The term 'capital' is generally associated with an asset such as a building, a business, stocks, etc: something that someone owns that can produce value. Add 'human' to that term and it seems slightly contradictory. People are not assets, are they? Well, not in the sense that you'd list them on a balance sheet, but often times the people who run an organization are its strongest resource to generate income, or in the case of non-profits, services. Human capital, therefore, refers to the skills, the knowledge, the proficiency that the people or the workforce possess, which are valuable to an organization.

While difficult to quantify or measure itself, employers demonstrate the importance of human capital by investing in training, professional development, health care plans, and other benefits for their employees. People entering the workforce validate the magnitude of human capital by obtaining graduate or post-graduate degrees, furthering their education, and completing internships in their fields before applying for a job. The better prepared you are to execute a job, the better chance you'll have at getting it and excelling in it. In its simplest terms, human capital is the value people hold in economy.

Employers tend to reward what people bring to a business – how they help the business succeed – with higher salaries, raises or bonuses. How many times have you seen "compensation commensurate with experience" in job postings? This makes sense. The better someone can do their job, the more income they can generate for the company, the more they should be compensated. But what if the business is non-profit? What if it doesn't make sense or is not possible to reward employees financially?  

With the economic downturn, non-profits are struggling to stay afloat. According to the 2011 Portfolio published by the Greater Philadelphia Cultural Alliance, "Almost half of the organizations [surveyed] are in the red. Operating margins (excluding investments), which had been thin in FY2007 (+2%), became negative in FY2009 (-9%)."

On top of diminishing operating budgets, the non-profit sector was already notorious for having under-paid employees. But does that mean they are under-valued?

Show Them More Than the Money
Ellen Owens, Executive Director of Philadelphia's Magic Gardens, explains, "It may seem that nonprofits do not appreciate their employees by giving them small salaries or wages and often locking these rates into place, rather than providing raises, medical benefits, and/or other monetary rewards.  Most non-profits fall into small or medium-sized organizations, where money is tight and staff are often paid below the going rate for their jobs."

For some people who work in non-profits, it's not about the money. A 2009 Gallup Study of Employee Attitudes for Improving the Workplace lists the services of the non-profit as a high employee motivator: "The mission and purpose of my company make me feel my job is important."

"Non-profit professionals are often drawn to the field with a sense of purpose and compassion," says Laurel Klein, Founder of Cafe Olam, an upcoming community space devoted to local food, art, music and culture. "The environment is a lot less competitive and stressful than the for-profit field in that regard. Maybe they do stick around because their passion outweighs their poor compensation."

They may be mission-driven, but many non-profits have been cutting programming and employee compensation to weather the economic downturn. According to a national GuideStar June 2010 Survey, the top six responses for what measures nonprofits used to reduce their budgets were: reduction in activities/ services (58%); salary freeze (50%); layoffs (38%); hiring freeze (30%); reduction in employee benefits (23%); salary reduction (21%).

While these cutbacks are not dissimilar to what is happening in the for-profit sector, the non-profit sector typically lags the general economy by 18 months and therefore will not bounce back as soon. Non-profits' missions, on the other hand, are unwavering. So for now there is more work for fewer hands on deck.

Recognizing and Retaining Value
In some cases, one non-profit job can be extremely important to the entire organization. "Most smaller- to medium- sized Philadelphia arts non-profits rely heavily on their human capital," says Ashley Peel Pinkham, Assistant Director of The Print Center. "When most staff sizes range from only 1-50 members, each member is a crucial element to its success. A certain personality or expertise can elevate an organization's capability to raise money or engage new audiences."

Peel Pinkham continues, "In one way, human capital can make an organization thrive and flourish and, in another, it can be devastating if a key employee leaves and takes his or her institutional memory and knowledge with them. Organizations need to recognize the intrinsic value their staff brings, way beyond computer and communication skills, and make sure they nurture these assets by providing professional development and proper compensation."

So what are Philadelphia non-profits doing to retain employees?

"At Philadelphia's Magic Gardens, we host two staff appreciation potlucks a year, where neighbors and staff can join in mutual celebration of the space with simple food and drink," says Ms. Owens, Executive Director. "We also allow for some wind-down time after our annual fundraiser gala, where employees can relax together after hosting one of our largest and most difficult events."

Other organizations extend similar perks to make their employees' lives easier. Some allow parents to work from home a few days a week to save on childcare, or bring dogs in to the office. Others give days off to attend seminars, conferences, or other events in their field.

"My husband works in a non-profit that has very nice benefits and perks such as: a book, conference and discretionary fund, paternity leave, and I'm sure the list goes on," adds Klein. "Staff appreciation should be the practice of all non-profits."

Non-profits find ways to add perks that don't require much funding as well. "Providing professional development opportunities, even if it means taking staff to free workshops or making introductions at mixers with other cultural organizations/businesses will build their confidence and garner interest in the field," says Ellen Owens. "Hosting small events that allow the staff to enjoy both their institution and their co-workers is another important perk.  Staff spend so much energy providing positive experiences for others--it's important to get them together to celebrate this work together."

Education Can Combat Cuts
In Philadelphia, some non-profits that cut or froze staff salaries in 2009 and 2010, restored them in 2011; though many did not account for cost of living raises that should have occurred during that time period. The general operating funds that contribute to staff salaries is scarce and harder to come by than funding for programs. In fiscal year 2009, the Philadelphia Cultural Fund, which provides general operating money for many Philadelphia non-profits, was cut by 24% -- from $4.2 to $3.2 million. In 2011, it was down to $1.84 million. With less funding available and organizational investments taking the same hit the rest of the economy suffered, there's limited foreseeable chances for non-profit employees to receive higher financial compensation in the near future.

But that future doesn't have to be so dim. The economy will bounce back and corporations, foundations and individuals will increase giving to the non-profit sector; and simultaneously non-profits earned revenue (ie: ticket sales, admissions, investments) will rise. In the mean time, more educational programs in non-profit administration are opening up and growing in attendance. The Philadelphia region specifically now has such graduate level programs at The University of the Arts, Drexel University, The University of Delaware, Temple University, and the University of Pennsylvania.  

Joseph Gonzales is the Director of the Museum Communication Masters Program in the Museum Studies Department at the University of the Arts and standing President of the Museum Council of Philadelphia and the Delaware Valley. "As a researcher and educator in Museum Studies, developing human capital for the museum sector is at the core of my teaching approach. It is my goal and responsibility to prepare students for a demanding field and competitive job market. This includes developing a specialized and adaptable toolkit of competencies, knowledge, and interpersonal skills to meet the present and future needs of the museum field."

As more people enter the non-profit workforce with training and degrees aimed at the specific needs of the non-profit sector, perhaps job efficiency will increase. In the mean time, non-profits should continue to find ways to invest in the people that help them operate.

RACHEL DUKEMAN is Managing Director of Plays & Players and is a cultural marketer and planner throughout the region. Send feedback here.

PHOTOS:

Ashley Peel Pinkham, assistant director -of The Print Center

The Print Center

Ellen M. Owens, executive director of Philadelphia's Magic Gardens

Magic Gardens

Joseph J. Gonzales, Ph.D., assistant professor in the Museum Studies Department at The University of the Arts

Photographs by JEFF FUSCO