In recent years, businesses, governments, and nonprofit organisations alike have been urged to “do more with less,” with efficiency often promoted as the guiding principle. This drive has brought about decentralisation across many sectors, including nonprofits, which increasingly rely on flexible labour arrangements such as temporary employees, contractors, and consultants. While this shift may appear to provide immediate advantages in reducing costs and maintaining short-term liquidity, new research suggests the story is far more complex when it comes to long-term impact. Studies conducted at the University of Kansas reveal that reliance on labour not provided by full-time employees can undermine nonprofits’ operational effectiveness and does not lead to sustainable financial improvement.

The research, carried out by Hala Altamimi, assistant professor of public affairs and administration at the University of Kansas, in collaboration with Qiaozhen Liu of Florida Atlantic University, focused explicitly on arts-based nonprofits. Their analysis drew on a decade of data collected by DataArts, covering over 18,500 organisations across the United States. The findings show that when nonprofits increase their dependence on flexible labour, operational outcomes—measured in part by attendance at events—tend to decline. This negative relationship was most pronounced when flexible labour was used in core roles directly tied to programme delivery, such as production and service provision. The results suggest that when the heart of a nonprofit’s mission is outsourced to temporary staff, the quality and reach of its work can suffer.

Altamimi and Liu framed their analysis through three lenses: institutional, motivational, and relational. Unlike private businesses, nonprofits exist to pursue missions rather than profits, meaning their effectiveness depends heavily on continuity and depth of commitment. Employees in nonprofits are often motivated by the cause itself, even when wages are lower than in other sectors. Introducing flexible labour into such environments can undermine this motivation, as temporary staff are less likely to be aligned with the long-term mission. Furthermore, nonprofits thrive on social capital—relationships with communities, donors, and partners—that are difficult to build or sustain when staff turnover is high. These dynamics highlight why flexible labour may work in the private sector but proves less effective in mission-driven organisations.

In addition to operational outcomes, Altamimi and Liu examined the financial implications of flexible labour. Their second study, published in Nonprofit Management and Leadership, found that while nonprofits may experience short-term gains in liquidity and cost savings, these benefits do not translate into long-term fiscal health. Solvency, profitability, and overall financial sustainability remained unchanged despite higher use of flexible labour. In other words, the absence of adverse financial outcomes should not be mistaken for improvement—relying on flexible labour neither strengthens an organisation’s fiscal foundation nor provides a viable growth strategy.

These findings carry a cautionary message for nonprofits grappling with limited budgets and mounting pressures to adopt private-sector practices. Flexible labour offers a quick fix in times of financial constraint. Still, the evidence shows that over-reliance can jeopardise operational effectiveness and provide little in the way of lasting financial relief. Altamimi stresses that nonprofits should not entirely dismiss flexible labour but should carefully consider the roles in which it is used. Temporary or contract staff may be appropriate in peripheral areas such as administration or fundraising support, but using them in core programme roles risks weakening an organisation’s ability to fulfil its mission.

Ultimately, Altamimi’s research underscores the importance of balance and strategic foresight. Nonprofits must weigh the short-term appeal of flexible labour against the potential erosion of their mission-driven effectiveness and long-term stability. The message is clear: flexible labour is not inherently harmful, nor is it a sustainable solution on its own. Instead, it is a tool that must be employed judiciously, with careful attention to how it intersects with organisational values, community relationships, and strategic objectives. In a climate where efficiency narratives dominate, the research reminds nonprofit leaders that effectiveness, not simply cost-cutting, must remain at the heart of their decision-making.

More information: Qiaozhen Liu et al, The Financial Implications of Flexible Labor Use in Nonprofit Organizations, Nonprofit Management and Leadership. DOI: 10.1002/nml.70002

Journal information: Nonprofit Management and Leadership Provided by University of Kansas