The nonprofit sector is facing a massive talent shortage, which makes scaling a social enterprise extraordinarily difficult. To achieve impact, it’s critical that social entrepreneurs attract, retain, and develop skilled talent. Competing directly with the private sector to do so is not only a good idea; it’s a necessity for the best organizations to succeed.
As the head of Year Up, a social enterprise that has grown rapidly since 2001 (we have a 49% average annual growth rate in students served), I’d like to share what I’ve learned about going head to head with for-profit enterprises to secure the best talent. Year Up is empowering urban young adults with the skills, experience, and support to move them from poverty to professional careers in one year. We’ve been able to bring in and keep the right people by focusing on our mission, paying competitively, getting occasional help from professional recruiters, and ruthlessly focusing on talent development.
Leverage your mission. Nonprofits have an inherent asset in recruiting against their for-profit competitors: purpose. Many more young people today are looking to make an impact — in 2004, 5% of HBS’s first-year class applied for summer internships with Year Up — and that desire for purpose doesn’t go away as someone advances in their career. Indeed, three of Year Up’s five senior leaders came to us from the private sector, and their skillsets have been vital to scaling our impact.
Focus on culture and growth. Many nonprofits are able to attract talent, but struggle to develop and retain it. To do so, enterprises need to have a strong culture, excellent managers, and continued plans for growth. We continually strive for that kind of environment at Year Up. We regularly survey our staff to identify our cultural and managerial strengths and weaknesses, and we use the results to inform our annual planning process. Growing the organization helps us to serve more students directly, but it also drives down staff attrition by creating opportunities for advancement that rival the private sector.
Pay as competitively as you can. Year Up pays competitive salaries that are augmented by great benefits. Our pay scale will never be able to compete with investment banks, but that doesn’t mean a prospective employee shouldn’t be able to envision a prosperous future. If we want to go up against the private sector for the best talent, our employees need to know that a medical emergency will not bankrupt them, that their children can see a doctor when they need to, and that they are able to save for retirement through our competitive 401K matching program. We have had valued employees thank us for the difference our health insurance has made in their lives; one woman told me that she is alive today, as a cancer survivor, because she had been able to get access to the best treatment in the world. That kind of coverage matters to our employees, and is an important reason they come here and stay here.
Invest in leadership. To get the right leaders in the right seats, Year Up has often used executive recruiting firms to find the best talent, even though this takes a lot of time and money. Equally (if not more) important is our ability to attract committed, smart, talented young employees and then nurture their development. We challenge ourselves to attract committed, smart, talented young employees and then nurture their development. In addition to our formal leadership development initiatives, which we have ramped up over the last two years, we also give every employee $2,000/year in professional development funds. This isn’t just added compensation. Ultimately, we want to offer the same kind of career aspirations that are available at the world’s leading for-profit companies; although nonprofits have historically had about 25% of their leadership hires and promotions come internally, we instead try to match the 40% rate that for-profits seek.
Year Up’s benefits average about 30% of an average full-time employee’s salary, which is not inexpensive, but these investments have fueled our growth from serving 22 students in one city in 2001 to 1,500 nationally in 2012. Far too many nonprofits are hesitant to make these kinds of investments, and the sector has suffered as a result. Social entrepreneurs worry about increasing their cost-per-client or convincing donors to fund these areas, but this has too often meant that they are unable attract and retain the best employees. Enterprises shouldn’t save money by cutting recruitment and development costs.
For the social enterprise movement to realize its potential, organizations will need to invest in the recruitment, development, and growth of their future leaders, just as for-profits do. People provide the real growth capital for any enterprise — and make it possible for them to have an impact.
Follow the Scaling Social Impact insight center on Twitter @ScalingSocial and register to stay informed and give us feedback.
Scaling Social Impact
Insights from HBR and The Bridgespan Group
Two weeks ago my colleague 
