The Dangerous Cost of Employee Turnover for Non-Profits: 3 Ways You Lose When Employees Keep Leaving

For non-profits, the cost of employee turnover goes far beyond revenue and can impact the mission and define the culture of your organization.  Why do non-profit employees leave, what is the net effect, and how can leaders repair the damage?  The solution is more natural than most executive directors and non-profit leaders realize.

How does high staff turnover start?

I once had a board member say to me, “When I hire a new employee, I expect them to be useless to me for 6 months.” This was in response to a question about staffing in the midst of a leadership change at a non-profit. Non-profit staff retention is a real and persistent problem for organizations and with it comes the cost of employee turnover. 

If you’ve ever worked for a non-profit, you know that two things are true: (1) staff retention is a real problem for non-profits and (2) when employees leave, you need someone to fill that role immediately and effectively. There is no runway or months long training. You’re often filling a position that is crucial now, not 6 months down the road. And what if the organization is filling multiple positions at once on a small staff? This is an all too common problem in non-profit staffing. 

This all begs the questions, what happens when an organization has frequent staff turnover, how does it hurt the organization, and what is being lost when staff retention is poor? In this post, I will explore what can lead to poor staff retention in non-profits and what the cost can really be – from time, to money, to institutional knowledge and systems, and more.

Toxic work culture in a non-profit

There are many costs of constant staff turnover that I will detail later but when you look at them cumulatively, they all add up to create one thing: toxic work culture. Ultimately, your organization cannot thrive when staff morale is low and everyone knows it’s just a matter of time (maybe only months) before another person leaves.

You see, when employees are happy and secure in their workplace and are passionate about their work, they get the work done. They have professional working relationships with their co-workers, sometimes friendly ones. And there is little to distract them in a healthy office dynamic.

Too often, organizations tend to rely only on the second part of that equation – employees’ passion for their work, the mission, and the organization. Don’t get me wrong, that’s a great thing to have. But it cannot exist by itself and still reliably create a secure environment. When the organization relies too heavily on that, it tends to only take from their employees, never give. They’re living in the now, not thinking ahead to the cost of employee turnover.

The taking only increases until everyone is unhappy. What happens when everyone is unhappy is that they talk. They talk to each other about how overwhelmed they’re feeling, how they’re not appreciated, how they can fix it. When they’re talking, what they’re certainly not doing is working. And when nothing ultimately changes and they’ve reached their limit? Voila – massive staff turnover, naturally leading to the cost of employee turnover.

Why do non-profit employees leave?  

Here’s where we run into a bit of a chicken or the egg scenario. Do employees leave because of the toxic workplace? Or is the workplace toxic because people are constantly leaving? I would argue that the answer is yes – to both. The reasons people leave create the toxic work environment and the turnover adds yet another element to the toxic work environment. 

The reasons that employees leave and create poor non-profit staff retention are many and varied.  Perhaps the biggest is the piling on of responsibilities and additions to your job description. Added work when you’re performing well is an all too common occurrence. This additional work almost never comes with a pay raise, either. 

In the same vein, you’re expected to participate in everything. All events are “all hands on deck”. There’s often a small staff so general miscellaneous items get delegated to you. You also have to do absolutely everything for your department yourself. Sometimes that’s being your own marketing department and sometimes it’s moving an industrial fridge by yourself (yes, that’s a real example and yes, several of us helped that unfortunate soul). 

There are also times when the staff and board relationship can be tense. Non-profits have a board of directors tasked with fiduciary oversight and sometimes they are not serving that role properly. Whether it’s mismatched expectations, too much direct access to staff, or too big of a role in day-to-day operations, this can create a breakdown in trust between staff and board. (If you’re curious about board and staff relations in a non-profit, check out this resource from Board Source.)

All of these reasons may seem trivial when isolated. However, add them all together and you have a problem. Compounding these issues is the compensation non-profit organizations are able to offer. Too often it is uncompetitive but sometimes it is downright insulting. People who may be able to overlook the other reasons when compensated with a nice paycheck simply cannot afford to when making a pittance.

The real cost of employee turnover:  3 ways you lose by not investing in your people

Now we know why staff turnover occurs but what is the real cost of employee turnover? There are many things that constant staff turnover can cost you but we’re going to focus on the big three. These are the three costs that are most detrimental to your organization.

The first cost:  losing your hiring and training investment

The most tangible cost of employee turnover is your investment and it’s two-fold: time and money. When you hire someone, you are investing your time (a finite resource) and your money (a sometimes replenishable resource) in that individual.

Your time is the hours and days it takes to post the job opening, interview for the position, hire a person, and train them. When your staff is a revolving door of personnel, you’re constantly stuck in the cycle of hiring and training, just for the staff turnover to continue. As soon as someone leaves, that investment of time is lost. You must start the process over with someone new and you cannot get that time back.

The money aspect, though sometimes harder to measure, also has an impact. It’s not always free to post a job so you have an actual measurable cost there. And if executive staff is participating in interviews, guess what they’re not doing? You bet, their regular work. And this time translates to a portion of their salary that is lost to this hiring churn.

The second cost:  institutional knowledge lost to staff turnover

A less tangible cost of employee turnover (but just as important) is institutional knowledge. This is knowledge about the organization and its systems that cannot be recovered once lost. This ties into time lost training new employees, but there are also the elements that cannot be imparted through training. They are simply gained through the familiarity that comes with time spent at an organization.

This is compounded by the fact that many non-profit organizations have a department of one – one person who knows how that department runs and the intricacies of the day to day. So what happens when that person leaves? Even if they kept meticulous notes and records (which is optimistic at best, delusional at worst), there are things that cannot be conveyed through a document.

I once worked at an organization where the worst-case scenario of this exact situation occurred. One person decided to leave and they were their entire department. They’d also been with the organization for 15 years. Leadership was unprepared for this exit and did not have a replacement lined up, so they did not even have the opportunity to train their successor. 

When they left, the department descended into chaos. Other staff members were left to attempt to pick up the pieces, while relying on second, something third-hand information. Through no fault of their own, they had taken their institutional knowledge with them and left confusion in their wake.  This is an unfortunate cost of employee turnover.

The third cost: compromised trust from employees 

Perhaps the most intangible cost of employee turnover, yet most detrimental, is loss of trust from your employees. When trust is lost, the relationship can be very hard to repair. Your promises no longer mean anything to your employees. You can no longer rely on their dedication to the mission when you’ve lost their loyalty. 

This is the ultimate cost of employee turnover. Because the result of the other costs is that the brunt of the consequence does not fall on leadership, it falls on the employees. They are being assigned entire job descriptions to fill the gap with no extra pay. They’re the only ones with remaining institutional knowledge, so all training of new employees falls to them. 

And worst of all, they know it will happen again. Maybe they will leave this time when they’ve finally had enough. I’ve seen a massive staff turnover happen more than once, more than twice even. You may have a year of stability before someone leaves. But it never stops at one, so inevitably five more go in the next few months. And so the cycle begins again, again incurring the cost of employee turnover. How long before you have an entirely new staff than you did two years ago?

Strategies for improving staff retention

Though this has been a pretty bleak exploration into poor non-profit staff retention, hope is not lost! You can stop the cycle and revolving door of employees to end the churn and cost of employee turnover. But the challenge is having leadership and board on the same page. Effective leadership development doesn’t hurt either.

Once that happens, start taking a people-first approach to your leadership. Show employees that you truly value them, in both word AND action. Though you might not be able to give raises all around, compensate those that are doing extra work when a position is being filled. Don’t pile on the work and don’t ask employees for more than they can reasonably give within a 40 hour work week.

The trick is, this has to be genuine. People know when you’re being phony and it won’t get you anywhere. You have to ACTUALLY care about the people you’re managing, not just pretend to. You’d be surprised how far that can get you in lowering the cost of employee turnover for your non-profit.

And finally, make a plan for when the next person leaves – and you will have a next person. It’s not as if you can stop staff turnover entirely, so instead, be prepared for when it does happen. Build redundancies into the workflow of each department and standardize your record keeping. Then when the next person leaves, you’ll be ready. Now you’re on your way to growth for a non-profit organization. 

Need help with your non-profit? Book a free discovery call with AstroCat today through our contact form!