Skyrocketing Costs and Tech Talent Wars: The Problems Silicon Valley Nonprofits Face

Print Share on LinkedIn More

September 15, 2016; Fast Company

Over the years, we have covered an array of nonprofit news from the high tech world of Silicon Valley—from social change drivers to gender diversity and inclusion and bridging the digital divide. We have also examined philanthropic advocacy for tech leaders looking to “do good,” public-private partnerships, and charter school initiatives in the San Francisco Bay Area.

We now come to the evolving topic of nonprofit technology startups in Silicon Valley. An article by Fast Company elaborates on the challenges that this latest breed of nonprofits struggles with as they operate in the Valley. This offers a new lens to view the backfiring attributes of Bay area inequality.

Unlike traditional nonprofits, these technology-integration organizations provide apps, digital tools, and website design services that support social programs and service deliveries. Many people may think that Silicon Valley is a good match for these nonprofits, considering the funding potential of most of its residents. The problem is that despite its reputation of being home to the nation’s wealthy, tech-talented entrepreneurs, Silicon Valley is actually not an ideal start-up haven. Extremely high living costs, and “a war for talent continues to drive tech workers’ salaries beyond the reach of the nonprofit sector.”

It was just yesterday that an NPQ team member wrote a feature story about the latest GuideStar nonprofit compensation report. The report indicated that health and science related nonprofits enjoy the highest salaries in the nonprofit sector. Meantime, Fast Company confirms that according to the latest Dice survey, the average salary for private sector tech workers jumped by nearly eight percent nationwide in 2015 to $96,370 per year. The range exceeds six digits in Silicon Valley. According to the survey, this trend is expected to continue in 2016.

In contrast, the same survey indicates that government tech workers’ salaries increased in 2015 by almost seven percent to an annual $91,172. (This is a national average.) The report does not indicate the average earnings of a nonprofit tech worker. However, according to a 2014 Nonprofit Times report, non-executive nonprofit IT salaries ranged between mid-$60k and upper $70k. Private sector IT workers’ salaries rose on the national level to six digits that same year. These high salaries parallel the Valley’s extraordinarily expensive real estate and overall cost of living. These factors are detrimental to nonprofits, which struggle to provide much-needed services.

According to the article, Naldo Peliks, COO of the nonprofit Central Community Partners, says that CSR (corporate social responsibility) initiatives that are meant to support IT-related nonprofits in Silicon Valley simply do not cut the cake. Pelkis points to challenges pertaining to capacity issues. The amount of time that even the most socially driven tech giant’s employee can spare on the side is very limited. Their full-time work is time consuming enough. For a nonprofit IT services provider to survive, “the requirements are pretty intense,” which is why the time constraints impose significant barriers.

While the in-kind support that many tech companies provide as part of their CSR models is always appreciated, the lack of ability for software engineers to commit more time to work at these types of nonprofits slows technology development and related service capabilities. This is a critical detriment in a cutting-edge sector like IT services, where things have to move fast. Outsourcing to freelance tech workers who are overseas (the article notes locations like Venezuela and the Ukraine) is more affordable. However, the article reminds us that it does not speed things up considering the distance communications and related “small pockets of hours” available.

The article concludes with the views of a Vodafone Americas foundation director, June Sugiyama. She explains that the mindsets of most philanthropists interested in funding nonprofits lean more toward naming “an office or a building or a sculpture or a project- something you can point your finger at” rather than paying salaries. The resulting lack of staffing creates less fruitful outcomes and “in the long run, the recipients of these services are the ones who are losing out.”

Where does this leave us? It seems that the struggle to incentivize corporate to provide program- and services-specific funding—rather than logo-displaying arenas—continues. The industry partnerships that do go beyond such displays present staffing constraints on both sides of the token.

Nonprofit sector academics have questioned why it is sometimes more expensive to develop a nonprofit than some for-profits. One reason is not new, and that’s the concentration of nonprofits in the Northeast and Pacific regions of the U.S. However, that certainly does not support an argument for any region to lack human services. Another recent NPQ article asks the overarching question: What’s a cash-strapped nonprofit to do? The Fast Company article shows that the complexities behind the question endure.—Noreen Ohlrich