Maintaining Proper Staffing Levels for Nonprofit Capacity Building

You could start a hiring spree. After all, you’ve already allotted a certain amount of grant funds to payroll expenses. And you need people on the ground to run your programs and execute on your mission. But wouldn’t it be better to look at hiring in a more sustainable way? A way that shows you want your nonprofit to be successful long after you’ve run through this current wave of funding? To take that long-term look at meeting your nonprofit’s mission, you should start doing some serious nonprofit capacity building.

What is Nonprofit Capacity Building?

Nonprofit capacity building is the process of taking a long view of the future of your organization to outline and act on steps for overall improvement. That improvement can take many forms, encompassing a wide range of actions. It could include tangible activities, such as investing in technology or upgrading equipment. But it could also incorporate more abstract actions such as creating internal processes or pledging to decrease staff burnout. In fact, Elizabeth A. Castillo, an assistant professor of leadership and interdisciplinary studies at Arizona State University, outlines several areas of improvement nonprofits can focus on for capacity building:

Capacity Building - Areas of Improvement:

• Financial — Evaluating and improving your organizational budget’s line items.
• Natural — Becoming a greener organization through environmentally conscious actions.
• Human — Doing a better job of looking out for employee well-being and development.
• Relational — Improving and increasing relationships with stakeholders.
• Symbolic — Strengthening your sense of purpose and its impact on the community.
• Structural — Bettering internal processes with an eye for compliance, authenticity, and effectiveness.

Why is Nonprofit Capacity Building Important?

Attempting to improve your organization in any of the above areas will help your nonprofit do more — i.e., build your capacity — to achieve your mission. And that means you can help more people, better advance your cause, more deeply impact the communities you serve. Of course, you might think that throwing all your money at your principal programs will help you achieve all of those things — and better funding for impactful programs is one part of capacity building. However, capacity building encompasses quite a few elements that require nonprofits to look inward and improve themselves so they can better improve the world around them.

Why You Should Focus on the Human Element First

Focusing on improving your staff first doesn’t mean you have to neglect the other elements of capacity building. It means that, as a nonprofit, you have limited resources and need to prioritize a place to focus your efforts. Taking a critical look at your staff and staffing strategies will help you identify areas of improvement for your team. And making positive changes for your team overflows into every other element of nonprofit capacity building. For example, a higher functioning team will impress donors with its ability to efficiently and effectively advance your mission. Impressed donors will be encouraged to offer more funding, diversifying your revenue sources and giving you the ability to invest in your existing staff or expand it to achieve more. With more funding and a united staff, you can strengthen your nonprofit’s sense of purpose, inspiring more donors to empty their wallets for your cause. Lather, rinse, repeat. However, staffing is a sector-wide issue for all nonprofits, largely due to high turnover rates. Those rates can often be attributed to burnout — or, to summarize findings from Nonprofit PRO, being underpaid and overworked with little perceived chance of a raise or promotion. Some of this issue just comes with the industry. Maintaining proper staffing levels in nonprofit organizations is a Goldilocks-esque operation. Understaffing can result in paying expensive overtime rates for hourly employees and burning out employees, inspiring high turnover. And overstaffing can result in scrambling to find new projects at best and laying off employees at worst. Finding that “just right” amount of staff is difficult for nonprofits, whose funding can fluctuate dramatically and rapidly throughout the year. But without having the right amount of staff on hand, all of your other efforts to build capacity will fall short. Instead of improving, you’ll have to spend your time in interviews or training new employees, all the while spending precious funding on the hiring process. So how can you surmount these sector-wide obstacles to decrease turnover and burnout? And along the way, how can you increase employee well-being to improve your overall capacity? Keep reading to find out.

5 Staffing Tips for Successful Nonprofit Capacity Building

While maintaining the proper staffing levels involves many challenges for nonprofits, there are a few strategies you can employ that will hopefully make your decisions less reactive and more proactive. Below are a handful of nonprofit staffing best practices to help you improve morale, optimize funding, and decrease turnover.

1 Use Historical Data to Understand How Much Work It Will Take to Achieve Your Goals

If you’re seeking more funding, it’s likely because you want to be able to do more to work toward your mission. And if you have the money to pay their salaries, one of the easiest ways to have a bigger impact is to hire more people to do more work. To understand how much more you could be doing, you should start by understanding how much work you’re already doing. Knowing how much of an impact your programs have at your current level of funding (which pays for your current amount of employee hours) is the key to understanding the work you would be able to do with more people. You can find some of this data — or start tracking it — in employee timesheets. Especially if you use a system that allows employees to track time by program, project, and task, you’ll be able to see how much time and effort it takes to get work done at your current staffing level. How does that help you understand what you could get done with more staff on hand? Let’s say you’re applying for a grant with the stated goal of using funding to feed 10% more families in your community by the end of the year. With your current team, you’re able to feed 100 families. So how many more employees will it take to feed 10 more families? You can start with simple estimates. Let’s say you have five staff members working on this project of providing food to local families in need. You could look at those numbers and say, “That means that each employee feeds about 20 families.” To feed 10 more families, you’ll need to hire a part-time employee or contractor. But these simple numbers don’t tell the full story. Historical timesheet data can help you gain a better understanding of what you can really accomplish with more staff. How many hours do your five employees spend working on programmatic activities? Let’s say one employee devotes more time to fundraising for your program (an indirect expense that’s not likely to be fully reimbursed by a funder). By hiring a new full-time employee to work solely on programmatic activities, you could ask for the funding to pay for their salary and benefits, rather than ask for half of that amount to pay for a part-time contractor. In addition, by hiring this new full-time employee to work on programmatic activities, your current employee is now able to turn their full-time job into fundraising for this program. Your program is run more efficiently because your new employee can concentrate on their on-the-ground work. And with a laser focus on fundraising, your current employee can increase the donations coming into your program. That diversifies your funding sources, makes your program more impactful, and attracts the attention of more donors when they see you’re running such a successful program. In short, you can use your historical data to understand what it takes to run your programs well. When all your staff is on hand and fully funded, what can they do with their time? Timesheet data is the key to answering this question. When you track time by program, project, and task, you can see where your employees’ time went when they were running their programs.

Timesheet data can show you:

• How many total hours it currently takes your staff to run a project from start to finish.
• How many employees it should take to run a scaled-up project or program based on the number of hours recorded.
• Areas where you could be more efficient, either by automating tasks with software or hiring contractors to take on extra work.
• Areas where you’re already running as efficiently as possible and could use more staff to do more effective work.

2 Calculate Your Bare Minimum Staffing Level

Realistically, your nonprofit’s funding will always fluctuate, and you won’t always be able to anticipate by how much. That means you need to understand your minimum viable bottom line: how many employees does it take to keep the lights on? To be clear, creating your bare minimum staff is a strategy only to be employed on the rainiest of days. Your ideal staffing level will be much higher, allowing you to smoothly run — and expand — your programs and further your mission. However, knowing how many people you have to employ to sustain operations can help you:

• Better prepare yourself for changes in funding.
• Identify priority levels for your whole staff — i.e., which roles and functions are necessary and which you could give up, if needed — for a worst-case scenario.

George Santos, director of talent delivery at 180 Engineering, says that “during the process [of identifying your bare minimum staff], it is important to map out and monitor how many employees it takes to complete certain tasks.” To understand how much time each task takes — and how much time it takes different employees to complete them — you’ll need historical time tracking data. And for the most accurate understanding of how time is spent in your organization, it’s best to use timesheet software that can crunch those numbers for you.

3 Regularly Evaluate Your Organization’s Performance

You shouldn’t stop looking at how you’ve run your projects once you’ve pulled this historical data. Continually evaluating your organization’s overall performance will also help you stay ahead of or anticipate any shifts in funding. You can — and should — consider performance at the organizational level. For example, if you’re generally failing to meet your goals, you might be understaffed. Employees might be burnt out or not have capacity to complete necessary tasks. So you’ll need to evaluate your funding sources to see if you can afford to take on contractors, freelancers, or even hire new full-time staff members to pick up the slack. Santos again weighs in on the importance of concrete data when it comes to these evaluations: “Having clear data to consider will give you vital insight into whether additional funding should be spent on new hires or if funding would be better spent on operational and marketing costs.” Employee timesheet data could come in handy again here if you use a timesheet tool that helps you categorize tasks by their functional expenses. Seeing the ratio of time split between programs, management and general activities, and fundraising could help you decide what your next best move should be.

Outside of a time study, here are some other metrics you can use to evaluate performance:

• Frequent overtime payments could indicate understaffing.
• High payroll expenses compared to your overall organizational costs (the industry average put payroll at around 45% of nonprofit expenditures), could indicate overstaffing, with more money being paid to staff than you can afford.
• High turnover could indicate either under- or overstaffing. Bored employees will leave for more exciting roles, while overworked team members will leave due to burnout.

4 Use a Resource Planning Tool

When you understand your staffing situation and the projects you need to fund to meet your goals, you can use a powerful tool to stay on top of staffing levels: resource planning. Resource planning is the process of allocating employee hours to different projects based on their budgets. For nonprofits, this also means allocating employee hours to different funding sources. A good resource planning tool will help you:

• See all available employee hours, taking time off and hours already worked into account.
• View program budgets to determine where your team should spend their time.
• Avoid dipping into unrestricted funds to cover costs after overservicing a grant.
• Use all the reimbursable money available to you by directing employees to spend their time on programs with funding.

5 Help Employees Build their Skills

Making time for training might seem like a luxury nonprofits can’t afford. While some funding sources will allow you to allot a portion of your budget to employee development, funders want to see the majority of their money going directly toward programs. “Fluffier” activities, like attending team-building conferences or taking professional development courses, might be harder to justify in a competitive funding budget proposal. But talent expert Santos points out that NPOs are actually most in need of setting aside time and money for training. Since their funding situation can change at any moment, he says, “an effective strategy is to cross-train employees so that they are able to wear multiple hats within the organization. That way, if something breaks down or you find yourself lacking in a department, an existing member of your team may be able to bridge the gap until you are able to secure a more permanent solution.” However, beware of expecting too much of each employee. “You’ll wear many hats here,” is a red flag in many job descriptions that could turn potential new hires away. Make sure to focus your cross-training on necessary skills your nonprofit needs, while also aligning them with employee interests. And be upfront in interviews when speaking about job roles, responsibilities, and the expectations that come with an ever-shifting financial situation.

Maintain Your Ideal Staffing Levels to Build Your Nonprofit’s Capacity

When nonprofits have incorrect staffing levels, they experience a plethora of problems. All of those problems have one consequence: the inability to further their mission. Understaffed organizations have burnt out employees who will eventually leave for less stressful positions. They’ll take their skills with them, and you’ll be stuck throwing money at an endless, expensive cycle of interviewing, hiring, and training new employees. If your organization is understaffed and employs hourly workers, you’ll also have to throw lots of extra money at overtime wages, which will rapidly deplete your program budgets. And salaried employees’ hourly wages will become diluted when they’ve worked overtime. (Check out the math below to see what I mean.) These scenarios leave your funding underutilized and your staff unhappy. And in the case of overstaffing, you’ll have to create new projects, lay off staff members, or be prepared to defend organizational bloat to potential funders. ClickTime’s capacity planning software can help you avoid all of these staffing issues. You’ll be able to quickly course correct when you see staff starting to work longer hours or overtime pay requests coming in from hourly workers. And since the timesheets are customizable, you’ll be able to see exactly what each employee worked on and when. Completed timesheets with detailed notes will help you create a time study to optimize your employees’ time, as well as make auditors happy with federal grant-compliant timestamps and recordkeeping.