The GuideStar Blog retired September 9, 2019. We invite you to visit its replacement, the Candid Blog. You’re also welcome to browse or search the GuideStar Blog archives. Onward!

GuideStar Blog

The role of Human Capital Strategy in nonprofits

I was recently the keynote speaker at the Nonprofit Human Resources Conference at the Gaylord Conference Center.

Due to the recession, the job of the nonprofit human resources director is tougher than ever. Today’s financial environment is causing anxiety and uncertainty. This is a time for lots of communication about the state of the organization, particularly revenue issues and prospects for the future. There is considerable talk about transparency to the outside world and to stakeholders, but transparency within an organization is just as important and is often overlooked.

In my talk I urged the human resources directors to embrace adaptability—something I’ve come to believe is one of the keys to effective leadership. When revenues are crashing and the future is gloomy, this is not the time to stubbornly hold on to the ways things have always been done. In fact, it can be a liberating experience to start saying “no more” and to start exploring brand new approaches.

In most nonprofit organizations, personnel costs are roughly 50 percent or more of total expenses. That’s a lot of money. But we often don’t think about carefully nurturing our people resources the same way we do with managing financial resources or IT resources.

Last year at GuideStar we developed a Human Capital Strategy with the tremendous help of Sal Giambanco of the Omidyar Network.

We started by confirming our mission, strategy and goals, and reviewing our desired impacts.

This led to a discussion of the organizational impact of our work and our business strategy. How were we going to accomplish what we said we wanted to do? What are our services? What is our business model?

And then finally, we reviewed what kind of talent we needed to attract, engage and retain in order to deliver on these mission and business promises. Here’s a graphical depiction:

Image courtesy of Omidyar Network

An organization’s business strategy is driven by numerous dynamic factors:

  • external market factors that create demand and shape the competitive environment for products and services
  • organizational factors include core competencies, products, structure and composition of the management team, the cultural and political environment within the organization
  • people factors include leadership and management competencies, the ability of the organization to develop and retain


An organization’s Human Capital strategy – that is, the people side of business design is centered on the selection, deployment, motivation, and management of people and is ultimately one of the most important key drivers of business success. Jim Collins terms this “do we have the right people on the bus?”

Remember this: almost any significant changes in market dynamics or business design will require changes
in a firm’s Human Capital strategy.

Finally, the HR function delivers a range of consulting and program administrative services based on the organization’s needs.

HR’s service delivery strategy must be:

  • responsive to the organization’s business strategy
  • explicitly aligned to support the implementation of the organization’s human capital strategy
  • should be “owned” by the CEO or COO

What is your human capital strategy?

Topics: Events