Not-for-profit organizations are the in the midst of a leadership shortage. Research compiled by Bridgespan projects that organizations will need nearly 80,000 new senior managers per year, significantly more than the number of senior managers who are currently employed.
Talent acquisition in the not-for-profit space has traditionally been a challenge, in part because many organizations grapple with stringent budget limitations and may not have the luxury of building “bench strength” to groom up-and-coming leaders. To identify the right candidate, not-for-profit organizations may want to broaden the search to include individuals with a corporate background. Many of the desired skills in a not-for-profit executive are common in the for-profit sector. Nevertheless, there are significant differences between how a not-for-profit operates and a how a for-profit entity operates. Hiring a for-profit candidate will require both parties to work around some common misconceptions.
Salary & Benefits Differences
There is a pay difference between working in the not-for-profit sector and for-profit sector, but candidates should keep in mind that the difference may not be as extreme as they think. Fast Company analyzed data from Charity Navigator and Payscale and determined that CEOs of not-for-profit organizations make about 25 percent less than CEOs of for-profit companies.
Salaries may not be lower for not-for-profit organizations across the board, however. Research institutions, universities, health care organizations and larger not-for-profits tend to offer more lucrative benefits. If candidates are concerned about pay differences, they should do some research prior to starting the job search. Most states have not-for-profit professional associations that can provide survey data on compensation based on the size of not-for-profits’ operating budgets.
Not-for-profit organizations, on the other hand, should not be discouraged that lower pay would automatically disqualify them from attracting a good executive candidate with a corporate background. If your organization isn’t one that can compete with a for-profit’s base pay, there may be other ways to sweeten the pot to attract talent.
Year Up, an organization that helps young adults in low-income, urban areas with professional development skills, made investments in its health care plans and retirement program and provided generous stipends for professional development opportunities. The organization found that the benefits were one of the selling points for employees and helped the organization grow and retain its workforce. Deferred compensation plans may also be another way to make a more competitive job offer for an executive position.
For-profit candidates may be wary of what not-for-profit budget constraints could mean for their job security. According to a survey conducted by Nonprofit HR, funding and budget concerns were among the top talent obstacles not-for-profits are expecting to face in 2017. Nevertheless, the organizations surveyed said that attracting and hiring diverse talent was a top priority.
Workplace shortages tend to make employees hired more valuable to the organization. Many not-for-profit executives are “aging out,” and the organizations they’re leaving may not have strong succession plans. This effectively leaves many organizations without the bench strength they need to transition when an executive steps down. Demand for personnel, particularly at the top of the organization, may mean that organizations will be more willing to retain executives, even if their budgets are limited.
Another common misconception that for-profit candidates may have about the not-for-profit world relates to job responsibilities. Not-for-profit organizations may have fewer administrative and technological support resources than for-profit professionals may be accustomed to, and as a result, not-for-profit professionals may take on a more diverse array of work activities. For example, a not-for-profit may not have many senior financial professionals, and a CEO candidate with a finance background may become more involved in day-to-day financial management responsibilities than they would if they held a similar position in a corporate environment. The variety and challenge involved in taking on more responsibilities may be a huge draw for a professional who is looking to do more in the executive role.
There are some challenges with job responsibilities that both for-profit candidates and not-for-profit organizations may not anticipate. Not-for-profit organizations may want a for-profit candidate to assist in fund development. Some of the best practices regularly used in the for-profit world may make a for-profit candidate more appealing to not-for-profit organizations, but organizations should keep in mind that most for-profit professionals will not have a fundraising skillset. Ideal for-profit candidates can bring their corporate business practices to the table and be comfortable with leveraging the relationships they have with the business community to help the organization secure funding.
Additionally, for-profit professionals may have trouble adjusting to board management. Not-for-profit executives work extensively with their boards to make crucial decisions for their organizations. Members of the board have term limits and day jobs, which can make board engagement a challenge. A candidate who has never worked with a board before may not be prepared for how to navigate board dynamics. An ideal for-profit candidate would be someone who has served on a not-for-profit board and understands the interactions between a board and an organization.
Professionals from the corporate world may want to join a not-for-profit so they can work for an organization that “makes a difference.” The ideal candidate, however, must be truly aligned with the mission of the organization. Not-for-profit executives who believe in the work their organization is doing may find their work more rewarding, which could more than mitigate a decrease in income and benefits and smaller staff that may accompany the leap from a for-profit company to a not-for-profit organization.
Make the Move
Expanding the candidate pool to include applicants without extensive not-for-profit experience may be just the answer to the workforce shortage that not-for-profit organizations need. A more diverse talent pool may lead to an organization finding an applicant with the skills and experience to help the organization grow and expand its mission. At the same time, for a candidate from the for-profit sector to be successful at a not-for-profit organization, both parties need to understand what the challenges might be from the beginning. Board experience will be essential, as will a level of comfort with the fundraising aspect of the job.
A third-party recruiter may be able to assist not-for-profit organizations in vetting candidates and weighing the pros and cons of their talent pool. For more information about whether a for-profit candidate could benefit you, please contact us.
Daniel J. Cummings, CPA is a Vice President at EFL Associates located in Denver, CO. EFL Associates, a CBIZ company, is a management consulting firm and has over 35 years of helping not-for-profit boards and their search committees with senior leadership transitions. Dan can be reached at 720.200.1765 or email@example.com.