Why Should Nonprofits Invest in Diversity & Inclusion Work? Arguments for the Budget

pencilsI’ve been worried about the diversity problem in my nonprofit organization for a while.  I’m the #2 person, my Executive Director is a little aloof about these issues – he’s ultimately worried that our white, wealthier donors and board members will see this work as “fringe work” and may think we’ve strayed from our mission.  And he’s right, to a certain extent.  How can we justify spending time and resources on internal diversity and inclusion when we have so little resources to work toward our primary mission?
Add to that the fact that I’m also the go-to person for all human resource complaints.  I’ve been trying to keep a lid on things, but I know unless we do some serious work, we’re going to lose people.  We’ve already lost good people and there’s some in-fighting among staff, although the ED is quite insulated from that.  We have some staff well-versed in diversity and inclusion who are all but calling others out on the carpet for their lack of awareness.  Others are really well-intentioned, but get beat over the head by other staff when they make mistakes out of ignorance.  I’m just not sure what to do, but it’s becoming more and more difficult to manage and if I don’t move the organization on this, I will feel like a hypocrite.
 I know we need to make changes, but how do I make the case to invest in this?
If this sounds familiar, that’s because it’s not unusual.  Many people in what I call historically white organizations have a primarily white leadership tier with more diverse hires at lower levels within the organization.  Well-meaning and well-intentioned leaders struggle with how to proactively improve diversity and inclusion within their nonprofit organizations.  They struggle with how to communicate urgency about this work, how to make a case for investing time and resources in it when both are already coming from overdrawn accounts.
Let’s cut to the chase.  Even though nonprofits are mission-driven, change-making, people-focused organizations, they are still in it for the money.  Not to make a profit, but to fund the work toward their mission.  It’s the reality.  And yes, there’s a much more compelling, human reason for diversity and inclusion at your organization, but that may not be the argument your stakeholders need to hear right now.
If you’re looking at it from a purely dollars-and-cents perspective, consider these facts:
1. The cost of replacing a staff person can cost an organization anywhere from 50% to 200% of that person’s annual salary according to the Society for Human Resource Management.
And diverse staff are much more likely leave organizations they find unfair.   The 2007 Corporate Leavers Report found that people of color are three times as likely to cite workplace unfairness as the only reason for leaving their employer.  Gay and lesbian professionals said workplace unfairness was the only reason they left their employer.  Where does that 50% to 200% come from?  Consider these factors:
  • HR Staff time (exit interview, payroll administration, benefits)
  • Manager’s time (retention attempts, exit interview)
  • Accrued paid time off
  • Temporary coverage – paid and “unpaid” where another staff full-time member assumes responsibilities.
  • Reduction in program delivery
  • Disruptions to team
  • Hiring activities (job posting, resume reviewing, interviewing, HR hiring functions, orientation & training)
It’s even more expensive to replace those who have been on the job less than a year because in many jobs, an employee is not fully productive for many months. This Compensation Today article highlights the costs of employee turnover.  A high turnover rate in the first year can be extra costly for the organization.
2. Failed diversity & inclusion initiatives are expensive.
Many organizations start their efforts with diversity training.  In recent years, research has shown that some of the traditional models of diversity training actually have an adverse effect on an organization.  In the 2012 Harvard Business Review article Diversity Training Doesn’t Work, Peter Bregman shows how rather than improving appreciation for difference, many trainings have the effect of heightening and polarizing difference, leaving people feeling defensive and cynical about training efforts.  The cost of these failed efforts equals not just the cost of the training itself but also the cost of fixing the mess – which includes bringing in better, more effective training, managing the increase in the staff retention costs (itemized above) and possibly lawsuit expenses.
Organizations should start with assessing what their training needs are.  One way to go about that is to use the Intercultural Development Inventory.  It’s a research-based assessment grounded in a developmental model that is non-judgmental and offers specific training objectives based on an individual and group’s intercultural awareness levels.  Most recently, the diversity and inclusion field has been abuzz about the effects of unconscious or implicit bias – prejudices that go unnoticed by the holder.  There are new trainings specifically designed to get at these unconscious choices we make – a critical consideration in the hiring process.
3. In ten years, if you’re not diverse, you will likely find that your grant-funding options will decrease. This is already true of major urban cores and is expanding out to more rural parts of the country as well.
The D5 Coalition is a national group of philanthropic organizations that have come together across the country to advance diversity, equity and inclusion in philanthropy.  They have four main priorities for big sector changes for 2015, one of which is to increase funding for diverse communities and ensure that foundations offer all constituencies equal opportunity to access the resources they need to thrive.  Another priority involves better data collection – including greater transparency of diversity demographics of organizations funded.
In October of 2014, GuideStar, the nation’s leading nonprofit reporting group, announced that it will begin collecting and publishing demographic information about nonprofit board, staff and volunteer diversity.  This will be an incredible tool for philanthropists to access when considering their giving choices.
So let’s tally up our expenses.  While the following exercise won’t be a perfect fit for your organization, you can certainly plug in your own numbers to estimate the cost for your particular organization.
  1. Lost retention of two professional nonprofit staff members: $60,000 (based on annual salary of $45K, plus benefits = $60K x 50% = $30,000 x two people)
  2. Failed Diversity Training = $10,000 (or much more, depending on how much you spend…)
  3. Fewer grant prospects = $50,000 (5% fewer grant prospects= 5% of $1mill budget = $50,000)

$125,000 – TOTAL SAVINGS
By engaging in strong internal diversity and inclusion work, the average one-million-dollar nonprofit has the potential to reinvest a considerable amount of its resources into its mission, build a strong and diverse staff team, reduce turnover, improve service and strengthen its organization.
It’s a new year and time for a new way of thinking.  Let 2015 be the year you decide to do something different.


Kathleen LaTosch at NCRC Annual Conference 2012
Kathleen LaTosch is a consultant specializing in diversity and inclusion planning for nonprofit organizations.  For more information about Kathleen’s work and availability, email her at klatosch at gmail.com

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