S.O.S.—Nonprofits Need Funding for “Staff Operating Support”

The nonprofit sector is adrift in a flat sea, with no wind, tattered sails, and gaping holes in the hull. We need a new source of momentum!

Allow me to share what I mean—and propose a new form of funding, one that I believe could do much to help get us back on course by investing in the true fuel that powers our sector: its workforce.

Back when COVID shuttered workplaces in 2020, Congress created the Paycheck Protection Program (PPP), forgivable loans that enabled employers to maintain payroll during lockdown. But the legislation initially left out nonprofits—a sector that comprises roughly 10 percent of the American workforce.

It was only because of the advocacy of thousands of nonprofit leaders, rallied by the National Council of Nonprofits, that nonprofit employees were covered by this essential relief. So, why did our government almost leave us out?

The second Trump administration is definitely not ignoring the power of the nonprofit workforce.

Apparently, it didn’t occur to our political leaders that people work for a living in nonprofit organizations, or that nonprofits are major employers.

And that wasn’t the first time nonprofit workers have been overlooked by federal policy. As Jon Pratt reported in NPQ, “Work performed in the service of a charitable corporation…was excluded from the definition of ‘employment’ under the Social Security Act of 1935.” It wasn’t until 1984—50 years later—that mandatory old-age assistance and unemployment insurance were extended to all nonprofit employees.

Underinvestment from Government and Philanthropy

Unlike previous presidential administrations, the second Trump administration is definitely not ignoring the power of the nonprofit workforce. In their effort to defame, defund, and delegitimize the social sector, this White House launched an ongoing siege against nonprofits, philanthropy, progressive groups, and public service more generally. On top of brutal funding cuts, our field was damaged by censorship, claw-backs, DOGE takeovers, legislation, propaganda, regulation, and more.

The outcome, of course, was that tens of thousands of nonprofit workers lost their jobs in the first year of this regime. And there are no PPP loans coming to help bail us out this time.

But our workforce has not been ignored or harmed by lawmakers alone. Nonprofit workers have long suffered from a chronic deficit of investment from within the social sector—from foundations, donors, and nonprofit boards and executives themselves.

A Fund the People study showed that over the span of a decade, 1 percent or less of foundation grants are aimed at investing in grantee staff. Research from the Bridgespan Group found that, of all types of leadership development funding, by far the type most needed by nonprofit executives—and the least available to them—is “overhead for talent-management capacity.” In other words, workforce support.

Philanthropy’s historic inertia when it comes to supporting the workforce of grantee organizations is particularly problematic right now.

The pain created by this lack of support from both government and foundations has only intensified during a decade of overlapping crises. The people keeping our sector alive are under more pressure than ever.

Research by the Center for Effective Philanthropy (CEP) shows that issues of staff recruitment, retention, compensation, and burnout are the top internal challenges facing nonprofits, and have been for at least the last three years. Another study from CEP finds that while 93 percent of grantmakers believe they understand their grantees’ challenges, only 53 percent of nonprofit leaders concur with that assessment.

This means that organized philanthropy’s historic inertia when it comes to supporting the workforce of grantee organizations is particularly problematic right now.

To help nonprofits survive and thrive in the coming years, private funders must intentionally do what they have not for generations: dedicate dollars to support and sustain nonprofit workers.

We need what I call Staff Operating Support—or “S.O.S.”—and we need it now.

Current Funding Forms Are Inadequate

While there are many wonderful funders and fundraisers in the field, I would argue that most types of grants available today are inadequate because they don’t intentionally invest in the grantee’s workforce. In fact, most grants actively disincentivize nonprofits from creating high-quality jobs! Let’s use this lens to examine these major types of grants: project restricted support, general operating support, capacity-building support, and capital investment support.

Project restricted support reinforces an obsession with programs, severing them from the very organizations and people who create, nurture, and support them. It tends to treat grantee staffing as an unnecessary evil to be avoided, as it leans on outdated ideas like “indirect costs” and “overhead” that force nonprofits to segregate staff and activities in unproductive ways, and falsely slice up their time into the meaningless buckets of administrative, fundraising, or programming activities.

Rather than helping organizations support the people who drive their programs, project restricted support actually creates unnecessary “administrative” activities and costs to track these meaningless distinctions. Nonprofits may even be incentivized to fudge the numbers so they look like they’re spending less on “overhead,” which is generally viewed negatively among donors, foundations, and charity ratings websites.

A few years ago, the Ford Foundation’s Darren Walker led a group of major national foundations in a multiyear research and learning process to understand the real costs of running healthy nonprofits.

As part of this effort, the accounting consultancy BDO looked through 130,000 nonprofit IRS filings and found that the financially healthiest of them had a 29 percent indirect cost rate in each grant. Many of these foundations had limited indirect costs to 5 percent, 10 percent, or 15 percent of grant funds.

One result of this research and learning was that several big funders—including Ford, MacArthur, Hewlett, and Annie E. Casey—increased these indirect cost rates. Yet, despite large-scale data and some recognizable names leading the way, project restricted grants across organized philanthropy have not changed much.

General operating support is popular but the learned behavior and self-imposed pressure within nonprofits means general support is often used to backfill budget gaps or to launch or scale programs. These may be important activities, but they leave no resources to boost job quality.

Linda Wood, director of leadership funding at the Evelyn and Walter Haas, Jr. Fund, wrote on the fund’s blog in 2012, “There are times when general operating support may not be the most effective capacity-building strategy.”

Wood listed several reasons for this:

Executive directors…find it difficult to prioritize long-term staff development when confronted with short-term program and budget needs. The “selfless” culture of nonprofits discourages leaders from dedicating resources to their own development. Some executive directors fear that choosing to invest general support in leadership development could be perceived as a sign of weakness.

In June 2025, Kara Park of All Due Respect (ADR), an initiative focused on improving working conditions for community organizers, offered a similar message on the Fund the People podcast when discussing ADR’s research findings on working conditions in Southern California organizing groups:

We found that across different budget sizes, the average salary for organizers was pretty similar. Organizations that were receiving much larger grants were not necessarily using them to raise salaries. We talk a lot about the importance of multiyear general operating funding—I don’t want to take away from that at all. And what this finding told us is that sometimes it is important to actually be explicit about: You can use it for salaries, for benefits. It may be a larger amount of money, and that doesn’t necessarily mean there also have to be more program outcomes or additional programming….[We have to start] recognizing that, even with general operating money, there’s just years of these kinds of baked-in expectations around keeping overhead low, around higher outcomes. So just make that explicit in conversations between grantees and funders.

Capacity building support is simply too broad, covering many valuable topics (strategic planning, technology, and so on). Staff or leadership development needs are equated with and competing with all the other needs, rather than being treated as the bedrock upon which all capacity rests. It also tends to take the form of either small-scale supplemental funds added to “the primary grant” (which is project restricted support or general operating support) or delivered through external programs such as training, consultations, or cohorts.

When capacity building does focus on nonprofit people, it tends to be individualistic in approach, and generally sticks with proven, charismatic, public-facing leaders, not full staff teams. It tends to be expensive to deliver. And it tends to be one predetermined intervention selected by the funder, such as a fellowship, sabbatical, or award, among other possibilities.

In any of these iterations, capacity building support doesn’t change a nonprofit’s internal budget enough to enable serious investment in the full staff team over time.

Capital investment support focuses on buildings, campuses, endowments, or other facilities. Investments in human capital are far rarer, with some exceptions (like endowed faculty positions).

So, if the major types of funding are poorly designed to support the nonprofit workforce, what should we do?

A New Kind of Funding: Staff Operating Support (S.O.S.) Grants

To address the lack of inappropriate funding across the philanthropic and nonprofit system, I recently proposed the concept of Staff Operating Support (S.O.S.). This is a new type of funding that intentionally offers the incentive and budget that nonprofits need in order to invest in their people.

S.O.S. funding is dedicated exclusively to investing in the grantee’s team members and the organizational systems that support that team. Within this zone of restriction, it can be used in a flexible, responsive, and trust-based manner.

Although the idea is fairly straightforward on the surface, there’s a fair amount of complexity underneath. In practice, there are seven key traits of the S.O.S. grant that help it stand out:

1. A Focus on Systems: An S.O.S. grant is restricted for uses that support and develop the grantee’s staff, contractors, and volunteers, depending on the context.

It should be used primarily to strengthen internal (or outsourced) systems that support and develop the team. By this I mean systems such as career paths, compensation, benefits, recruitment and retention practices, personnel policies, human resource infrastructure, sabbatical policies, paid internships, and executive transitions.

While this restriction may seem narrow, it actually addresses some of the largest budget items at most nonprofits, and addresses functions that are generally vastly underfunded.

2. Responsive to Needs of the Moment: An S.O.S. grant, within its area of restriction, is trust-based, flexible, and responsive to changes in need and context. Because the internal context (staffing size, board development, executive transitions) and external context (policy crises and the funding environment) are rapidly changing, the uses of this grant can shift in response.

As much as possible, the proper uses of the grant should be identified with input from the full team of the grantee organization, so that the grant addresses actual needs and solves real pain points experienced across the full range of people and roles, including the least powerful people in the organization.

3. Capital for Humans: An S.O.S. grant is not a supplementary grant or a stipend for wellbeing or professional development. It is the grant. Why? Because nonprofits can’t adequately invest in their biggest assets with a minigrant. They can’t create new jobs, raise salaries, or pay for health insurance with stipends.

Nonprofits need significant, sustained capital to build people-first systems. Should additional funds be desired for general support, program support, or a specific capacity building project, supplement grants can be made in addition to the S.O.S. grant.

4. Grants, Not Fellowships: An S.O.S. grant provides money, not programming. Funders commonly create fellowships, awards, convenings, or cohorts to provide leadership development to grantee leaders, not whole teams. While these can be extremely valuable for the individuals who participate, enlightening for funders, and good for building relationships among grantees and their funder, these programmatic interventions are external to the grantee organization.

The S.O.S. grant provides what the Bridgespan research referenced above indicated nonprofits most need: “overhead” funding for “talent-management capacity.” It provides the internal financial resources that organizations need to build a team that can survive and thrive. If you want an organization with staying power, S.O.S. grants are crucial.

5. Good Boundaries: An S.O.S. grant does not cause the grantee to divulge sensitive information to their funder, nor does it cause the funder to micromanage the grantee’s staffing matters. The grant maintains the anonymity of workers while informing management about the entire team’s needs and interests, so that the funding is used to address the real pain points of the team.
6. Ability to Document Value: An S.O.S. grant, with agreement from all involved, includes funding to document the value created by investing in the grantee’s team. This documentation helps the grantee understand what they’ve achieved and to make the case to other funders. It helps the funder understand what they’re supporting across grantees and discuss the value of their investments internally and externally.

A version of this documentation ought to be shared publicly when possible, so that other funders and nonprofits can learn about the benefits of S.O.S. funding.

7. Consent: An S.O.S. grant should be one tool in the toolboxes of funders and fundraisers. It should not be thrust upon either party unwittingly or unwillingly, but rather be agreed upon with full consent and understanding by both grantor and grantee.

Staff Operating Support funding offers a win-win for nonprofits and their funders. It can meet the staffing, flexibility, and budgetary needs of nonprofits, while addressing funders’ desire for specificity, visibility, and measurability.

As the practice of S.O.S. grantmaking fundraising takes hold, I believe many will be happily surprised to witness how investing in nonprofit people can lead directly and swiftly to stronger organizations, programs, and mission impact.

You can learn more about the S.O.S. grants concept in my recent episode of the Fund the People podcast, or in this brief illustrated concept paper.

Have feedback? Email me at rusty@fundthepeople.org.