The High Cost of Cheap in Nonprofits

At The Collaborative Collective, we hear these frustrations all the time. Staff and volunteers joke about them in hushed conversations, laughing to keep from groaning. But behind the humor is real exhaustion and resentment. Nonprofit leaders love to talk about impact, justice, and transformation. Yet when it comes to their own teams, the commitment to fairness and care suddenly disappears, replaced by rigid budgets and penny-pinching policies.

Here’s the hard truth: being cheap with your team isn’t just bad ethics—it’s bad strategy. When employees feel undervalued and unsupported, engagement drops, turnover rises, and productivity suffers. In the long run, this directly weakens your nonprofit’s ability to fulfill its mission effectively.

Let’s take an honest look at some of the most common ways nonprofits try to save money at their employees’ expense—often without realizing the long-term damage it causes. These decisions may seem like cost-cutting measures, but in reality, they erode morale, stifle productivity, and ultimately, hurt your mission.

1. Branded Merch as “Compensation”

Nothing says “we value you” like a tote bag, right? Instead of genuine appreciation, you hand out company-branded water bottles, hoodies, or notebooks—things that nobody asked for, replacing meaningful recognition with corporate tchotchkes.

Commitment to Real Appreciation: If you can afford custom merch, you can afford to be intentional. Instead of generic swag, offer something truly meaningful: a paid dinner at a restaurant of their choice, additional PTO days, a weekend getaway using company rewards, or covering travel expenses for a spouse or partner to join them at a conference. Gratitude should be thoughtful and personal, not just stamped on a tote bag.

2. Choosing the Cheapest Health Insurance Plan

Nonprofit salaries are already modest, but when you choose a high-deductible, bare-minimum health plan, you're effectively passing a hidden tax onto your employees. They end up shouldering unexpected medical expenses, delaying doctor visits, and worrying about whether they can afford basic care.

Commitment to Employee Well-Being: If you truly value your team, offer a health plan that doesn’t force them to choose between their paycheck and their health. Do you really want staff questioning whether they can afford to go to the doctor? A healthier, less stressed workforce means fewer sick days, higher retention, and a team that can fully focus on your mission.

3. Micromanaging Small Expenses

Your site leaders are running programs, engaging the community, and keeping operations afloat—but you, as an executive, are weighing in on whether they can buy snacks for a staff meeting. Or maybe you’re questioning a $15 supply purchase, requiring excessive approval steps for minor expenses. Meanwhile, larger financial decisions sail through with little scrutiny.

Commitment to Trust: If you’ve hired competent leaders, trust them to make reasonable spending decisions. Micromanaging small expenses signals a lack of confidence in your team and wastes time better spent on mission-driven work. Empower staff to allocate resources wisely instead of forcing them to justify every minor cost.

4. Not Paying for Zoom Licenses

You expect your team to collaborate, meet with donors, and engage partners—but won’t spring for professional Zoom accounts? Instead, your staff is stuck in 40-minute free meetings, scrambling for workarounds or borrowing a colleague’s login like it’s contraband.

Commitment to Connection: If you believe in the power of relationships (as most nonprofits claim to), invest in the basic tools that facilitate them. A seamless meeting experience isn’t a luxury; it’s an operational necessity.

5. Withholding Cost of Living Adjustments (COLA) to Hire More Staff

The logic goes like this: “We could give existing employees a COLA, but instead, let’s hire someone new.” Meanwhile, your current staff absorbs more work, struggles to make ends meet, and quietly starts job hunting.

Commitment to Sustainability: If you can’t afford to adjust salaries for inflation, you can’t afford new hires. Growing at the expense of your existing team is a short-term illusion—burnout and turnover will wipe out any perceived gains.

6. Unpaid “Culture-Building” Work

You expect staff to join after-hours happy hours, serve on committees, and engage in “fun” team-building exercises—on their own time. But when they ask for professional development or a training budget? Crickets.

Commitment to Professional Growth: If you want a thriving organizational culture, invest in your people. Pay them for extra work, support their development, and create a workplace where growth isn’t just lip service.

7. Bare Minimum PTO (or Denying PTO Requests)

Your employees work tirelessly to support the mission, but when they ask for time off? Suddenly, it’s a burden. Worse, some leaders treat PTO as a privilege rather than an earned right, making employees feel guilty for stepping away.

Commitment to Well-Being: If your mission is about caring for people, start with your own. Employees who are rested, recharged, and supported will do better work. Overworked, exhausted staff? That’s a retention crisis waiting to happen.

8. Hiring a ‘Passionate’ Employee at a Below-Market Rate

Passion is not a salary. Too many nonprofits justify low pay with “but they believe in the mission!”—as if purpose should somehow make rent cheaper.

Commitment to Equity: If your work is about justice and fairness, start internally. Fair compensation isn’t just a private-sector concept; it’s the baseline for any ethical employer.

9. Forcing Staff to Work With Broken or Outdated Tech

You wouldn’t hand a carpenter a dull saw, but you expect your staff to work miracles with decade-old software, glitchy computers, and a lack of basic tech support. The result? Lost time, inefficiency, and pure frustration.

Commitment to Effectiveness: If you want staff to be productive, equip them accordingly. Investing in updated tools and technology isn’t an expense—it’s a multiplier for efficiency and impact.

Stop Being Cheap. Start Being Strategic.

Nonprofits exist to make the world better, but that mission starts from the inside. You don’t attract top talent with scarcity mindsets and you don’t keep employees engaged by squeezing them dry.

If you can afford to be cheap, you can afford to do better. The choice is yours.

Need help shifting from scarcity to strategy? We’re here to support you—book a discovery call with us today to explore how to build a thriving team without breaking the budget.