Beyond Salaries: Understanding and Managing the True Cost of Nonprofit Talent

Key Takeaways: Beyond Salaries: Understanding and Managing the True Cost of Nonprofit Talent

Executive Summary

The webinar focused on the comprehensive costs associated with nonprofit personnel beyond just salaries. Key points included the importance of understanding hidden costs such as recruiting, onboarding, training, turnover, and benefits. Naima from Kansas Big Brothers Big Sisters shared her experience in effectively managing and budgeting these costs, emphasizing the use of historical data and collaboration with HR to create realistic budgets. The discussion highlighted the challenges of nonprofit staffing, including high turnover rates and compensation gaps, and the necessity of using data-driven forecasting and scenario planning to build sustainable staffing models. The session also underscored the importance of cross-team collaboration and the role of technology in enhancing accuracy and efficiency in personnel budgeting.

Speakers

Kelli Goody, MPAc, Sr. Strategic Solutions Consultant, Martus Solutions
Naima Loera-Mexsen, Controller, Kansas Big Brothers Big Sisters

Key Takeaways

1. Personnel Cost Analysis: Nonprofit personnel costs account for 60-70% of total budgets, making it crucial to understand both direct and indirect costs for sustainable planning.

2. Data-Driven Forecasting: Historical data and forecasting are essential for creating realistic personnel budgets, considering factors like turnover, benefits, and regional hiring challenges.

3. Cross-Team Collaboration: Cross-team collaboration, especially between finance and HR, is vital for accurate budgeting and managing hidden costs such as recruitment, training, and retention efforts.

4. Technology-Enhanced Budgeting: Technology solutions like Martus can significantly streamline the budgeting process, reduce manual errors, and enhance data-driven decision-making.

5. Secure Budgeting Tools: Implementing secure, user-friendly budgeting tools with role-based permissions can foster better engagement and ownership across finance and non-finance team members.

Key Quote
"Understanding the big picture is just as important as tracking the details."

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Webinar

Watch Full Webinar here.

FAQs: Beyond Salaries: Understanding and Managing the True Cost of Nonprofit Talent

General Information

1. What is the main focus of the webinar?
The main focus of the webinar is to explore the true cost of nonprofit talent, going beyond just salaries, and to discuss effective strategies for budgeting and managing personnel costs in nonprofit organizations.

Personnel Budgeting Challenges

1. Why is budgeting for personnel in nonprofits complex and challenging?
Budgeting for personnel in nonprofits is complex due to many unknowns such as turnover rates, new employee benefits elections, and the time it takes to hire. Additionally, controllers often do not have a say in hiring decisions, making it crucial to rely on historical data and maintain open communication with other departments.

2. What are some hidden or overlooked costs in personnel budgeting?
Some hidden or overlooked costs include job advertising, overtime for staff covering for open positions, and costs associated with staff retention efforts such as team lunches for new hires.

Data and Forecasting

1. What types of data are most instrumental in creating a realistic personnel budget?
Historical data (three to five years) and current data are most instrumental. This includes turnover rates, demographic information of new hires, and specific reports on staff allocations and milestones.

2. How often should personnel budgets be updated?
Personnel budgets should be updated regularly throughout the year to account for changes such as staff turnover, promotions, and benefit elections. Creating different scenarios and updating them as new information becomes available is crucial.

Cross-Team Collaboration

1. Why is cross-team collaboration important in personnel budgeting?
Cross-team collaboration is important because finance teams often do not have all the necessary information about staffing changes, allocations, and other factors that impact the budget. Collaboration with HR, program managers, and other departments ensures that all relevant data is considered.

2. How can technology facilitate cross-team collaboration?
Technology can facilitate cross-team collaboration by providing a centralized platform where different teams can input and access data. Tools like Martus allow for secure, role-based permissions, ensuring that team members see only the information they need.

Choosing the Right Tool

1. What should organizations look for in a personnel budgeting tool?
Organizations should look for a tool that is easy to use, secure, flexible, and capable of centralizing data. It should support collaboration, enable scenario planning, and have robust permissions to protect sensitive information.

2. How has technology improved personnel budgeting for nonprofits?
Technology has improved personnel budgeting for nonprofits by making data more accessible, reducing the time required to create and update budgets, and providing tools for more accurate forecasting and scenario planning.

Blog: Strategies for Effective Personnel Budgeting in Nonprofits

Personnel expenses constitute a significant portion of a nonprofit's budget, often ranging from 60 to 70%. Understanding the full scope of these costs, including both direct expenses like recruiting, onboarding, and training, and indirect costs such as loss of productivity and team disruption, is vital. Effective personnel budgeting requires a comprehensive approach that goes beyond just calculating salaries. It involves accounting for benefits, promotions, turnover, and other variables that impact the overall budget. This blog will explore strategies for effective personnel budgeting and demonstrate how leveraging technology can transform this essential task into a streamlined, data-driven process.

Effective Personnel Budgeting Strategies for Nonprofits

Nonprofits face unique challenges in personnel budgeting due to unknowns like turnover rates, new employee benefits, and the time required to fill positions. Historical data provides a baseline, but current trends and future projections must also be considered. Effective communication and collaboration with HR are vital for creating accurate and realistic budgets, helping anticipate changes like leadership transitions and demographic shifts that impact staffing needs and costs.

Access to data is a common challenge for many nonprofits. Investing in reliable data tools can significantly increase productivity. For example, software like Martus streamlines the budgeting process, reducing time from months to weeks, allowing organizations to focus on data analysis and informed decision-making. Running various reports and examining data from different perspectives can uncover hidden costs that might otherwise be overlooked.

Hidden costs in personnel budgeting, such as job advertising, overtime for existing staff covering vacancies, and small expenses like taking new hires out for lunch, can add up. These costs vary depending on location and organizational needs. Monitoring these expenses and adjusting budgets accordingly helps avoid unexpected overruns and better manage financial resources.

Creating a realistic personnel budget requires balancing historical data with current trends. Partnering with HR to understand turnover rates, upcoming retirements, and other factors provides valuable insights. Considering milestones and other incentives that may impact the budget is essential. Investing in a detailed and data-driven budgeting process saves time and reduces stress in the long run, ensuring nonprofits are better prepared to navigate personnel costs and maintain financial stability.

Effective personnel budgeting starts with creating a baseline scenario, serving as the foundation for all future updates and adjustments throughout the year. Accounting for changes like staff turnover, salary adjustments, and benefit enrollments keeps the budget accurate and up-to-date. This proactive approach simplifies the budgeting process and prepares the organization for unexpected changes.

Scenario planning is critical in personnel budgeting. By creating multiple scenarios, organizations can anticipate different outcomes and plan accordingly. Modeling scenarios, such as a 3% salary increase or significant changes in benefit enrollments, helps in making informed decisions and preparing for various possibilities. This approach identifies potential risks and opportunities, allowing for more strategic planning.

Technology has revolutionized personnel budgeting, making traditional methods like Excel spreadsheets obsolete due to their time-consuming nature and error-prone processes. Modern budgeting tools automate manual processes, reducing errors and saving time. They offer advanced features like scenario planning, real-time updates, and detailed reporting.

Cross-team collaboration is essential for effective personnel budgeting. Finance teams need accurate and timely data from HR and program managers to create comprehensive budgets. Technology facilitates this collaboration by providing a centralized platform for stakeholders to access and share information, improving communication and decision-making.

Effective personnel budgeting in nonprofits goes beyond calculating salaries. It demands a thorough understanding of both direct and indirect costs, collaboration across departments, and access to reliable data. Investing in the right tools and processes helps create accurate and realistic budgets, supporting sustainable staffing models. This strategic approach aids in managing daily operations and prepares organizations for future challenges, ensuring they can fulfill their mission effectively. Ultimately, fostering a collaborative culture and leveraging technology enhances the efficiency and effectiveness of personnel budgeting, contributing to long-term organizational success.