Updated: Sep 18, 2019
I have been fortunate in my career to work with so many faith based grassroots and small nonprofit organizations (typically with a budget under $1 million) who are trying to navigate scalability and growth. I love working with these leaders! They have so much passion, zeal and big dreams to change the world by following the calling of Christ. It's contagious! They go all in and give 110% to their mission, even though they face very big challenges (giants) in this phase of growth.
Recently, I read a report by Oliver Wyman of SeaChange Capital Partners and GuideStar revealing that 50% of nonprofits have less than one month of cash reserves. In addition to funding challenges, other giants organizations face (especially during this phase of growth) include interpersonal conflicts, difficulties related to decision making, lack of systems, protocols and adequate support to meet the expectations of stakeholders (including funders, staff, volunteers and those being served).
Are you one of these leaders facing big giants? If so, know that you are not alone!
You may find it interesting and helpful as you navigate your current growth phase to read more about the various nonprofit lifecycles.
In the book Nonprofit Lifecycles, Susan Kenny Stevens Ph.D describes seven distinct nonprofit lifecycle stages with a short recommendation for each cycle.
Do any of these resonate with you?
A solution or vision for a community need has been identified and developed, though a formal organization has not been established and programs are not well-defined. Supporters – service volunteers and funders – are heavily relied upon and are likely comprised of friends and family. Many groups do not move beyond the idea stage into the formal “start-up” stage. Most people use a “kitchen cabinet,” or small group of trusted friends, as advisors. This is the place for a feasibility study or a business plan to determine viability and start up steps.
Marked by high energy, limited funding, and a newly acquired 501c3 status, start-ups are out to prove their business case by experimenting with program design. Start-ups are typically led by a technical expert with a board comprised of close friends and trusted colleagues. In this stage, there is always more work than people, meaning everyone does everything: Think a hands-on, working board that’s very engaged in doing, rather than governing. This is the place for a business plan, with annual implementation plans, and a strong fundraising plan focused on implementation. Transitioning out of this phase requires a strategic plan to address growth, personnel and position descriptions, governance transition (from a working board to a governing board), and strong focus on fundraising to raise the money needed.
As the organization hits its stride, becoming a growth-stage operation, it focuses on standardizing and deepening programs to meet the needs of its constituents, and formalizing its structure and processes to ensure organizational vitality. Growth always outpaces capacity, systems, and cash. Communication can be an issue at this stage, as everyone can no longer know everything. Growth sees people seeking formal policies and procedures that are written out explicitly or new ways of doing business. This phase requires a strategic plan that focuses on governance, capacity, development, and systems. To run this organization, a CEO must change their style and up their skill level. Cash flow can be a challenge, prompting the need for larger, multi-year grants or contracts.
Mature organizations have a reputation among their constituents. They have established formal organizational structures and processes, managed by an executive leader and led by a governing board of directors. Programs are outcomes-based and are aligned with the strategic plan. Funding is diversified and supports the organization’s needs. This can be a happy place: Things work, systems are in place, and people know their jobs – however, they often begin the process of creating the problems found in the next phase. This transition calls for policies and procedures to be followed, and more upgrades in software for HR, data collection, development, and more. The CEO is often getting more involved in external community relations, including major donor fundraising. Life is good until you get too set in your ways: silos develop, policies feel rigid, and you begin avoiding risks. In the early part of this stage, mature groups need a strategic plan that focuses on managing the organization and deepening programs. In the later part, it needs to look at options or scenarios for changing up programs and integrating people, programs, and money. The board is governing, but they may also be moving toward a more limited sense of engagement, and feeling set in their ways.
Organizations in decline have settled into a prescribed way of doing things, subtly losing touch with clients and resisting the programmatic adaptations necessary to meet changing community needs. The formal systems and budgets that once spurred growth now hinder evolution. Decline often sets in through genuine or willful ignorance among leaders: This is the organization where the CEO may “retire in place,” and the board comes to meetings complacent and unengaged. Those that love the way things have always been done may be happy, but those asking questions probably do not stay long; this applies to the board as well, where a member who starts asking tough questions may be ostracized rather than listened to. This group need an organizational assessment and a crisis plan, or recommendations for changes in leadership, board, and programs. Organizations in decline will need to recognize and address their problems, and then build a crisis plan for addressing the issues.
This pivotal stage finds organizations in the process of regaining the market. Strong leadership and a committed board lead the restoration, in which programs are redesigned to meet community and constituent needs, budgets are cut to meet cash flow demands, and formal processes are simplified to enable the transformation. This phase is the bridge back to growth. It often involves the crisis plan referenced above to help define the bridge, and determine how to cross it. The next step is to develop a plan that repositions the organization for growth at the end of the bridge. This phase often requires a CEO that is willing to do very tough things with the organization, which could mean replacing the existing chief executive with a new or interim leader. This CEO needs to work closely with the board, and follow a turnaround plan which will inevitably cause waves, disrupting the organization’s culture and people.
When an organization has declined too far, a turnaround is unsuccessful, or a start-up never finds its place, an organization enters the terminal stage. Leadership has lost interest and motivation; funding and staff have dwindled. This organization faces three options: closing, merging, or giving programs to another nonprofit. Often, the board (with a limited number of members remaining) is left to keep the organization alive through the decision-making process. This phase requires an organizational assessment to frame the options and make recommendations to the board, which might involve a “soft” or “hard” close.
In closing, I want to encourage you from His word..."being confident of this, that he who began a good work in you will carry it on to completion until the day of Christ Jesus."
- Phil. 1:6
He promises a good work in YOU, regardless of the status of your organization!
If there is anything we can do for you here at Flagship Equip, please don't hesitate to reach out! We love serving you. - Emily
Join the conversation in our LinkedIn Group: Faith Based Nonprofit Leader Connection