The GiveWell Blog

A good response re: diversion of skilled labor

I previously expressed concerns about diversion of skilled labor: the possibility that nonprofits are outbidding the local private sector for top local talent. John de Wit of the Small Enterprise Foundation emailed us with a response:

On the question of whether we divert skilled labour from other potentially productive pursuits let me try to comment on this by referring to our actual practice:

  • At the moment I can only think of two staff members, both current or past, who were working with any other agency which focussed on poverty alleviation or microcredit or some other development field … Both worked for different NGOs which did water provision. Neither came to us because of better pay. The one came because of being somewhat frustrated at the former employer and we wanted them to do work which was more in line with their personal professional interests. The other came because they were keen to work more on a part-time basis.
  • The vast majority of our employees were unemployed when they came to work for SEF and it is only in the “professional” posts that we have employed people who already had employment. These worked for general commercial companies e.g. a producer of canned goods, a commercial farm, a legal firm etc.
  • In general we are only able to pay at the 25-percentile level versus the general market. i.e. we grade all posts in the organisation using a standard grading system which is employed by commercial firms, non-profits and some government agencies. We then obtain national survey data for what employers are paying at each grade level. We try to pay at least at the 25-percentile level. This means that 75% of employers pay more than us and 25% pay less than us. (Paying at this level is not a good position to be in.) To illustrate this please see the attached file [confidential]
  • Generally when a job candidate is already employed then we offer about 10% more than their current package.
  • Besides from pay and our location another major challenge we have in attracting and retaining good people is that most people would rather work for a large, high profile company than some small “unknown” NGO in a small “unknown” town. The big companies have a very good public image and appear to offer extensive career opportunities.

I asked for clarification on what he meant by “unemployed” (chronic or transitional?) and “professional positions.” He sent me a complete breakdown of what he knew about the previous employment of major staff. I am not sharing the breakdown (due to the presence of individual names and salary information), but here is a summary:

Employment situation prior to joining SEF  
Started as DF/admin (not “professional”) 64%
Previously employed 11%
Unclear 8%
Employed directly out of school 8%
Volunteer 5%
Chronically unemployed 4%

The question of “diversion of skilled labor” is one that we haven’t even asked charities, because we’ve felt it is so unlikely that they will have substantive information to address it. SEF’s email suggests otherwise for at least one case.