In the three years since Dan Pallotta, the controversial nonprofit activist, delivered a TED talk called "The Way We Think About Charity Is Dead Wrong," the video has been viewed more than 3.7 million times and has changed the conversation about economic incentives at America’s charities. Mr. Pallotta argued that for nonprofits to achieve their desired impact, they need to pay their leaders and employees like a Silicon Valley start-up or investment bank.
His argument is compelling — and, it turns out, dead wrong.
In 2015, my team at Imperative, a B Corporation devoted to helping people find employment that fulfills their sense of purpose, studied the U.S. work force in collaboration with New York University and published the results as the Workforce Purpose Index. We collected data from across the labor force, including at nonprofits. We found that people who help their companies expand and achieve incredible results — whether at charities or investment banks — are not motivated by money and prestige. As detailed below, the index shows that the most effective employees are motivated most by a sense of purpose.
Most nonprofit employees aren’t purpose-oriented. Our research showed that the majority of people working at nonprofits aren’t primarily motivated by helping others and their own personal growth. Fifty-five percent of the people who teach our children, care for the sick, engage voters, and conduct other nonprofit tasks see work as more akin to a financial transaction or a game to be won.
We found that there are two work forces today at nonprofits. One of them — making up about 55 percent of nonprofit workers — views work as a means to get a paycheck or gain personal advancement. The other 45 percent is remarkably different. This group defines work as being about relationships, having a meaningful impact, and personal growth. They see work as a means to serve others and grow themselves. They need to get paid and be acknowledged, but that’s not what gets them out of bed each morning. These are the people we came to call "purpose-oriented workers."
Purpose-oriented workers are top performers. As someone who has worked with nonprofits for a long time, I was alarmed by the study’s findings. They seem so counter to the origins and ethos of the nonprofit world.
What is perhaps more critical than the divide between purpose-oriented workers and others, however, is the implication it has for performance. The index showed that purpose-oriented employees are exceptional. Compared to their status- and money-oriented peers, they scored higher in every measure, including expected tenure, job satisfaction, perceived contribution at work, and leadership roles.
Mission alone doesn’t provide purpose. In 2015, the YWCA Metropolitan Chicago asked Imperative to survey its employees to measure their fulfillment at work. The data revealed a challenge that most nonprofits face in creating a satisfying work culture: The YWCA leadership had been relying on the organization’s mission to fulfill the team, while drastically underinvesting in employees’ growth and relationships.
Nonprofits are supposed to help people in the neediest communities thrive. Yet according to the Workforce Purpose Index, 57 percent of those who work at nonprofits report low levels of fulfillment and satisfaction in their work. How can we expect nonprofits to fulfill their role in society if their own workers aren’t thriving?
Money won’t close the purpose gap. Rather than radically boosting executive compensation, our research suggests, nonprofit leaders should focus on closing the purpose gap at nonprofits. Creating opportunities for purpose will do more to increase employee fulfillment and boost performance than throwing hard-to-find dollars at the problem.
In working with leaders, we found these two key strategies for closing the purpose gap in an organization.
- First, screen hires for a focus on purpose. Work orientation is a trait, not a state, which means it stays constant over the span of one’s career. It is not driven by a specific job or employer; it’s something we bring to work. This means nonprofits need to invest in screening and hiring purpose-oriented workers. Bringing in such employees is the fastest and most effective way to close the purpose gap.
- Second, invest in relationships and growth. To attract and retain these exceptional employees, nonprofit leaders need to invest in building cultures in which people can foster deep relationships and grow.
This doesn’t mean investing more money in catered meals and staff retreats. It requires designing jobs so that employees have clear paths to grow and opportunities to try new challenges. It means designing work to be social and not isolating. It is about trusting people to bring their whole selves to work every day and develop human relationships, not guarded, professional ones.
To attract the best people, nonprofits don’t need to overcompensate their workers the way Silicon Valley does. Rather, they need to make a radical shift in who they hire and the overall work culture. They need to realize that it isn’t enough for employees to know that their organization is doing important work.
Many nonprofit leaders assume that their mission is enough to make work meaningful for their teams through extrinsic rewards. Our research makes clear that it is relationships, especially with co-workers, and opportunities for personal growth that together create fulfillment at work, be it at a nonprofit or in Silicon Valley.
Aaron Hurst is chief executive of Imperative and author of "The Purpose Economy."