So You Want to Work for a Nonprofit? Read This

Recently one of my old school mates in high school quit her corporate job. Understandably, she doesn’t want to spend her whole career helping her company sell more instruments. She wants to work on something more meaningful. Since I have a bit of experience working at nonprofits and philanthropic organizations, she is eager to ask for my advice regarding working for nonprofits. I love her enthusiasm and the eagerness to make the world a better place. My short advice is “Great”! But the real advice is long and complicated.

It might be surprising to a lot of people but one of the most important items on your due diligence list while considering working for a nonprofit is:

How does the organization pay its bills?

In order to work hard to make the world a better place, nonprofits have to have resources to build and support their core programs and to hire and train talented staff to sustain their daily operations. All of these activities cost money!! There are a lot of small business types of nonprofits where the principals work for free, spend their own money to further the causes and use their skills to mobilize the community. I deeply admire these people. However, they are mostly not the faces you see on the major media. They are typically too resource constrained to get any publicity. But if you could afford to work for free and know what causes you want to work on, this would be a very fulfilling life path to take.

If you are looking for a job at a nonprofit with full pay and benefits, then the nonprofit must be some kind of establishment. Figuring out their business model is the key. Typically, there are four ways nonprofits get funded:

1) Program and Service Revenues

2) Small donations from regular individuals

3) Public funding from government programs

4) Large donations from corporations, foundations and wealthy individuals

If a nonprofit is largely funded by the program and service revenues, it’s basically functioning like a regular business by providing products and services people are willing to pay such as museum tickets or after school programs. But unlike C-corp, profit-maximizing is not supposed to be the goal. I think it’s a good way to build a sustainable non-profit *business*. But then the question becomes why organize as a non-profit at all?! Being a nonprofit does introduce more overhead for compliance, legal and accounting costs. It might not be worth it if the organization doesn’t require any donations to be sustainable.

Except for museums and religious institutions (and maybe Wikipedia), I don’t see a whole lot of organizations who could sustain themselves by only taking small donations. Here is the math: Say you need to raise $100K. You can do it by getting $10 donations from 10,000 people. In order to get 10,000 people to donate to your compelling cause, assuming 10% conversion rate, you will need to reach out to 100K people. Getting 100K people’s attention is hard and a 10% conversion rate is extremely high. You probably need to pull a Bernie Sanders to make this happen.

If a nonprofit is primarily government funded, then you are basically working for a government affiliated institution. They are typically more risk averse and their funding could get cut after the grant period expires. If you are into this, then why not just work for the government? There’s typically more job security and retirement benefits.

Finally, let’s get into the most intriguing part. If a nonprofit is funded by large donors, you want to be aware of the power dynamic between the leadership and the major donors. The major donors could have a lot of influence over the direction and the projects happening in the nonprofit. After all, the projects/special initiatives are largely funded by these donors who are basically super rich people and big corporations whose motivations might not be 100% pure. If these donations are not *renewed*, the projects would get canceled and people would get reassigned or laid off. Capitalism is working its magic in every corner of our society. The reality is big donors really have quite a bit of control over what work is being done in the *nonprofit* world. Before you join a nonprofit, I would suggest you put on your cynical glasses and think of practical reasons why the major donors give money to the nonprofit you are about to join and how long it would last. If you can see an aligned vision, tangible impact and long term funding, you could feel more reassured. Otherwise, it might be a good idea to reconsider.

I am simplifying things quite a bit here. A nonprofit could be funded by a combination of funding sources mentioned above. During your due diligence process, I would recommend trying to figure out how your project and your role would be funded as detailed as you could. It would help obtain a good picture of the goal and structure of your future work and in turn help you decide if it would be a good fit for you. I joined a nonprofit after more than a decade working for various technology companies. When I was trying to switch to a different higher-impact project at the nonprofit, it dawned on me I actually couldn’t just do it the way I did it at the technology companies where roles and projects are often flexible and dynamic. My role at the nonprofit was financed by particular grants for specific purposes. Switching to a different project will take quite a bit of administrative and accounting work, assuming there’s budget for the new project. I was able to work it out in the end but if you ask me if I want to go through it again, my answer will be no.

To summarize, when considering working for a nonprofit, you want to be comfortable with how the nonprofit gets their funding and make sure your expectation is realistic. Nonprofit is just a label. If you are prioritizing making a positive impact for your career, look for projects you are passionate about and people who share your values. You might end up working for a for-profit company that turns out to be a not for profit cause with a self-sustaining business model.

If you are looking for opportunities to make the world a better place, consider joining the following Brighter Capital companies. They are hiring:

• Binti: Helping Every Child Have a Family
• Read To Me: A Digital Platform for Students and Teachers Dedicated to Solving the Literacy Crisis through Reading out Loud
• Terraformation: Reducing Greenhouse Gases through Reforestation