Can Nonprofits Gain an Advantage in Employee Retention Through Management Practices? A Comparative Lens for Managing Nonprofit Versus for‐Profit Employees

Abstract

ABSTRACT Nonprofit organizations (NPOs) face growing competition for human capital from for‐profit organizations (FPOs). However, little research adopts a comparative lens to explore management practices that are associated with an advantage in retaining employees for NPOs relative to FPOs. Integrating resource orchestration theory and firm‐specific incentives theory, we contend that employee‐centered management practices (i.e., employee benefits, participation, and training) should be more effective in retaining NPO (versus FPO) employees. We tested our theory with four studies. The Preliminary Study documented that NPO employees rated their organization more positively than FPO employees when their organization implemented more employee‐centered management practices. Study 1 utilized archival survey data from Statistics Canada and showed that employee‐centered management practices were associated with lower voluntary turnover rates in NPOs (versus FPOs). Further, through Study 2, a qualitative study, we identified psychological contract fulfillment as a possible employee‐level mechanism that explained the observed differential effects for NPO versus FPO employees. We further tested this mechanism using scenario experiments in Study 3, finding support for the mediating role of psychological contract fulfillment. Our work suggests that NPOs may achieve an employee retention advantage over FPOs by aligning management practices with their institutional contexts and employee values.