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Human Capital Investments, A Cost Benefit Analysis

In his piece, “United We Stand, Divided We Fall,” my colleague Joe Kluger writes about the  growing trend of unionization in the nonprofit arts sector and offers nonprofit leaders some suggestions for showing support for the employees in their organizations. This topic has been on my mind for almost as long as I’ve been in the sector and I’m encouraged by the increase in dialogue that’s taken place as a result of workers’ bringing their frustrations to the fore.

Generally speaking, employees join unions when they become dissatisfied with how they feel they are being treated by management and conclude that a union is the best way to protect their interests and be heard. Nonprofits unfortunately rely too heavily on the assumption that “passion pay” can make up for low wages, long hours, and few benefits. Being under-compensated is one reason employees seek union assistance, but there is more to this issue than a paycheck. When a workplace’s culture is at its best, people are rewarded both intrinsically and extrinsically.

Making workplace conditions better isn’t rocket science, it’s common sense, as is the growing understanding that investing in human capital is a key strategy for strengthening organizational capacity, productivity, and sustainability. In my almost thirty years of experience in this sector I’ve found that very few nonprofit arts organizations have any staff members with HR experience or training. As a result, there is little internal knowledge about what are best practices in human capital management or how to implement them.

Recently I saw Larry Bourgerie, a senior lecturer at the University of Minnesota’s Carlson School of Management, talk about the importance of creating a “culture of civility” in the workplace. He noted that best practices in performance management link an organization’s desired workplace norms and culture to their human capital strategies and practices. Bourgerie provided a list of attributes with which workers in high performing organizational cultures can identify. As I was preparing to write this post, I thought about the list, added a few of my own and wondered how many of these statements workers in nonprofit arts organizations would be able to say are true for them:

  • This is a great place to work
  • This is a results-oriented organization and we accomplish our goals
  • I can use my skills and abilities here
  • My manager is interested in my professional development
  • This is a great place to learn, grow and develop
  • We know what is going on elsewhere in the organization and see how our work aligns with organization-wide strategies
  • There are clear expectations of me, and I know how I can fulfill them
  • I feel I am compensated fairly for the work I do
  • The compensation structure has been explained to me and I understand how my pay is determined
  • I have a voice in workplace matters that impact me and I feel I am heard

Of course, even in organizations with the best workplace cultures, every statement above will not be true for everyone. However, in organizations in which people are thinking about the upsides to unionizing or where employee engagement is low, there will likely be far fewer true statements than false ones. Consider too that as employees experience greater dissatisfaction in the workplace, there are increased organizational costs – both hard and soft – such as:

  • High employee turnover
  • Difficulty recruiting and hiring
  • Decreased employee loyalty and commitment
  • Decreased productivity from turnover and retraining
  • Increased absenteeism
  • “Quit and Stay” employees – those who check out of their jobs, but don’t leave the organization
  • Loss of a reputation as a desirable place to work

Are we willing to undercompensate employees but pay the high cost of their dis-engagement? All the studies show that creating a culture that regards employees as an investment and prioritizes their well-being in the workplace can make for a high-performing, mission-centric organization and a great place to work. It can also be good for the bottom line.


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