Why Punching Above Your Weight Isn't a Good Thing (Or A Love Letter to Small Nonprofits)

February 23, 2023

This goes out to all those Executive Directors at small nonprofits. How many times have you heard your organization described as:

"Tiny but mighty!"

"We really punch above our weight!"

Maybe you've even described it that way yourself.

Pssst . . . nonprofit boards . . . . I'm mostly talking to you here. This article is going to be a bit of tough love. No doubt, you care deeply about your organization's mission, and you're investing precious volunteer time and expending a lot of emotional and mental effort, while making personal and professional sacrifices for the cause. If we don't stop expecting small nonprofits to be "tiny but mighty," all that effort and love you're putting into the organization is going to dry it out into a shriveled husk of itself.

"Separating salaries out as a side thought, as something to be sacrificed, or something that needs to be ratioed against 'direct program costs' makes no sense unless your organization is entirely staffed by independently wealthy professional volunteers."

Over the years, and in my work now as an Executive Coach/Adviser, the single most common challenge I hear bemoaned by small nonprofit EDs is that their board's (and even their own) ambitions outscale the resources available to put goals into action. (The second is that the board is hesitant to get involved in fundraising -- more on that in a later article).

And the first thing that gets sacrificed? Often, it's the staff . . . . in terms of salaries, work-life balance, and resources to get the job done . . . which perpetuates the vicious cycle of low nonprofit pay, burnout, and turnover.

Even taking ethics out of it, that doesn't make business sense for the organization -- turnover, low morale, and hampered ability to recruit great talent cost the organization far more than scaling back ambition to meet present resources. It is easy for boards, and even EDs and rest of staff, to lose sight of that fact since the costs of those intangibles add up like thousands of paper cuts over time, whereas the savings in lower-than-ideal staff salaries, lower-than-ideal benefits, etc. are more immediate, more black-and-white. When you're always in survival mode, this vicious cycle can feel nearly impossible to break.

Other sacrifices get made too . . . .dated technology hardware and software (which in turn has a massive effect on productivity, efficiency, and individual feeling of accomplishment), forgoing annual audits (which in turn can perpetuate bad financial habits), chasing after every possible dollar (even when the time spent chasing the dollar far outweighs the return), and on and on. Staff time and talent and how it can most effectively be harnessed for the mission becomes increasingly devalued, thus time isn't used strategically, and the organization finds itself no longer able to "punch above its weight" anyway.

So I'm going to say it again for the people in the back.

Low nonprofit salaries and holding programs together with metaphorical duct tape will never work in an organization's favor.

What happens if you get that unexpected windfall gift? Well, what happens when you take duct tape off to properly fix something? It leaves sticky residue everywhere. Same thing with metaphorical duct tape. The resources needed to properly fix everything balloon beyond the cost of having built it sustainably to begin with, so a chunk of that beautiful gift is spent de-gunking everything, instead of putting it straight to action.

There's a way to get off this spinning hamster wheel.

Scale current plans to match current resources. Start with setting competitive salaries and benefits. Push a bit here. Almost the whole nonprofit sector is paid artificially low salaries, based on outdated beliefs from donors of the past that nonprofits are meant to spend entirely on outcomes and not on salary (which doesn't even make any logical sense -- how effective can you be with only volunteer labor? who does that leave out? are only independently-wealthy people supposed to work at nonprofits?). A nonprofit is as much a business as a for-profit corporation is. That's a really important point that many nonprofit boards and staff can easily lose sight of -- you need to treat your nonprofit like a business, or you won't be able to execute your mission.

So, push a bit here. Set competitive salaries and benefits and THEN see how many FTEs you can afford. As you look at your staffing plan within that FTE limit, like with any business, you need to spend money to make money, which means you need to invest in professional development staff. Put all your budget into programmatic staff and you're back where you started . . . . on the survival mode hamster wheel.

Now take a look at your infrastructure budget. What hardware and software do you need that will be reliable, efficient, and sustainable? Put the duct tape and "scrappy shoestringy MacGivery" mindset away. Maybe you can't get the top-of-the-line, but you also don't have to go for whatever is cheapest -- you get what you pay for, after all.

Great. NOW, go back to your strategic plan. Rework it to match the resources you have currently, for the first year. Build in an ambitious but reasonably reachable growth plan. Focus on your core identity and what you're really, really good at now and market the heck out of that to donors. Know, as a whole group, board and staff, what you would do with a sudden doubling or even quintupling of your budget so that you have a guide star for your growth. Share that vision with donors. Get them excited about what you're accomplishing now and where you see yourself going.

"Put the duct tape and 'scrappy shoestringy MacGivery' mindset away."

What was once unthinkable has evolved through controversial to the latest best practice in the nonprofit sector (whether the charity raters of the world have caught up yet or not). Salaries, software, benefits, laptops, home office stipends . . . . these are all part and parcel of programmatic expenses. The brains and bodies behind those salaries build and execute the programs, coordinate the volunteers, bring in the funding, and raise awareness about the mission. Without them, there are no outcomes. Separating salaries (essentially, the organization's professional brain trust) out as a side thought, as something to be sacrificed, or something that needs to be ratioed against "direct program costs" makes no sense unless your organization is entirely staffed by independently wealthy professional volunteers.

Investing in your staff and what they need to do their job effectively and with professional satisfaction comes before everything else. Scale all else to meet that, and you're off the hamster wheel and set up for successful growth. Wring them dry of every last ounce of emotional, physical, and mental reserve under the assumption that they should be driven only by love of the mission and a can-do attitude, and, well, you can probably ascertain the outcome.

I'm not pretending that scaling back, reworking strategic plans, or (even if temporary) reducing FTEs is easy. It's emotionally and mentally tough work. It takes an enormous amount of courage to have the required existential conversations and to buck age-old nonprofit habits and norms and be a leader in the sector. Scaling back means you'll undoubtedly, at least initially, lose some funding that was tied to specific programs. Growth plans may mean letting go of (otherwise kind) board members who aren't pulling their weight. It may mean the current board setting aside ego and realizing that they need to recruit a different mix of directors. People who can serve as a volunteer parttime finance manager or social media manager etc. if the budget can't handle paid staff or contractors, cheerlead for the organization to spread its renown, get the work done on governance and fiduciary oversight, and . . . most importantly . . . network to save their life and deepen the potential donor bench so that the ED, development staff, and board have folks to cultivate into donors.

This is tough stuff. But it can be done. Take courage. You're setting your organization up for sustainable success and long-term wins.