Before applying for a grant or asking for a donation, it is important to consider the impact of funding on employees. Increasing requirements from funders often negatively impact and overburden employees. In focus groups we conducted, we found that staff is often overwhelmed with both the volume of reporting and compliance required by funders in addition to the complexity of their work. This is particularly true in the field of human services. Therefore, when vetting potential funding sources, managers should evaluate whether workload adjustments are realistic. If not, will it be possible to hire new staff instead of spreading employees too thin? Considering what will create the best working conditions for staff will help to advance the organizational mission. 

Based on our findings, which you can find in the chapter I wrote here, nonprofits when assessing the impact of funding on employees should consider the following: 

1. Will the funding requirements be too burdensome for the staff? 

Will the compliance requirements be too onerous, or will the expectations of performance be unrealistic and force employees to overextend themselves?  If so, it may make more sense to not apply or accept the funding because it will negatively impact employee satisfaction. 

2. Will staff be appropriately compensated?

Often, funders allot small portions of funding to pay for salaries, despite expecting significant results under very challenging circumstances. As a result, many nonprofit employees often qualify for the very services they provide. Furthermore, they feel underappreciated, disrespected by not being valued for their work, and overwhelmed with their growing duties. This, of course, has an adverse impact on employees and their morale. It also leads them to feel they are working for an unethical organization that does not care about them. 

3. Is enough funding provided to hire an additional staff member for multiple years to avoid overextending and overtaxing employees? 

When organizations do not have sufficient income, many nonprofit leaders feel like they have no choice, but to overextend their employees. They feel there is no other way to pay their salaries in a sustainable way. They also hesitate to create a new position if they know that the funding will not be sustainable because they don’t want to let new employees go in a year or two. This is not only unfair to the employee, but it has a terrible psychological impact on the remaining staff.  As a result, the nonprofit field has a higher turnover than other fields. This practice should be avoided in order to minimize the turnover rate. 

4. How will the management style and culture of the funder potentially impact the administrative and direct service workload?

Does the funder ask a participant to provide the same information over and over? Is the funder known for frequently changing reporting requirements mid-way? Is the funder known for making unreasonable data demands? If their demands do not allow either you or your team to manage their time due to ongoing requests, it may be better to skip that funding opportunity.

5. Will the staff have to shift between administrative and direct-service employees?

Most funding formulas do not accurately represent the dual roles that both administrators and front-line workers must play when they switch from direct services to administrators and vice-versa. Thus, if this must occur frequently, the funding should cover the compensation of employees who play multiple roles.

Impact of Funding on Employees is Only One Step

Examining the impact of funding on employees is just one step in trying to balance the sustainability of an organization with advancing its mission. The chart below outlines the vetting processes that nonprofits should follow before applying for a grant or accepting funding from any potential source.

Source: Mendilow, J., & Phélippeau, E. (eds.)(2019). Political Corruption in a World in Transition. Vernon Press. Chapter Author – Paulina Alvarado-Goldman

Share the Impact of Funding on Employees in Your Nonprofit

Please share with us your experiences. How have different funding sources impacted the employees in your organization? Are there some requirements that are better than others?  

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