by Josh Jacobson
The alternative title of this post could be “Sustainable Growth – Is It an Oxymoron?” (Answer: No, but it ain’t easy.)
A lesson learned early in my consulting career came in the form of a longtime board member for a stable, no-frills human services organization. As a part of a strategic planning process, board members posited a number of ideas for how the organization could leverage its position in the community to create positive impacts. Some of the ideas were pretty out there, but most were rooted in the mission. I felt at the time that my job was to encourage more risk-taking by a nonprofit that was somewhat risk-adverse.
The response of that board member: “That’s just not who we are.”
There is a lot of wisdom in those words. Knowing when not to explore expansion is as important, or even more important, than the brainstorming that comes up with innovative solutions. While Next Stage has social innovation as a tenet of its work, we know that the key is to right-size that for individual organizations.
The challenge is that it is difficult for nonprofits to stand still. There is a built-in expectation of growth that has only become more pronounced in donor audiences over the last ten years. Whereas the Greatest Generation was satisfied to see stability and “regular returns” as a case for support, each successive generation has tended to seek a dynamic vision of future impact.
And in reality, it’s a somewhat unfair expectation that is unique to nonprofits.
I love the bagels at a certain shop near my home. We visit often and know the owners fairly well. Their bagels are delicious and the homemade cream cheese is top-notch. I patronize this bagel shop because I love their product. My willingness to shop there is not predicated on the bagel shop’s plan for growth and increased impact. I have self-interest baked (literally) into my reason for visiting.
Nonprofits are different. For many donors, it is not enough to have built a sustainable business model that serves a set number of people each year, or is focused on one specific outcome. Constituents expect a dynamic vision that inspires them to be involved, and that vision almost always speaks to how the organization will have even more impact in the future.
Whether we like it or not, this trend is only becoming more pronounced. And yet with growth comes the challenge of continued sustainability. Foundations and savvy donors want to see diversified revenue streams that reflect a stability that can weather change.
Such is the challenge of nonprofits, to both grow in impact while also demonstrating sustainable operations.
The Niche Organization
I think often about that board member who educated me about his nonprofit’s identity based on a set of values that inform the creation of guiding principles. Those principles help an organization’s leadership make decisions about how to move forward.
As I mentioned in the post introducing the Community Social Impact Portfolio, those guiding principles should result in a goal of “leading in our space” for the vast majority of nonprofits. While there are many large agencies in the Charlotte region that have evolved over time to include a diversity of programming, there are simply too many nonprofit organizations in existence now for any organization to aspire to that level of institutional capacity.
Leading in your space means that no one would even think of creating another nonprofit in your city with a similar mission. It means “owning” your mission in such a way that you are the go-to organization and considered a thought-leader. It also typically means narrowing your organization’s focus to ensure that it can continue to claim that mantle as it scales.
An organization seeking niche status must start with evaluating its mission, which is often too expansive. Missions are not meant to be locked forever in time, but instead should evolve to meet the needs of a community. Next Stage suggests conducting a needs assessment married with competition analysis to better understand where a nonprofit fits. Whereas an organization may have claimed a wider berth 20 years ago when there were fewer organizations, the changing environment likely requires making changes to mission to reflect today’s realities.
“What do you want to own?”
It is a question we will ask the leadership of an organization with a murky mix of programming or overly broad ambitions. I have seen organizations clarifying their pursuit of a niche as the missing ingredient to their success. That decision is clarifying and provides leadership with a vision platform that greatly informs decision-making. It allows organizational leaders to have more productive dialogue and unleashes creativity in service to specific goals.
The Checklist: Niche Organizations
Niche organizations (and those that aspire to such a designation) must continually conduct internal and external analysis to stay on track – this is not a “set it and forget it” effort. Donors and volunteers seeking an organization to engage with can use the following top-five evaluation areas when considering the health and worthiness of a niche nonprofit:
- Logic Model – According to the W.K. Kellogg Foundation, a program logic model is defined as “a picture of how your organization does its work – the theory and assumptions underlying the program. A program logic model links outcomes (both short- and long-term) with program activities/processes and the theoretical assumptions/principles of the program.” The Foundation has a very good development guide available, and it is a framework that not only results in optimization of operations and programming, but also makes for a great case for support. For niche organizations, creating your own version of “how a bill becomes a law” is critical as the organization zeros in on (and narrows) its value proposition. As a donor or volunteer, it should be clear how your time and support translates into impact.
- Theory of Growth & Change – As discussed previously, X-Gens and Millennials crave an understanding of the underlying business model of a nonprofit to better understand its potential for future impact. Sturdy niche organizations have developed a theory of growth and change that serves as an important messaging platform. Next Stage champions the development of a ten-year vision with a clear three-year roadmap and optimized one-year action plan. Ten years is a long time, and no one has a crystal ball. Still, an organization should have some overarching time-limited “theory of growth and change” that outlines an idea of where it is going. And that theory should note how the organization intends to lead in its space.
- Ten-Year Pro Forma – Alongside that ten-year plan should be a pro forma budget that suggests the income and expenses need for that decade-long ambition. This is the difference between lip service and having an articulated business plan in support of that overarching goal. Some donors and most funders start their exploration of a nonprofit with the income and expense statement, long before they read a narrative or conduct a site visit. How you express your current and future impact through the numbers is a differentiator, with strong organizations pursuing niche status able to express financial need not only as a function of today but tomorrow as well.
- Strong Branding – A common refrain for each of these checklists will be marketing, which is badly needed to ensure any sort of sustainable growth. This is particularly true for niche organizations (and those pursuing it), which must clearly articulate their reason for being. Organizations like Crisis Assistance Ministry, Charlotte Toolbank, and Catawba Riverkeepers have strong, clearly-articulated brands that allow them to lead in their space. That branding is about more than a great logo or informative website. It is about creating consistency in the mind’s eye of Charlotteans, who understand why a nonprofit exists and what it does to strengthen the community. If an organization’s brand is poorly formed, the chances of it ever truly owning its space are weak.
- Pipeline of Individual Giving – Over-reliance on institutional support (government and foundations) is the primary challenge for niche organizations, particularly in Charlotte. The city’s institutional philanthropy has a bit of a reputation of “shiny penny” funding – supporting new initiatives for several years and then cutting funding before the organization can achieve sustainable support in favor of the next new idea. Organizations planning to grow programming with grant funding must develop a pipeline of individual giving from a variety of sources since that grant funding is likely to disappear. That means getting smart about donor acquisition and retention – two terms that should be daily affirmations for the niche organization.
We love niche organizations at Next Stage – we believe strongly that a robust community of nonprofits that lead in their space has a much better opportunity of actually moving the needle than a hodge-podge of groups chasing funding. Do you agree? Please share your thoughts on Facebook: www.facebook.com/NextStageConsultingNC/
Next week, Caylin Viales will tackle Imported Nonprofits. Stay tuned!
Josh Jacobson is Managing Director of Next Stage Consulting, a Charlotte-based firm focused on organizational development and fund development for the nonprofit sector. Next Stage Consulting provides organizations access to affordable, high-quality consulting services to help them “get to the next level.” Josh is a Certified Fundraising Executive (CFRE) and is President Elect for the Charlotte Chapter of the Association of Fundraising Professionals.
Image Copyright : Mike Nellums