Managing Employee Relations in the Nonprofit World

Those who have never worked in a non- or not-for-profit organization might wonder whether HR practices differ in any notable ways from those in the for-profit world. Below, HR professionals provide a glimpse into the nonprofit employee relations environment.

Cindy Karchner, now manager of employee relations at Godiva Chocolatier in the Allentown, Pa., area, might have spent most of her 30-year career in the for-profit sector, including retail, insurance and manufacturing, but during the year she spent in the nonprofit world, working for a 2,000-employee senior living agency, she said there was “no support, no budget and little time, if any, to be spent actually interacting with anyone.” It was “not very employee relations-friendly,” she told SHRM Online. “But I only worked for one organization like that for just one year, so I wouldn’t want to judge all organizations based on that experience.”

Marie LaMarche, SPHR, employee/labor relations manager for Harrison Medical Center, a not-for-profit hospital in Bremerton, Wash., and member of the Society for Human Resource Management’s (SHRM) Employee Relations Special Expertise Panel, has had a different experience. She said she has not noticed substantial differences between her current employer and the newspaper she worked for previously.

“The major difference that I have discovered is that at the for profit company I worked for, managers and above had incentive pay in the form of a bonus, and a large percentage of the bonus was based on the company making operating cash flow targets,” she said.

But many HR professionals who have experience in both sectors say there are notable differences that should be considered before transitioning from the for-profit to the non- or not-for-profit sector.

Mission-Focused

Kevin M. Horan, vice president of human resources for TechnoServe Inc., a nonprofit that helps entrepreneurs in developing countries start businesses, said that in many respects his transition to the nonprofit world wasn’t as big of a change as he expected it to be. “People are people,” he said.

Horan, who spent more than two decades working for the airline industry (an industry that he said jokingly could be considered nonprofit) was reluctant to join the nonprofit sector. So when he was approached by a headhunter representing TechnoServe after he had accepted a change-of-control opportunity from his recently merged airline, Horan’s first response was “not interested.”

But it was the organization’s mission—to give a hand up, not a handout—that won him over. And, once he arrived, Horan said, he found TechnoServe’s desire to focus on the organization’s vision, mission and values very refreshing after working for a company whose mission was “to survive another day.”

“When I walked in [to TechnoServe], one of the first things I was handed was a document describing the mission, vision, core values and strategy,” he said. “It was like being handed the keys to the kingdom.”

Resources Are valued

Because TechnoServe previously had no HR function, Horan was greeted by “a huge outcry for support” once he began talking to country directors about employee development, succession planning and making managers’ lives easier. “It was like dropping a minnow into a sea of piranhas; they just went nuts,” he told SHRM Online.

He soon noticed other differences.

For example, in the airline industry most employees saw their work as a job, Horan said. But that’s not true at TechnoServe. “Because of the way we pay and what we do, this is a calling,” he said. “There is not a person I have met who would not be willing to take a pay cut if necessary.”

And, because field employees, who make up the majority of the 700-employee workforce, are working directly with the poor, they are careful not to waste resources, he added, such as the time they spend in training or the materials they are given to use during a class. “These people will suck the marrow out of everything,” he said, noting that employees in the corporate world often don’t pay attention during training, doodle in their workbooks and take multiple breaks.

The organization is equally careful not to squander resources, Horan noted, especially its human resources. “Instead of outsourcing, we try to take a thoughtful look at anything we want to do and to bring in the brainpower we have,” he explained. “The people we have come from business consulting and have a wealth of information.

“Everything you do, from putting a policy in place to granting vacation time to setting a salary, is done remembering that you are spending other people’s money,” he added. “This isn’t money that the organization is generating for itself. This is money people have given us to go out and do good with,” he said.

History Matters

Laura Viehmyer, vice president, human resources, at The United States Pharmacopeial Convention, a standards-setting organization for the pharmaceutical industry, has practiced HR in multiple sectors, including “about three years in local government, about 12 years working in for-profit organizations and probably about 18 years in nonprofits,” she told SHRM Online.

The first thing she noticed when she transitioned from the private to the nonprofit sector was that the nonprofit organization was “very familial in nature” and that nonprofits, in general, tend to be “steeped in tradition.”

“There are long histories that generate a great feeling of pride of being associated with an organization with such a long timeline,” Viehmyer explained. “The for-profit organizations I have been in have more of a present focus—what is going on today and what is going on in the future?”

But this means that nonprofit organizations might be slow to change.

“The openness and acceptance of rules and policies in a nonprofit depend on the age of the organization,” said Chana Anderson, CCP, SPHR-CA, director of human resources for Jewish Home San Francisco, a not-for-profit nursing facility for older adults. Anderson has worked for two organizations that were over 100 years old. “These organizations are slow to change, as change is not part of their culture. The slow process of evolution historically works for them.”

Impact on Employee Relations

Anderson, who serves on SHRM’s Employee Relations Special Expertise Panel, said there are several key differences in how employee relations issues are handled at nonprofit and for-profit organizations. For example, she said, a nonprofit’s employment policies typically are developed through consensus and often as a reactive measure rather than a proactive one.

“While nonprofits are subject to as many rules as corporations, the social service model extends to staff, and the greater need of the staff has more impact than the survival of the organization,” Anderson explained. “When policies are implemented, they tend to have less detail than [those for] corporations, leaving the manager or supervisor to have greater empowerment. However, this also leads to increased inconsistency of policy application.”

One employee relations area where nonprofit and for-profit organizations’ practices are similar is in handling employee complaints, such as harassment, according to Viehmyer. Those practices are “pretty much the same regardless of industry sector or type of organization,” she said.

Horan agreed but added that nonprofits have another factor to consider.

“Like any organization, we have our instances where employees don’t get along or we have something we need to look into,” he said. But such investigations are conducted with an underlying question: What will the donor think? “We approach any sort of investigation—from harassment to ethical—with the utmost of care and involve many people at very high levels.”

But accommodations for religious observance or disability are handled no differently, according to Viehmyer.

Anderson agreed, noting that disability-related accommodations “are regularly made, typically without the benefit of the interactive process and documentation.

“Because the culture is one of service, organizations tend to work with employees to retain them, whether it be to modify their position, create a new one or even partner with another nonprofit to keep the employee engaged,” she added.

Managing Performance

But in some respects, non- and not-for-profit HR practices are quite distinct.

“Where I see the biggest difference in employee relations is in the performance management arena,” Viehmyer said.

“Nonprofits tend to hold on to staff longer than necessary as a result of the service culture,” Anderson said, meaning that employees are given plenty of room to succeed or fail. “Long-term service with the organization and knowing the practices hold more weight than stellar performance.”

And even if strong performance is expected of employees working for nonprofits, compensation structures are rarely tied to performance, Anderson added: “Less-evolved nonprofits will still provide across-the-board [pay] increases and may annually increase an employee’s salary without the benefit of a performance review.

“Performance standards for employees are often communicated verbally and not set out in written communication goals,” Anderson continued. “Additionally, departmental and individual goals are not always tied back to the organizational goals for the year.”

That’s not true for every nonprofit organization, however.

Horan said TechnoServe focuses on linking employee goals to the organization’s goals with a standard of measurement. “The goal setting is far more rigorous than what I experienced in the for-profit world,” he said.

Even so, the goals might differ from those in for-profit companies.

“In nonprofits, whether there are balanced scorecard goals or strategic plan goals, they are more programmatic in nature,” Viehmyer said, such as a goal to provide resources for a program that does not make any money, whereas in a for-profit organization the goals and metrics are linked to revenue. “When products and services [in a for-profit organization] don’t yield a favorable bottom line, they are terminated quickly, whereas in a not-for-profit they might be retained indefinitely.”

Slow to Terminate

And it’s not just products and services that might be retained indefinitely.

In an April 2009 HR Talk bulletin board posting on the SHRM web site, a SHRM member said “all my HR experience has been in one organization, a social service nonprofit. When it comes to disciplinary actions for performance-related issues, we seem to do coaching, more coaching, more coaching, a verbal [warning], finally a written [warning], another written, one more written for good measure, suspension, and finally a termination. Heck, my last termination took over six months to complete. I’m a big fan of the second chance, and maybe even a third chance; however, I’ve never been able to wrap my mind around the fifth-chance approach.”

“Termination is seen as a last resort for an employee with a long—and I do mean long—history of performance challenges,” Anderson said, unless the employee has engaged in some sort of egregious act such as theft or fraud.

Viehmyer said she has seen “more soft landings” in nonprofit organizations, such as mutual agreement separation with extended benefits. “It’s a kinder, gentler approach to the exiting of someone whose skill sets have not kept up,” she said.

Are Employees Really Satisfied?

“Often, nonprofits assume employees are happy and engaged, simply because they are still employed with the organization,” Anderson said. Therefore, some organizations do not take the time to measure employee satisfaction—or, if they do, they fail to act on the results.

“Of the organizations I have been in, only one measured employee satisfaction before I was hired,” she said. But even after organizations fielded surveys, she found that many “were not ready to address the deep-seated issues revealed in the surveys.

“While employees realized they worked for nonprofits and felt internal satisfaction working for a mission other than money, they wanted the same benefits and compensation practices as the private sector,” Anderson explained. “The nonprofits were not ready to consider many of the corporate-sector ideologies, even if it meant retaining key staff.”

The Best Choice for Some

Despite the drawbacks, Anderson said, working for a nonprofit is a beautiful thing: “Making shareholders money does not motivate me, but walking down the hallways and seeing my customer every day does.

“What these organizations lack in formal corporate structure they make up for in the family environment full of support, encouragement, career expansion (lateral), work/life balance and sense of purpose,” she added.

“The major distinction for me,” Horan said, “is the open willingness to engage that wasn’t there in the for-profit world … the acceptance of HR as a partner rather than as a necessary evil.” He added that the organization is committed to focusing on employee issues, “realizing that our people here are our product and that we want to retain and build the best possible product out there.”

Viehmyer stopped short of choosing one sector over the other: “In the long run, the richest career experience would be from participating in and having an opportunity to contribute in both types of environments,” she said. “If someone has spent their whole career in one environment, they might want to move from one to the other.”

But forewarned is forearmed. Viehmyer said that HR professionals who anticipate the differences they are likely to encounter in a nonprofit will be more likely to have a “much easier transition.”

Rebecca R. Hastings, SPHR, is an online editor/manager for SHRM

Interested in this topic? Learn more at these SHRM 62nd Annual Conference & Exposition sessions, to be held in late June 2010 in San Diego:

• You’ll Love Working Here! The Performance Power of Workplace Culture
• People Are Your Business

Learn more about this event