After working with hundreds of nonprofits over a couple of decades, helpful patterns emerge.
We partner with nonprofits to help them grow, and as we’ve realized, making significant amounts of sustained growth happen is hard work. While the practices that drive true growth and performance are well known and proven by thousands of organizations every day, it’s not easy to get groups of people to adopt these practices– because it means changing behaviors.
This is where the C word comes in– Culture. We’ve come to recognize that nonprofits fall into more or less distinct categories, and some of these categories are more amenable to change, growth and performance than others.
So here is an unscientific set of observations, an informal effort to segment the non-profit sector into its major phyla– recognizing that true speciation is as varied as nature itself.
1. Social Clubs — the most common type: small groups, under a few hundred thousand in annual revenue, these organizations are a primary foundation for friendship and community. Many nonprofits are truly social groups that plan activity and raise money among themselves and their friends and families to do something modest yet meaningful for them. At their best, they are honest about their aims and intended benefits. They aren’t enterprises and they don’t have mission statements filled with grandiose adjectives.
- Examples: PTAs; The Awesome Foundation.
- These groups offer tremendous collective richness and benefit to the world. We applaud them and even participate in them ourselves.
2. Feel Goods — these orgs are very similar to social clubs, but they differ chiefly in that they use the rhetoric of solving larger problems to attract interest. Look beyond the aspirational language, however, and there many not be the strategy, grit, discipline, risk tolerance, data, or capital necessary to make more than symbolic progress. In these environments, talk and reflection often takes the place of action, risk and experimentation.
- Any type of organization can fall into the “words, not deeds” trap, and without rigorous, transparent reporting, from programs to finance, it’s often difficult to tell a performer from a pretender. They aren’t bad people, they appear to work at nonprofits to seek refuge from the world, not necessarily change it for the better.
- On the surface, these groups appear to be doing valuable work, but they have cultural or performance barriers to achieving significant levels of impact. They are pretenders, not performers.
3. Enduring CBOs (Community Based Organizations)— the meat and potatoes of the non-profit sector, there are tens of thousands CBOs, among the best threads in the fabric of American society. They have clear bounds for their services and seek to deliver quality at an intentional and well defined scale, typically at the neighborhood, municipal or at most a regional level. They often have significant unrealized organizational potential.
- Examples: day care centers, independent schools; clinics, homeless shelters & food banks; regional theater, art, museums; farmers markets.
- They often suffer from performance or revenue pain, and they would do well to learn enterprise-class business modeling and execution. They should look outside the nonprofit sector and learn how all high performing businesses function if they wish to reach their full promise and potential.
4. Dysfunction Junctions — Tolstoy opens Anna Karenia with the line “Happy families are all alike; every unhappy families is unhappy in its own way.” Just so, all high performing organizations share many of the same characteristics, but dysfunctional ones have many different challenges. Disengaged boards; poor HR practices; micro-managing or absentee leadership; shoddy cost controls; toxic culture… the list is very long indeed. There is even a small circle of truly bad people, a disturbing minority.
- Ken Stern’s brilliant muckraking With Charity for All exposes this dark side of the non-profit sector.
- Nonprofits aren’t alone in suffering from dysfunction—all organizational types, including private sector businesses and government agencies—fall prey to poor leadership.
5. Gutsy Aspirants — there are many thousands of these, and they represent the most promising, scalable organizations in the sector, ranging from start-ups to $10-$20m annually. They have a proven or highly promising program models and are willing to work hard to get it to scale. There’s passion, yes, but also evidence of discipline and focus, decent teamwork, and committed leadership.
- Social impact investors, savvy philanthropists, intelligent corporations, and critically minded individuals look to these orgs as their primary means of creating social impact.
- We love working with these shops. We get to die happy because of our experiences helping them grow and solve problems at scale.
6. Staid Institutions — These are established regional orgs or affiliates of a strong national brand, but some are running on momentum. Great looking trees but which ones are hollow on the inside? They may need moderate to serious triage before they come down in the next storm.
- Some longstanding nonprofits and national associations have very strong brands and little competition, and without rigorous oversight, serious problems can occur out of sight of donors and even staff.
- Expert analysis and close partnership at the executive and board level are often necessary to diagnose organizational malfunction or lost opportunity before the problem grows.
7. Big Business — major research institutions; the largest national associations; large hospital systems. In the nonprofit sector, 4% of the nonprofit population controls 85% of the resources, a surprising concentration of wealth and scale in fewer that 30,000 of the current 1.4 million nonprofits.
- Major universities. Large hospital systems. The top museums and largest arts organizations. But beware: some of them look good on the outside but are suffering deep challenges. The Red Cross has been widely criticized; there are many stories about how Nike’s Phil Knight took over the University of Oregon.
- These organizations prove that its possible to make tons of money, run effectively and efficiently, and maintain integrity and social purpose (except when you get corrupted by all that money, which happens). Smaller nonprofits can learn from and adapt their growth strategies—they, too, were once small.
It’s not a comprehensive list, but it’s helpful for making sense of a tremendously varied sector filled with many excellent and virtuous souls, a space in which it is an honor to work.