These responses expose a gap between the values that many nonprofits hold and the way they treat their own staffs. There’s no doubt that nonprofits today face serious financial difficulties and constraints, but do they have no choice but to demand long, unpaid hours of their employees? Putting questions of fairness aside, is their treatment of their workers limiting their effectiveness?
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The answers have a lot to do with how nonprofits survive in an economy that’s geared primarily toward profit. Many nonprofit organizations stare down a shared set of challenges: In a 2013 report, the Urban Institute surveyed over 4,000 nonprofits of a wide range of types and sizes across the continental U.S. It found that all kinds of nonprofits struggled with delays in payment for contracts, difficulty securing funding for the full cost of their services, and other financial issues.
Recent years have been especially hard for many nonprofits. Most have annual budgets of less than $1 million, and those budgets took a big hit from the recession, when federal, municipal, and philanthropic funding dried up. On top of that, because so many nonprofits depend on government money, policy changes can cause funding priorities to change, which in turn can put nonprofits in a bind.
Heather Iliff, the president and CEO of an association called Maryland Nonprofits, says that she has seen a number of funders suddenly shift the requirements of their funding in response to a new trend, leaving organizations scrambling to adapt. “On the one hand it’s positive that the government is trying to look at what works and fund what works, but they tend to be categorical and abrupt in their shifts, without providing the necessary transitional supports,” Iliff says.
Iliff has seen that scramble to meet funding demands lead to bizarre and unproductive decisions. An employee of one agency that serves adults with significant developmental disabilities told her that its funders recently ordered it to provide clients with a number of hours “in the community,” as opposed to time spent on the in-house services it normally would have administered. But the funders did not provide guidance on how to do that, and the agency’s best option was to bus disabled adults to a mall’s food court just to satisfy the new requirement.
All of this is particularly difficult for human-services nonprofits that survive mostly on Medicaid funding. Homeless shelters, for example, don’t charge for their services, and thus can’t raise prices when their funding is cut. (These types of agencies have a longer period to adjust to the new overtime rules.) And when faced with funding cuts, many nonprofits have no place to turn but their own payrolls.
The pressure from funders to tighten budgets and cut costs can produce what researchers call the “nonprofit starvation cycle.” The cycle starts with funders’ unrealistic expectations about the costs of running a nonprofit. In response, nonprofits try to spend less on overhead (like salaries) and under-report expenses to try to meet those unrealistic expectations. That response then reinforces the unrealistic expectations that began the cycle. In this light, it’s no surprise that so many nonprofits have come to rely on unpaid work.