Document 6494135

Advancement Through Sharing
NONPROFITWORLD
The National Nonprofit Leadership and Management Journal
Volume 17, Number 3
May/June 1999
GOOD GROWTH
BAD
GROWTH
and How to Tell the Difference
BY
BY PAUL
PAUL CONNOLLY
CONNOLLY AND
AND LAURA
LAURA COLIN
COLIN KLEIN
KLEIN
A Reprint from....
THE CONSERVATION COMPANY
GOOD GROWTH
BAD GROWTH
and How to Tell the Difference
Bigger isn’t always better. Here’s how to decide if your
organization should grow—and in what direction.
BY PAUL CONNOLLY AND LAURA COLIN KLEIN
W
hen nonprofit executives talk about growth, it’s usually in positive terms.
There’s no organization, we’re told, that can’t benefit from a bigger budget,
more staff, expanded quarters, new programs, or broader outreach. If small is
beautiful, big is more beautiful.
In fact, growth typically is desirable, and the failure to grow or remain
stable may lead to a decline in relevance and effectiveness. The client base
shrinks, programs lapse, and, ultimately, the organization withers and dies.
But not always. When growth isn’t carefully planned and managed, bigger
is not better and may turn out to be worse.
A Leapin
in the
Dark?
A Leap
the
Dark?
Consider the successful drug counseling program that decides to increase its caseload to
reduce per-unit costs. Additional staff members are brought in, but the new hires lack the
commitment of existing staff. Suddenly, the program’s best feature–close relationships between case workers and clients–is undermined. An air of impersonality creeps in. Growth, in
this case, is self-defeating: Rather than enhance the service, it dilutes it.
The novelist Henry Miller once wrote, “All growth is a leap in the dark, a spontaneous
unpremeditated act without benefit of experience.” No, not all growth: Before you think
about future development, you must have a clear sense of current realities. Is your mission
still valid? Is your organization properly funded and structured to achieve its objectives?
If, as a result of this self-analysis, expansion seems appropriate, you must plan, pace, and
manage it carefully. Where nonprofits are concerned, growth should never be spontaneous
and unpremeditated.
The Dimensions
The Dimensions of Growth
of Growth
For nonprofits, growth is most readily seen
in terms of dollars–just as in the private sector.
Growth implies an increase in financial resources–through a grant, government subsidy,
fundraising drive, or increase in earned income.
The fact that the budget is bigger means the organization has grown. The additional income
usually goes to serve more clients, contact a
larger audience, add staff, launch new programs,
reach out to new constituencies, or expand a successful program.
But your organization can evolve without
adding to your budget or staff. Instead, you
can scale back programs of dwindling importance and reallocate your resources to more
critical initiatives.
For example, hundreds of women’s centers
in the 1970s and ’80s redirected their energies
from social protest to advocacy programs aimed
at changing “the system” from the inside. Where
once their agenda was political, now they focus
on such priorities as shelters, hotlines for battered
women, and workplace assistance programs.
To be sure, the potential to grow isn’t the
exclusive province of small or fledgling
nonprofits. Mature operations, including those
with multi-million-dollar budgets and national
constituencies, can also benefit from strategic
expansion and diversification. The budget of
New York City’s century-old Lenox Hill Neighborhood House doubled from $5 million to $10
million between 1995 and 1996 when it won a
city contract to manage a homeless shelter and a
federal contract for a new child care program.
Positive growth occurs to meet an unmet
demand. Growth usually follows one of two
models: funding-drives-growth or growthdrives-funding. In the former, a funder conceptualizes a program and provides money to develop it; in the latter, the organization identifies
the need to grow and then turns to funders or
fee-paying clients for revenues.
Why Grow?
Why Grow?
In the early ’90s, parents in Jackson, Mississippi, joined forces to form Parents for Public Schools. Their aim: to address the middleclass “white flight” eroding the quality of
Jackson’s public education. Dozens of other
Mississippi communities picked up on the idea;
with the support of the Phil Hardin Foundation
and Kraft Foods, it has since been replicated in
at least 25 other states.
▲
The LEAP program helps develop young leaders.
“The fatal metaphor of progress, which
means leaving things behind us, has utterly
obscured the real idea of growth, which
means leaving things inside us.”
This experience underscores a compelling driver of growth: the
opportunity to get more mileage out of a good idea–either by serving more people over a broader area or taking a local program nationwide.
In addition, you can expand and upgrade your services–sometimes in dramatic ways. In 1995, four years after its founding as a
needle-exchange program, Prevention Point Philadelphia opened a
“Harm Reduction Drop-In Center.” Its services went far beyond
fresh needles for IV drug users. New offerings included AIDS information, condoms, safer injection supplies, support groups, information on medical care and drug treatment programs, and HIV counseling and testing.
Often, funding earmarked for a single program has a “halo effect”: A grant can boost your profile among other funding sources.
You can then generate even more money and support–and, in turn,
expand your offerings. A case in point: Leadership Education for
Asian Pacifics. A $150,000 grant from the Carnegie Corporation in
1993 gave the California-based organization new credibility as a national advocacy group and improved its chances of winning funding
from other foundations.
The Challenges
The Challenges of Growth
of Growth
Organizational growth is neither inexorable nor automatic. To
be beneficial, it must result from a meticulously reasoned and
closely managed process. It doesn’t make sense to expand in a
way that sacrifices program quality or jeopardizes your
organization’s financial health. Before you contemplate any type
of change, play devil’s advocate with yourself, acknowledging that
there may be cogent arguments against growth–for preserving the
status quo.
The fact is, organizational growth is never easy. It requires staff
to move beyond their comfort zone–to assume new responsibilities
or a heavier workload, or to operate in unfamiliar settings. It almost
always carries a high degree of risk.
Often, of course, the risk pays off. As a result of strategic planning, the Trust for Public Land is expanding its activity in urban
areas and changing the way it works in those settings. It has shifted
its focus from acquisition only–for which it has a highly developed
skill base–to working with local partners. While this approach requires new skills, it also ensures long-term care for the parks.
Sometimes staff may be thrust into serving a new population.
It’s one thing to run a Head Start center for parents and their preschoolers; it’s something else to expand that effort into a job training
program for unemployed youth and adults. If your staff members
aren’t up to the challenge, or you’re not planning to hire professionals who are, it may be best not to undertake it.
FIGURE 1. AREAS AFFECTED BY GROWTH.
SYMPTOMS OF PROBLEMS, AND BEST RESPONSES
Area Affected: Programs
Symptom: The demand for services exceeds
capacity.
Response: Refine or expand the programmatic mix. Hire new staff or train current
staff to provide new services.
Area Affected: Management
Symptom: An inability to manage expansion
into new areas triggers a leadership crisis.
Response: Enlist help from external advisers.
Consider a change in leadership.
Area Affected: Staffing
Symptom: Staff members experience mounting frustration, confusion, and burnout as
demand outstrips capacity or services are
redirected.
Response: Seek help from outside management consultants. Consider additional hiring or reallocation of existing staff. Seek
staff input, and communicate all decisions openly.
Area Affected: The Board
Symptom: Board involvement diminishes.
Response: At newer organizations, the board
must become more active in fundraising
and financial oversight. At mature organizations, the board may need to revise
or expand its fundraising activities. Replacing some or all board members may
be the only way to acquire the necessary
expertise.
Area Affected: Systems
Symptom: Growth overwhelms the capacity
of existing administrative systems.
Response: If yours is a newer organization,
replace informal approaches with more
formal systems. If yours is an established
organization, revamp and upgrade existing systems. Consider using outside accounting, management, or information
technology consultants.
Area Affected: Finances
Symptom: Growth places a heavy financial
burden on the organization and plays
havoc with cash flow. Program upgrades,
enhanced computer systems, and additional staffing require sizable investments.
Response: Pare expenses by dropping or curtailing non-essential services or managing
costs more prudently and aggressively.
Develop new sources of earned and contributed income.
Area Affected: External Relations and
Communications
Symptom: Stakeholders are excluded from the
decision-making process and left uniformed.
Response: Take pains to pay attention to new
and existing stakeholders. Be sure the
board represents all appropriate constituents.
▲
By 2001, LEAP plans to double
its constituency to 2,000 children.
Or, suppose a funder has come
through with a grant for your repertory theater–but only on condition that
you launch an outreach program for
local schools. No one on staff is experienced in that area; mounting plays
is your organization’s sole strength,
passion, and reason for being. Accepting the money and creating the program could be a rational course–but
only if doing so fits your mission and
you understand the risks involved.
The decision to grow is not–nor
should it ever be–a “no-brainer.”
Growth may require staff to assume a more entrepreneurial mindset.
Consider a day care center with Title
XX funding: If it’s the only facility in
the region, there’s probably no need to be concerned with marketing
or with maintaining usage levels. But suppose the center opens a
second branch in a nearby community where other child care facilities are available. For the first time, the center is competing for
funding and clients. Money will have to be budgeted for marketing;
staff cuts may be necessary if usage levels drop. Envisioning this
scenario, the center’s leadership may opt not to expand. If they do,
it will be important to hire people with entrepreneurial skills. Service excellence is no longer enough.
Expansion may force a shift in emphasis from units of service
provided to outcomes achieved. Consider: A job training program
serving unemployed single parents receives funding for every client
who completes a nine-week course. A new, larger grant is offered–
but one based on outcomes. Now, the program will be paid for every client it successfully places in a job. Process has taken a back
seat; what matters most is results.
Growth invariably brings a need for additional staff and internal restructuring. You must weigh benefits against costs. Is the
funding available to hire six new program directors? If so, can you
assume you’ll find the people you need?
Growing nonprofits also require sophisticated administrative
systems to track programs and income streams. New York’s City
Harvest collects food from restaurants and distributes it to agencies
serving the hungry and homeless. In 1995, the nonprofit’s leaders
saw that growth was possible only if they found a more efficient
system for tracking contributions. Also needed was a way to maximize automation of their truck routing system for food pickups and
deliveries. City Harvest understood that upgrading its information
systems was key to fulfilling its mission through growth.
When Is Your
When Is Your Organization Ready
for Growth?Organization
Ready
for Growth?
How do you know if it’s time to expand your organization? To
decide, you need to go through a thoughtful process with your key
An impulsive or haphazard approach
is doomed to failure.
board and staff. Together, explore these questions:
1. What has triggered the discussion? Has a funder offered
money in exchange for your commitment to launch a new program?
Have clients or customers expressed a need for new or different products and services? Or has someone in the organization identified a
need to expand? Opinions are likely to differ, but you must reach a
consensus if there is to be a solid basis for planning.
2. On what assumptions is your organization based? Who do
you serve? What do they value? Are you delivering it? Have there
been shifts in the demographics of your client base or surrounding
community?
3. Is there sufficient “readiness” to grow? The fact that new
client demands or funding opportunities have materialized doesn’t a
priori mean your organization is programmatically ready to take the
next step. Survey your key constituencies as to their comfort with
change and how they view the risk-reward ratio. Absent support
from staff and board and an environment hospitable to change, any
new initiative will likely fail.
4. What are the obstacles to growing the organization–and can
they be overcome? While there may be compelling reasons to grow,
the road to growth will probably be bumpy. Outmoded systems,
insufficient funding, inadequate demand, programmatic gaps, lagging board or staff capacity–any one of these can derail the most
well-intentioned plan.
Consider funding and fees. Growth is often expensive, and being overly ambitious is like buying a house you can’t really afford.
Unless you can find a way to achieve your objectives without incurring excessive costs–or be reasonably certain that the requisite funding or earned income is available–you may be taking a fiscal leap
that jeopardizes the organization’s operations and very survival.
Growth:
Growth:
User’s ManualManual
AAUser’s
Managing organizational growth
is neither art nor science. Hard work
and good intentions alone won’t make
it work; an impulsive or haphazard
approach is doomed to failure. Here
are guidelines to help you derive maximum benefit from your efforts:
As LEAP’s reputation spreads from family to family, demand has shot up. ▲
BY LEAPS AND BOUNDS:
A GROWTH CASE HISTORY
Background. Founded in 1992, and now operating with a $3.5 million budget, LEAP
(Leadership, Education & Athletics in Partnership) is a community-based program for young
people. Its mission is to develop the strengths and talents of young leaders working with children in high-poverty urban neighborhoods. The young leaders create and implement programming designed to achieve positive academic and social outcomes for these children. LEAP
began in New Haven, Connecticut, and now operates in Hartford and New London as well.
Counselors–virtually all of whom are high school or college-age–live in the community, where
they work with small groups of youngsters in academic, sports, and recreational activities.
Driver: Program development and market demand. In the years since LEAP’s inception,
as the program’s reputation has spread from family to family and neighborhood to neighborhood, demand for its services has increased dramatically. Americorps funding and state support
have bolstered LEAP’s resources. By 2001, the organization plans to double its constituency to
2,000 children, add a fourth city, and set up computer learning centers in four cities.
Main Issue: Organizational capacity. LEAP grew rapidly in its first five years, both in
scope and impact. Today there is still vast potential for continued growth, but LEAP recognizes that reaching its potential will require strengthened capacity and infrastructure. An effective multi-city operation needs communication, quality control, and strong management.
Addressing the Issues: Beginning in 1996, The Conservation Company worked with LEAP
to draft a five-year strategic plan emphasizing four interconnected goals:
•
•
•
•
strengthen organizational systems and board and staff capacity
create tools to monitor and evaluate the program’s impact
work with children in the context of their families and schools
expand its scale.
LEAP has already taken great strides toward bringing its administrative systems in line
with program offerings, upgrading its financial management and reporting systems, formalizing staff training and communications, and professionalizing its board.
Plan Ahead. No organization should
embark on a new venture without first
drafting a plan. Strategic planning often begins with a survey of staff, board,
funders, clients, and other key populations. Your plan should reflect your
organization’s capacities, limitations,
and external environment. A carefully
conceived strategic plan will help you
stay on track and make the most of your
resources.
Know Your Market. When planning
a new or expanded museum, youth center, or theater, it isn’t enough to say,
“If we build it, they will come.” Market research can help you assess the
demand for services and provide a realistic context for growth. A marketing strategy identifies ways to meet
these needs and embodies recommendations about service development,
pricing, distribution, and promotion. A
communications strategy helps you refine your message and convey it to clients, funders, and other constituents.
“Show Me the Money.” Growth can
be costly. To generate more revenue,
consider ways to diversify or expand
your fundraising and earned-income
activities. Fundraising efforts might
consist of a capital campaign or more
aggressive grantseeking. Earned income might include fee-based services
or nonprofit business ventures.
It isn’t enough to say,
“If we build it, they
will come.”
Get Everyone’s Input. A growth initiative will affect every aspect
of your organization. Thus, you must be sure to include staff to
elicit their contributions and help prevent burnout. To address barriers, concentrate on board recruitment, organizational development,
systems planning, and fundraising.
Don’t Overlook Infrastructure. When planning for growth, focus
on programs–but not at the expense of less “glamorous” concerns
such as infrastructure. You’ll need to develop such a supporting
structure–which may include new computers, facilities, control systems, and reporting procedures–to sustain your programs. If you
neglect these basics, you could undermine an otherwise well-thoughtout growth initiative.
Take Advantage of Outside Expertise. Some organizations can
manage growth on their own. But most will find books, courses,
technical assistance, or consultants valuable. As outsiders, consultants can candidly explain where an organization needs to improve.
(For a listing of consultants, see the “Directory of Nonprofit Providers,” beginning on page 27. For relevant publications, see “Selected
References” on this page.)
Watch for Symptoms of Distress. Organizational growth is rarely
a smooth ride. In its early stages, it often brings uncertainty, angst,
and pain. Figure 1 lists the areas most often affected, common symptoms of growing pains, and ways to respond.
A Final Word
A Final Word
The nonprofit world is very different from what it was a decade
ago. Funding sources have tightened, while the demand for services
has expanded and intensified.
In this new environment, growth has become a more compelling issue-and a far more complex one. Your chief challenge may
be to expand your offerings, serve new populations, and adapt to
change without forsaking your mission. “The fatal metaphor of
progress, which means leaving things behind us,” wrote G.K.
Chesterton, “has utterly obscured the real idea of growth, which
means leaving things inside us.” ■
Selected References
*Brinckerhoff, Peter, “Starting a Business: Too Risky for Your Organization?”,
Nonprofit World, July-August 1998.
Churchill, Neil and Virginia Lewis, “Growing Concerns: The Five Stages of Small
Business Growth,” Harvard Business Review, May-June 1983.
*Conroy, Charles, “Staying Healthy after Expansion,” Nonprofit World, MayJune 1997.
*Drucker, Peter, Managing the Nonprofit Organization.
Growing Up Nonprofit: An Essay on Nonprofit Life Cycle Development, Minneapolis: The Stevens Group.
*Eadie, Douglas, “Master Change, Or Change Will Master You,” Nonprofit World,
July-August 1996.
*Hesselbein, Frances, et al., eds., The Organization of the Future.
Kotter, John P., Leading Change, Boston: Harvard Business School Press.
Mathaissen, Karl, Board Passages: Three Key Stages in a Nonprofit Board’s Life
Cycle, Washington, DC: National Center for Nonprofit Boards.
*McKay, Shona, “Building Morale: The Key to Successful Change,” Nonprofit
World, May-June 1995.
*Muehrcke, Jill, Are You Sitting on a Gold Mine? Fundraising Self Assessment Guide.
*Muehrcke, Jill, ed., Management and Planning, Leadership Series.
*Muehrcke, Jill, ed., Profiles in Excellence, Leadership Series.
Oster, Sharon, Strategic Management for Nonprofit Organizations: Theory and
Cases, New York: Oxford University
*Rosenberg, DeAnne, “Eliminating Resistance to Change: The Magic Formula,”
Nonprofit World, September-October 1992.
*Starred publications are available through the Society for Nonprofit Organizations’ Resource Center Catalog, included in this issue, or contact the Society at 6314
Odana Road, Suite 1, Madison, Wisconsin 53719 (800-424-7367).
Paul Connolly and Laura Colin Klein are consultants with The Conservation Company
(50 East 42nd Street, 19th Floor, New York, N.Y. 10017, 212-949-0990, toll-free 888222-2283), a management consulting firm with offices in New York City and Philadelphia that provides management and planning services to nonprofit organizations and
foundations.
Nonprofit World • Volume 17, Number 3 May/June 1999
Published by the Society for Nonprofit Organizations.
6314 Odana Road, Suite 1, Madison, WI 53719 • (800) 424-7367
This article appeared in Nonprofit World, the National Nonprofit Leadership and Management Journal, published by the Society for Nonprofit
Organizations, May/June 1999. Reprinted with permission of Nonprofit World. Jill Muehrcke, Editor.
THE CONSERVATION COMPANY
About The Conservation Company
For nearly two decades, The Conservation Company has provided strategic planning, program development, evaluation
and management consulting services to nonprofit organizations, foundations, corporate community involvement programs and government agencies. In this time, the firm has
developed substantive knowledge and expertise in fields as
diverse as community and economic development, human
services, children and family issues, education, health care,
the environment, and the arts.
From offices in Philadelphia and New York, the firm works
with clients nationally and, increasingly, globally. Our services include strategic planning, organizational assessment
and development, feasibility studies, program evaluation and
development, board development, restructuring and repositioning, as well as grant program design, evaluation, and
facilitation.
Challenges and Opportunities
In the face of increased competition for private funding, shifting patterns of public funding, and changing demand for
services, nonprofit organizations are faced with greater challenges than ever before. Some are finding it difficult to maintain financial stability. Others are more focused on ensuring
that their work is having maximum benefits for their clients
and communities. All are concerned with harnessing staff
and board capacity to meet their goals and communicate the
organization’s effectiveness and accomplishments.
While there are no magical solutions to these challenges,
The Conservation Company provides an array of consulting services that can help. We offer assistance with strategic
planning, organizational assessment, governance and external relations strategies. We help our clients to honestly assess their strengths and weaknesses, to take a step back from
their daily work and think in new ways, and to mobilize
their resources in addressing critical issues.
Our clients come from all parts of the nonprofit community
and are at different stages in their growth cycles. They include new organizations that need an appropriately ambitious plan to get started, emerging organizations needing assistance in designing systems and structures as they prepare
for growth, as well as established institutions re-shaping their
strategies to address new demands.
As a result of our work, our clients are able to:
• Generate more revenues from a wider base of support
• Operate more efficiently
• Enjoy more productive board-staff relationships
• Become better known by their stakeholders
• Improve and expand their programs and services
Our Services to Nonprofit Organizations
Our distinctive competence lies not only in understanding
nonprofit organizations but also in our intimate knowledge
of the private foundation and corporate grantmaking communities. Our work can extend to brokering new partnerships within the sector as well as with corporations and
public agencies, suggesting new approaches to foundations,
formulating innovative program strategies, and thinking
outside existing structures and systems.
While we adapt our work to each situation, our clients have
come to know us for the following core services:
• Strategic planning
• Organizational assessment and development
• Governance review and board restructuring
• Program feasibility, design and evaluation
We have also helped establish new nonprofit organizations,
formed cross-sector alliances for established organizations,
repositioned programs to take advantage of new opportunities, and benchmarked organizational operations.
We offer an integrated approach that provides a broad perspective to our clients, so that the varied experiences of our
staff can be brought to bear on specific challenges. We are
proud of the long-term relationships we have with many private funders – relationships that demonstrate The Conservation Company’s ability to adapt and refine its approach in
order to be of continuing service in these challenging times.
One Penn Center, Suite 1550
Philadelphia, PA 19103
215.568.0399 or 888.222.2281
50 East 42nd Street, 19th Floor
New York, NY 10017
212.949.0990 or 888.222.2283
For more information about The Conservation Company,
visit our Web site at: www.consco.com
Serving organizations that serve the public good.
Private Foundations – Corporate Community Involvement – Nonprofit Organizations