There are a number of challenges associated with leading a nonprofit, from constant demands on the leadership team’s time to never-ending budget constraints.
There are, however, commonalities in the obstacles faced by small nonprofits. Understanding the expected challenges can lead to more effective management and stewardship.
Three big challenges for small nonprofits are healthcare costs, employee recruitment and retention, and predictable revenue streams. All three areas can be a tremendous burden on a nonprofit team’s time and budget.
The majority (53 percent) of small nonprofits in the U.S. do not offer group health insurance coverage due to rising costs and restrictive minimum contribution and participation requirements. Following the passage of the Affordable Care Act, however, individuals now have an unprecedented number of options for health insurance that all meet a minimum standard of quality and coverage.
Nonprofit employees can now purchase health insurance through their employer’s group plan, or be reimbursed by their employer for the cost of their individual plans. These new options mean nonprofit employers can provide employees with high quality health insurance while controlling the cost of the benefit.
See our section on health insurance options for more information alternatives in plan design.
Recruiting and retaining top employees is another major concern facing small nonprofits. With the preferences of the workforce becoming more diverse and dynamic, employers are in need of a more personalized approach to retain their employees.
A common challenge for small nonprofits when hiring is deciding between offering higher wages for more competitive prospects or lower wages for a lower, but more secure, skill set. Nonprofits should not feel like they are at a disadvantage when recruiting new employees.
Small nonprofits can competitively recruit employees by using their strong mission and values, employee referrals, adding a career site to their webpage, advertising on online job boards, recruiting interns, and using social media to recruit employees. An outstanding retention program can also give an edge to nonprofits looking to hire. Employee retention strategies include creating a high-feedback environment, recognition programs, customizing benefits strategically, and boosting employee morale.
Creating and maintaining a predictable revenue stream presents more of a challenge to small nonprofits because they generally do not have the large and established budgets of larger University and government-backed nonprofits.
There area number of strategies for nonprofits to use to stabilize and grow funding including diversifying sources, fundraising events, donor acquisition and retention activities, and planned gifts. It is also vital for small nonprofits to have a strong mission and vision so the community can see the unique service provided.