One potential reason is that non-profits do not need employees to be quite as good (or work quite as hard) because they are not (generally) in competition with

One potential reason is that non-profits do not need employees to be quite as good (or work quite as hard) because they are not (generally) in competition with one other. A business that operates at 90% of the effectiveness of its competitors is likely to fail completely. A charity that operates at 90% effectiveness will just produce a bit less good work in the world.