www.missionbased.com

Management Tip

Is growth good for mission?
At a recent nonprofit conference, a speaker from a major US foundation was making the point that any nonprofit getting a grant from them must "take their idea to scale" in other words, grow and grow quickly. This led to a discussion at our table about growth, and the consensus seemed to assume that growth is always a good thing. I demurred, asking my table mates to think through both the good and the bad things that happen when a nonprofit grows. We came up with a long list on both sides of the issue, and I suspect that the people there were wondering who the cranky old guy was who spoiled the fun conversation.

The problem is--growth can be a big problem for nonprofits, and assuming that we should always be in growth mode can lead to real and significant problems. I want to make four points about nonprofit growth here, and then we'll dive down a bit more next month.

1. A growing nonprofit can (but not necessarily will) do more hands-on mission. This is the good news. By growing (measured by units of service provided) you provide more service...obviously. That's good as long as quality stays high (see below) and meets the overarching goal of any nonprofit which should be to help as many people, touch as many lives, do as much mission as possible. The trap here is measuring growth by money and not by outcomes. I recently worked with a large nonprofit who's stated goal is to "grow from $75 million to $100 million in revenues by 2015". When I asked the CEO how many more people they will serve by 2015 she answered "A lot". While this may well be true, it's not a good enough answer. Measuring income is an easy metric but it does not necessarily translate to more mission. If you decide to grow to do more mission, good for you, but measure the mission as your key metric.

2. If your organization hasn't been making money each of the past three or four years, you're not ready (or really able) to grow. Nonprofits, like all other organizations soak up cash during growth. It's called working capital, and the only way nonprofits can accumulate it is by making a profit. You don't have to make money on every service (in fact, that may be a poor mission choice) but if the organization has not been profitable overall in the past few years, you don't have the funds to expand. As I tell my audiences all the time:

"Money enables mission. Profits enable more mission."

3. The two things fast growing organizations run out of are cash and quality. We've discussed cash already, and your need for (lots of) working capital, but what about quality? Growth, particularly fast growth (including such things as mergers and partnerships) is so distracting if you haven't been through it before that you can easily take your eye off the quality ball. Think about it this way: Is it fair to reduce the quality of service to the people who currently receive your mission support in order to grow? Of course not. So, if you are going to grown, make sure you and your staff and board are ever zealous in keeping mission quality high.

4. As you consider your growth strategy, is it a bad thing to stay small but provide really high quality? In Bo Burlingame's excellent book "Small Giants" he recounts the stories of organizations who are superior in their field but choose to stay small to assure the long term high quality of both product and work environment for their employees. Think about it.

Understand, I have no problem with nonprofit growth as long as it is planned, well thought out, well financed, and doesn't ding overall quality of service. Note: I DO have a problem with funders always pushing nonprofits to go to scale, but you can read about that here.

July, 2011 -by Peter C. Brinckerhoff