention: FAQs
- The current state of retention in the nonprofit sector
- Essential elements of an employee retention strategy
- Key nonprofit employee retention strategies
- How experts can help with your retention plan
Understanding Nonprofit Employee Retention
What is employee retention?
Employee retention refers to an organization’s ability to retain employees without losing them to voluntary or involuntary turnover, also called employee churn. Retention occurs when an employee chooses to stay with an organization or is not fired from one period of time to another.
How is retention measured?
Calculating your employee retention rate allows you to measure your retention in order to make decisions and improvements over time. This metric gives you the percentage of a team that was retained over a specified period of time, excluding any new employees who were hired during that period.
Use this formula to measure your nonprofit’s employee retention rate:
((Number of employees at the end of the period – Number of new employees hired during that period)/Number of employees at the start of the period) X 100
You can calculate your retention rate for the entire organization or for smaller teams within it. In fact, focusing on specific departments could help you pinpoint specific problem areas or successful strategies that could be expanded. For example, a fundraising department of 15 team members may have ended the year at 14, with 2 new members joining along the way. The departmental employee retention rate would then be 80%. The organization’s overall retention rate might be much lower, but they could examine the fundraising department closely to identify retention strategies that are working and could be applied to other teams.
Why does employee retention matter?
Employee retention matters for all organizations for a few important and interconnected reasons:
- Employee turnover is quite costly. When an employee departs your organization, you immediately lose their productivity and are faced with the overhead expenses of recruiting and training a new employee. Even after hiring a new team member, it takes time for them to reach full productivity. In fact, according to a study from The Chronicle of Philanthropy, it takes four years on average for fundraisers to reach their full potential in their roles. This creates significant opportunity costs compared to what a more experienced team member could accomplish during that time. Additionally, the departure of a fundraiser with a tenure of more than four years could cost the organization as much as 5x their salary in lost revenue.
- Poor retention harms overall employee engagement, culture, and brand. Simply put, being known as an organization where people are excited to work is a major benefit, both internally and externally. Engaging workplace culture and effective retention strategies will reinforce one another. A positive employer brand can translate to an improved overall brand image in the community, helping you secure new partnerships and donors over time.
- Strong retention drives better organizational results. Looking at the inverse of the negative outcomes described above, prioritizing employee retention brings major benefits. It can help your nonprofit drive greater impact and become more financially resilient. Experienced staff members who excel at their jobs, reduced turnover costs, and a positive reputation in the community can all work together to strengthen your nonprofit’s bottom line.
Why is staff retention especially important for nonprofits?
Staff retention is especially critical for the long-term health of nonprofit organizations. Why?
- Nonprofit budgets are often very tight. 88% of nonprofits operate on less than $500,000 annually, often leaving little room for non-essential program and overhead costs. Even organizations with larger or more flexible budgets can struggle to adjust to the lost productivity and increased internal overhead that result from employee departures, often forcing difficult decisions in order to balance program and staffing needs. Understaffing itself can then lead to poorer retention outcomes and harm your organization’s morale as team members who remain at your organization have to take on additional responsibilities, which can lead to burnout and turnover.
- Nonprofit work is uniquely relationship-centric. Nonprofits thrive on building relationships with constituents, donors, businesses, funders, and other partners. When a fundraiser or program coordinator leaves your organization, you risk losing those valuable contacts who help sustain and further your work. Even if an organization takes care not to silo its important relationships, employee departures can still harm its connections with those external stakeholders.
Retaining employees should be a top priority for nonprofits. By improving your retention rate, you not only reduce harmful turnover costs but foster more experienced teams that can build new relationships, grow existing ones, and generally drive greater and greater impact for your mission over time.
What is nonprofit talent strategy?
Talent strategy refers to an organization’s practices and policies for managing employees and using their contributions to drive the greatest impact. A comprehensive strategy will improve the entire employee lifecycle, from hiring to training to long-term retention. Key components of a talent strategy include recruiting practices, compensation, learning and development opportunities, retention efforts, succession planning, DEI, performance management, and the systems or tools needed to administer these practices.
For nonprofits, talent strategy should take extra considerations into account, like mission alignment, volunteer management, and indirect compensation (non-monetary ways to support retention and engagement goals). Nonprofit employee retention should be thought of as one part of a broader talent strategy consisting of different practices and systems all designed to work together to strengthen the organization and drive greater impact.
How can you improve your nonprofit’s talent strategy? Let’s discuss your goals.
The Current State of Nonprofit Employee Retention
The average voluntary turnover rate for nonprofits consistently hovers around 19-20%, but looking at the data for recent years paints an interesting picture. The turnover rate for nonprofits was 19% in 2016. In 2019, it increased to 21% but dropped to a low of 14% in 2020. It has since risen back to 19% in 2022.
It would seem that the COVID-19 pandemic caused a significant drop in the number of nonprofit professionals who sought new jobs in 2020. Since then, the voluntary turnover rate has risen back to pre-pandemic norms as part of the phenomenon known as the Great Resignation, in which record numbers of employees have left their jobs to find more personally or financially appealing opportunities.
The average voluntary turnover rate for nonprofits has always been consistently higher than that of for-profit businesses, which currently sits at around 13%. However, most sectors were impacted, some quite significantly, by the largest waves of the Great Resignation. This has created a unique labor environment amid an already turbulent economy wracked by high levels of inflation.
How have nonprofits responded to these trends? Let’s take a look at some key metrics from NonprofitHR’s 2021 and 2022 Retention Surveys:
- In both 2021 and 2022, nonprofits indicated these as the top three reasons for voluntary turnover:
- Employees found better opportunities
- Employees experienced a lack of opportunity for upward mobility/career growth
- Employees were dissatisfied or disengaged by the organization/culture
- In both 2021 and 2022, nonprofits reported that they struggled the most to retain staff in their program, administration/operations, fundraising, and education/professional development departments.
- In 2021, 60% of nonprofits actively tracked retention metrics. In 2022, this number rose to 64%.
- Similarly, 21% of nonprofits reported having a formal retention strategy in 2022, up from 13% the year before.
Looking at the last two metrics listed, we can infer that nonprofits are adapting to the lessons of the pandemic and Great Resignation. Retention is increasingly important and must be prioritized with concrete strategy. High turnover holds nonprofit missions back from driving the greatest impact in their communities, and although retention has been a perennial challenge for the sector, these trends are promising.
Essential Elements of a Nonprofit Retention Strategy
There are a number of different areas of your internal operations that your nonprofit can control and adjust in order to improve employee retention. These are the essential elements of a nonprofit retention strategy:
- Benefits and compensation. Although not necessarily the single most important factor (especially in the mission-driven sector), how you compensate employees for their contributions does play a significant role in whether they feel valued and compelled to stay for the long term.
- Learning and development. Employees at all stages of their careers want to learn and grow new skills. Empower them to drive greater impact or take on new responsibilities over time. This will start on day one with a thorough onboarding process and continue throughout employees’ tenure at your organization.
- Culture. An organizational culture that is engaging, respectful, transparent, and friendly will always be a more effective retention asset than one that is dull, opaque, or overly competitive.
- Engagement. Employees should be actively engaged by the organization through a variety of means. This connects them with each other, with the organization as a whole, and with the guiding mission of their work.
- Career progression. Having a clear vision for their opportunities for growth and/or working with management that is interested in their progression compels many employees to stay for longer.
- Recruiting practices. How you begin your employee relationships sets the tone for their continued retention. Positive, equitable, and organized recruiting and training can be extremely effective.
- Management styles and frameworks. Similarly, how employees engage with management and how their work is managed plays an important role in shaping their day-to-day experiences with the organization.
These elements are interrelated in many ways. For instance, the culture of an organization can be both reinforced and informed by all the other learning and development, engagement, recruiting, and management practices at play, all of which shape the overall ability of the organization to retain its staff. Understanding these elements and how they shape one another allows you to adjust practices and policies in the most positively impactful ways.
15 Fundamental Nonprofit Employee Retention Strategies to Prevent Turnover
What are some of the specific strategies that nonprofit organizations can implement to begin improving their employee retention rates and reducing staff turnover? Let’s review the most important best practices to keep in mind.
1. Bolster your recruiting practices.
Hiring the right team members from the start is the most fundamental step you can take to improve long-term employee retention. Although turnover due to poor job fit is an unfortunate part of running any organization, it can be minimized. And by intentionally and carefully screening for the right candidate skills, qualifications, and mission alignment, you’ll develop a team that’s more likely to engage deeply with the organization and want to stick around to drive greater impact.
Review your current recruiting practices and look for areas where you can tighten or more clearly define your vetting process. You should also seek to generally improve the candidate experience through clear organization and communication. Attracting strong candidates and offering them a stellar first impression can go a long way to secure their long-term retention.
2. Assess your current compensation strategies.
Although compensation isn’t the single most important factor that drives retention and turnover, it is still extremely important.
Employees want and need to feel valued for their contributions. Although nonprofits are often not in positions to offer salaries that can compete with the private sector, staying competitive to whatever degree you’re able can certainly have a big impact on retention.
Benefits and indirect forms of compensation (discussed below) are also important tools at your disposal for building an engaging and rewarding place to work.
Conducting a compensation analysis (including an examination of past 990 forms), speaking with third-party compensation consultants, or simply reviewing your records of past raises and feedback from exit interviews can help you pinpoint specific improvements that could be made.
3. Understand the value of indirect compensation.
Indirect compensation (non-monetary ways of recognizing and rewarding employees for their work) can be a powerful way for nonprofits to retain talent. Examples of forms of indirect compensation include:
- Benefits like health insurance and retirement plans
- Paid time off
- Family- and caregiver-friendly policies
- Flexible working arrangements (hybrid/remote) and schedule options
- Active performance recognition programs
- Career development opportunities
- Health and wellness programs
- Tangible perks like food and parking spaces
- Dynamic culture- and community-building through events
Although not all of these forms of indirect compensation are free for your organization to provide, understanding how they can create an environment that engages and retains employees will give you much more flexibility than you’d otherwise have if only considering compensation through the lens of paychecks.
Nonprofits have all kinds of options for showing employees that their contributions are valued. Review your current practices, policies, and benefits related to indirect compensation, and consider surveying employees to learn more about what kinds of perks and benefits they value the most.
4. Take a close look at your nonprofit’s culture.
Your organization’s overall culture plays a major role in driving retention. Culture is also complex; it’s shaped by all of the practices and policies you have in place, and it can continually evolve as a result of how you enact those practices. Your culture is also a reflection of how well your organization embodies its values and mission.
If your organization is struggling with employee turnover, closely analyze your culture. How do people feel about coming to work? What aspects of the job do they love, and what do they hate? How are your compensation, management, and other practices impacting those feelings? Again, surveys can be particularly useful for gathering direct insights.
Actively shaping your culture for the better starts with establishing guiding values, like community, giving back, transparency, and more, all with the ultimate goal of supporting your mission and building an environment where your nonprofit can have the greatest possible impact. Define your values, concretely tie them to your mission, communicate them to your employees, and seek their input. Then, continually monitor how things are going by talking with employees and offering events and opportunities that reinforce those values.
5. Ensure open lines of communication.
To feel like their efforts are valued and have an impact, being transparent with employees is key. There are a few key ways you can improve communication with an eye toward retention:
- Actively collect employee feedback. Then, act on it (or clearly explain why the organization has chosen not to act on it).
- Have clear reporting protocols in place. Everyone should know who they report to, who needs to know what, and when.
- Update any outdated communication or data management systems that create unnecessarily complicated steps for collaborating and sharing information.
- Be transparent with your organization’s goals, performance, and more. Give all employees a clear glimpse into how well your last fundraising campaign went, for instance. Use it as an opportunity to celebrate as a team or discuss how to improve next time.
How employees communicate with one another and with leadership strongly informs the organization’s culture. By making it easier to communicate and share ideas, you not only show that you value employees’ input but also simply make their jobs easier.
6. Foster transparency with your performance management approach.
Speaking of communication and transparency, your nonprofit’s employee performance management process should be among your most transparent practices. No one wants to feel like how their work is being judged is shrouded in mystery; this can create tense, unpleasant environments where employees are unsure of what’s expected of them or how they can improve.
First, have a clearly defined performance management process that follows a regular schedule. Use a combination of self-assessments, manager, and peer feedback to gather information about each employee’s performance, impact, accomplishments, and areas for improvement. Set performance goals based on what employees need and want to improve, and ensure that employees understand how their goals tie into the overarching organizational goals and mission. Then, support them along the way in between performance management meetings by asking about the goals and providing guidance.
Giving the process a clear structure and establishing exactly how leadership will gauge success eliminates mystery and contributes to a more positive and productive culture that will retain employees longer.
7. Set realistic goals with staff.
Building on the importance of having well-structured performance management practices, make sure that the performance goals you set with employees are good ones.
That is, goals should be specific, time-bound, measurable, and truly achievable. Otherwise, poor goal-setting can actually de-motivate employees, causing them to feel overwhelmed, frustrated, and likely ready to leave for new opportunities. Put intention and thought into the goals you set with individuals, departments, and for the organization as a whole.
Work with employees to get their input and make reasonable adjustments as needed based on what’s truly achievable and what will drive the most impact for your mission. For example, when determining goals for your fundraising team, you should use portfolio analysis to determine together what achievable goals for the future look like.
8. Manage with data.
Goal-setting is the perfect example of a way that you can manage with data, which generally improves decision-making and transparency across your organization. Use data to help shape:
- Individual and organizational goals
- Employee performance evaluations
- Strategic programming and fundraising decisions
- Staffing and resource allocation decisions
- Culture-building strategies
Quantitative data on your nonprofit’s performance and more qualitative data on employee satisfaction and feedback are both helpful. By showing employees how and why your organization makes the decisions it does, you promote transparency and invite them to feel more fully invested in your shared success.
Don’t forget the most fundamental piece of data you should collect to help improve retention: your employee retention rate. This simple step can be easily overlooked in busy organizations of all sizes, but it’s essential for improving retention in strategic, sustainable, and effective ways.
9. Provide training and development for staff and management.
Learning and development opportunities are essential elements of an employee retention plan for two reasons:
- They show that you value employees and want them to grow their skills
- They literally give employees the skills they need to drive greater impact and succeed the longer they stay at your organization
Courses, certification programs, on-the-ground projects, and mentoring programs can all be effective choices for helping employees expand their toolkits and see the bigger picture of how your mission runs. But don’t forget management; managers and leaders should also be encouraged (or expected) to not only develop their hard skills but also refine their management and communication skills in line with your organization’s values.
10. Create clear career paths and offer coaching.
Give employees an idea of what they can expect by succeeding in their roles over the long run by laying out career paths. These should be tailored to individuals over time as they take on new skills, demonstrate competencies, and express interests.
After all, if an employee enjoys their job and believes in the mission but can’t see a clear path to growth, a feeling of stagnancy or demotivation can naturally arise. Combat this by having managers talk transparently with strong performers about their personal career goals, interests, and desired skills. Work together to outline career paths, reference them over time in performance conversations, and support the trajectory with learning opportunities and mentorship or coaching programs.
11. Develop solid recognition strategies.
Aside from the bigger-picture concerns of career paths, remember that employees want to feel valued and that their work has an impact on your mission by actively recognizing their achievements.
Recognition is a foundational part of driving engagement and ultimately creating a culture that can retain employees. Explore popular and unique recognition ideas, consider which work best for your organization, culture, and internal structures, and try rolling them out. Your recognition strategies can be refined and adjusted over time, but the most important consideration to keep in mind is that recognition must be intentional, transparent, and consistent.
12. Promote work-life balance and well-being.
Actively encourage employees to strike the right work-life balance they need and to make use of your organization’s various benefits. Valuing employee well-being in this way helps to retain employees by first preventing burnout and more generally demonstrating that you care. If you can, and if employees would value them, try to offer additional health-related perks like flexible time off policies, gym memberships, and healthy snacks. Community partners or sponsors may even be able to help provide some of these things in support of your mission and in exchange for public recognition.
Remember that the overall culture you foster also plays a direct role in employee well-being. Stressful workplaces with toxic levels of confrontation, defensiveness, and opaqueness (or even friendly workplaces that operate with poor organization, direction, and communication) will contribute to employee burnout. Staying intentional about the culture you’re building, collecting employee feedback, and actively encouraging the usage of benefits will help improve retention.
13. Offer flexible working arrangements when possible.
When it comes to fostering work-life balance, flexible working arrangements can be among the most effective tools at your disposal. Remote and hybrid work and flexible working hours are now the norms for many industries. Consider your options here if you haven’t yet. Simply giving employees the ability to reallocate hours of work within the week in order to handle personal matters or just enjoy the afternoon is a very feasible example that works well for many types of roles.
Of course, not every role will lend itself to remote work. Many considerations go into organizations’ decisions to go remote or hybrid, and it can be a complicated topic. But by offering the level of flexibility that you can, actively listening to employee requests, and making transparent decisions, you can boost overall satisfaction and retention.
14. Gather employee feedback and ideas.
Gathering feedback is a recurring theme in many of the best practices discussed above. That’s because seeking employee input very directly shows them that you value their thoughts, ideas, preferences, and opinions. Seek input by:
- Scheduling regular one-on-one meetings between managers and direct reports to discuss ideas, goals, and updates.
- Sending organization- or department-wide surveys to specifically collect ideas for improving operations or driving impact
- Regularly soliciting employee satisfaction ratings and details with surveys
- Collecting feedback on the organization and management as part of the performance management process
- Asking for feedback related to specific recent initiatives, policy changes, etc.
When asking for employee feedback, be sure to establish what is and isn’t helpful for your organization to receive. Actively respond to feedback, and be transparent about why certain ideas or concerns won’t be acted upon. Develop an organized system for tracking feedback and analyzing trends over time.
These practices can go a long way to build a strong culture that retains employees, and they give managers and employees the ability to source new ideas, interests, and projects that lead to career growth and professional development.
15. Get professional help to develop a retention plan.
Many factors contribute to an organization’s ability to retain team members. Understanding and wrangling all of these elements and best practices into a plan that works for your unique team, mission, and goals can certainly be a challenge for nonprofits of all sizes. This is true for small shops with especially tight resources up to large, complex organizations where communication and alignment can be uniquely tricky.
Working with nonprofit professionals with experience in talent strategy and employee engagement will be your best bet for developing a customized retention plan that suits your needs and resources. Outside expertise is often helpful and can provide audits, assessments, and strategic planning services for specific parts of your internal operations or for the many elements that impact retention. Experts can help you pinpoint the causes of turnover in your organization, giving you objective guidance to begin implementing and iterating improvements.
How can you improve your nonprofit’s talent strategy? Let’s discuss your goals.
Developing Your Retention Plan: How Experts Can Help
Ready to begin laying out an employee retention plan that will allow your nonprofit to thrive for years to come? Start by reviewing the best practices discussed throughout this guide and considering the current state of your retention efforts. What problems are you seeing? What challenges are employees reporting? Are you currently tracking your retention rate?
When you have an idea of what your current challenges are, reach out to experts to start discussing the steps you could take to address them. Research consultants’ specific services and approaches to find the perfect fit, and consider each vendor’s broader experience. Have they worked with nonprofits in the past? Do they have direct experience with the unique fundraising, programming, and administrative needs of your type of organization?
Graham-Pelton is a leading nonprofit consulting firm that offers a range of fundraising, staffing, and talent strategy services. We can audit your current practices, recommend solutions, and help you implement and monitor them. With a customized, data-driven, but human-first strategy designed to meet your nonprofit’s unique needs, you can see real improvement in your employee retention and build a more sustainable foundation for your mission’s growth.
Please contact us if you’d like to learn more about what we do or to discuss your organization’s needs.
To learn more about nonprofit talent strategy, we recommend these resources:
- Growing Leaders from Within: 5 Skills to Look for in Fundraisers
- Building a Winning Talent Strategy
- Four Ways to Boost Fundraiser Job Satisfaction
- How Transitional Leadership Can Help Your Nonprofit Conquer the Great Resignation
